Millennium Pharmaceuticals Inc., one of Massachusetts' best-known biotechnology companies, has been sold to Japanese drug maker Takeda Pharmaceutical Co. for $8.8 billion, making it the biggest deal in the history of the state's biotech industry.
Takeda, the world's 17th-largest pharmaceutical company, said the deal could create a "powerful new drug development engine," giving it rights to Millennium's fast-growing cancer drug, Velcade, and access to a rich pipeline of cancer and anti-inflammatory drugs in development. Company executives said they plan to operate Millennium as a separate business unit, retaining its name, management team, and workforce of about 1,000, including 800 at its Cambridge headquarters.
"It is very important for us to stay and drive the business forward," said Millennium chief executive Deborah Dunsire, who said she planned to stay with the company for at least a year.
The deal also marks the second major US biotech acquisition by a Japanese drug maker in the last few months, as cash-rich Japanese firms look for opportunities to take advantage of the weak US dollar. In December, Japan's Eisai Co. bought Minnesota's MGI Pharma Inc. for $3.9 billion.
"You'll probably see more Japanese companies expanding in the US," said Howard Liang, an analyst with Boston investment bank Leerink Swann & Co.
Massachusetts is already home to a galaxy of European drug firms - including Novartis AG of Switzerland, EMD Serono of Germany, and British-based Shire PLC - which have flocked to the state mainly because of its successful companies and elite research universities. But Japanese drug makers have not established a significant presence here.
Wall Street was impressed with the size of the deal. Even adjusted for inflation, it ranks larger than Cambridge-based Biogen Inc.'s purchase of Idec Pharmaceuticals Corp. of San Diego five years ago for $5 billion. Takeda offered $25 per share, 53 percent higher than Millennium's closing stock price on Wednesday. Millennium shares rocketed 48.9 percent yesterday to $24.34, up $7.99, the highest level in four years. But the stock is still below its peak in late 2000, when investors thought Millennium was going to be one of the leading biotechs of the new century, sending its share price to more than $80 and making the company worth about $18 billion.
And in 2001, Millennium promised much more. Its cofounder, venture capitalist Mark J. Levin, boasted that Millennium would be worth more than $100 billion within a decade. Levin started the company in 1993 with a cast of renowned scientists, including MIT's Eric Lander, originally focused on genomics - the effort to unravel the secrets of DNA to hone in on genes associated with specific diseases. The idea was that if disease-causing genes could be targeted, drug discovery might be accelerated. Millennium quickly attracted tens of millions of dollars in capital and formed relationships with major drug companies, such as Eli Lilly & Co., which hoped to use Millennium's genomics research to develop powerful drugs. It went public in 1996 and by early 2003 had more than 2,000 employees and a prominent campus near the Massachusetts Institute of Technology.
But after racking up persistent losses, the company gradually decided to make the switch from research to drug development. The transition was sometimes painful, forcing Millennium to shed hundreds of jobs and narrow its focus. And like many biotechs, many of its promising drugs in development ultimately failed.
Still, yesterday's deal highlights the company's success with Velcade, a cancer drug discovered by a company that Millennium purchased. Millennium said yesterday that Velcade generated about $800 million in worldwide sales last year. Its partner, Johnson & Johnson, markets the drug in 85 other countries. Analysts believe it will soon deliver billions of dollars in annual sales, making it a blockbuster treatment. The drug, now used to treat multiple myeloma, a form of cancer, is undergoing trials to treat other types of cancer, such as non-Hodgkin's lymphoma.
In addition, analysts give the company credit for developing a promising pipeline of other cancer and anti-inflammatory drugs, though they are generally years away from being approved for sale. John Maraganore, who worked as a Millennium executive from 1997 to 2002, said the deal could potentially free Millennium from worries about making every quarter's profit figures, allowing it to invest more money in drug development.
"They can now realize their full potential," said Maraganore, now chief executive of Alnylam Pharmaceuticals Inc. in Cambridge.
Dunsire said she expects the deal to be completed in June. In a note to investors, JPMorgan analyst Geoff Meacham said the offer was so high it is unlikely another suitor would swoop in with a better price, even though Johnson & Johnson, was previously thought to be the most likely buyer.
Meacham said the deal gives a boost to the biotech industry overall, highlighting the "scarcity and strategic value" of strong biotech companies.
Mark Leuchtenberger, chief executive of Targanta Therapeutics Corp. in Cambridge, noted that many midsize biotech stocks rose yesterday on the news. "I'm sure it wasn't just because it was a nice warm day," he said. "You've got a clear endorsement" of biotech companies' value, he said.
Todd Wallack can be reached at email@example.com.