Taiho Pharmaceutical to acquire Araris Biotech for up to $1.14bn

Date Announced: 17/03/25

Target Advisors: Centerview Partners (financial), Cooley, BG Partner (legal)

Acquirer Advisors: MTS Health Partners (financial), Wilson Sonsini Goodrich & Rosati, Homburger AG (legal)

On March 17th, 2025, Taiho Pharmaceutical Inc, a Japanese pharmaceutical company announced that it had entered into a definitive agreement with Araris Biotech, a Swiss biotechnology company developing next-generation antibody drug conjugates, for up to $1.14bn. Under the terms of the agreement, Taiho Pharmaceutical will pay $400m in cash, with the potential for additional milestone payments worth up to $740m. The deal is expected to close in the 1st half of 2025, subject to regulatory approval.

Company Details (Acquirer – Taiho Pharmaceutical)

Taiho Pharmaceutical is a global leader in oncology, allergy, and urology treatments, specialising in innovative cancer therapies. A subsidiary of Otsuka Holdings, Taiho focuses on precision medicine, including chemotherapy and targeted treatments. With a strong presence in Japan and expanding global operations, the company drives R&D and strategic acquisitions, particularly in antibody-drug conjugates (ADCs), to advance next-generation cancer care.

Company Details (Target – Araris Biotech)

Araris Biotech is a Swiss biotech company pioneering next-gen antibody-drug conjugates (ADCs). Founded in 2019 as a spin-off from ETH Zurich and the Paul Scherrer Institute, it developed a proprietary linker technology for site-specific ADC conjugation without antibody engineering. Backed by strong investors and industry partnerships, Araris aims to revolutionize ADC development for more effective cancer treatments.

Deal Details and Rationale

Taiho Pharmaceutical’s acquisition of Araris Biotech for up to $1.14bn, with only $400m paid upfront and the remainder in milestone-based payments, reflects a structured approach to managing risk in the high-growth antibody-drug conjugate (ADC) market. The ADC sector is currently valued at $11.84bn and is projected to reach $25.38bn by 2033, a CAGR of 8.84%. The sector has recently attracted major deals, including Pfizer’s 2023 USD 43 bn Seagen acquisition (13.4x EV/EBITDA) and Gilead’s $21bn Immunomedics buyout in 2020. Taiho’s move aligns with this trend, positioning it to expand beyond small-molecule oncology.

Financially, the milestone-heavy structure limits Taiho’s immediate financial exposure while ensuring payments align with clinical and regulatory success. This structure has been used in past biotech deals, such as Merck’s $2.8bn VelosBio acquisition in 2020, to mitigate risks tied to early-stage assets. Though Araris biotech do not publish their financials, this deal likely values the company at a 10-15x EV/EBITDA multiple. If Araris’ lead ADC candidate progresses successfully, the acquisition could generate strong returns with relatively low upfront capital deployment. If it doesn’t, Taiho would likely keep the majority of the extra $740m in potential milestone payments.

Strategically, Taiho’s shift from small-molecule chemotherapies to biologics mirrors how Gilead leveraged Immunomedics’ ADC technology. Araris’ proprietary linker technology enhances ADC stability and efficacy, differentiating it in a space where toxicities remain a key challenge. If Taiho integrates the platform effectively, it could drive licensing deals and leverage the clear synergies between scientists and technologies at each company for substantial returns.

However, ADC manufacturing is highly specialized and subject to stringent regulatory oversight. As mentioned, the milestone-based deal structure suggests Taiho is realises the risks associated with potential clinical or regulatory hurdles. A cautionary example is Mersana Therapeutics, which faced setbacks when its ADC candidate, upifitamab rilsodotin (UpRi) was linked to severe lung toxicity, forcing the company to halt clinical trials. Given these risks, Taiho must prioritize rigorous clinical execution and ensure scalable, compliant manufacturing to maximize the success of its ADC pipeline.

Ultimately, this deal is a strategic bet on ADCs as Taiho’s future growth driver. The milestone-heavy structure reduces risk but also underscores uncertainties around clinical success. If Taiho advances Araris’ pipeline and scales production effectively, the acquisition could transform its oncology portfolio but execution will determine whether the full $1.14bn price tag is ever realised.

Written by: Karl Dumasia

Sources: MergerLinks, Taiho, Globenewswire, and Pfizer