As reported in February, the merger on 1 April 2005, will create Japan's second-biggest drug company by sales and marks the first major consolidation in Japan's crowded and highly competitive pharmaceutical industry.

Yamanouchi is paying around Y800 billion (€5.89bn) for Fujisawa, and following the completion of the merger with Astellas will be the second largest Japanese pharmaceutical company, with global sales of around $7.6 billion (€6bn), compared with Takeda's $9 billion, for the year ended March 2003.

The transaction follows the increasingly intense competition Japanese players are now facing in their domestic market, while overseas players have targeted Japan as a new growth opportunity now that barriers to western firms' entry have been removed.

OTC joint venture

Meanwhile, the two companies have entered a definitive agreement to amalgamate their over-the-counter (OC) medicines operations and set up a new joint venture for this business, of which each company will hold a half share.

The JV will operate under the name Zepharma and commence operations on1 October, with headquarters in Tokyo. Its major brands will include the OTC gastrointestinal Gaster 10 (famotidine), cold remedies Precol and Cakonal, dermatological products Malciron, Eurax and PyroAce and anti-allergics AG Eyes and AG Nose.

The new company, which had pro forma sales of Y137.9 billionin the fiscal year to March 2004, will also gain first refusal rights for OTC switch pharmaceutical candidates originating from both parent companies.