Mumbai: Mitsubishi Chemical Holdings Corporation will buy Tanabe Seiyaku Company in a 523 billion yen ($4.3 billion) deal. The takeover is expected to almost double sales at the drug unit of Japan's largest chemicals company.

Under the deal, Mitsubishi share will be converted into 0.69 share of Tanabe, with Mitsubishi owning 56.4 per cent of the new drugmaker. The deal will be completed by October 1, the companies said in a statement.

Japan's drug firms are under increasing pressure to merge, in order to compete overseas, as government-mandated price cuts for prescription drugs eat into profit at home in the country's $60 billion pharmaceuticals market.

The combined company would have annual sales of about 408 billion yen, less than a month's revenue at Pfizer Inc, the world's largest drugmaker.

Tanabe, the seller of the world's No. 1 rheumatoid arthritis treatment in Japan, last month reported a 15 per cent rise in net income at 18.8 billion yen in the nine months ended December 31 on sales of 140 billion yen. The company forecast revenue of 176.5 billion yen for the full year, compared to 228 billion yen for Mitsubishi Pharma.

Tanabe has sold Johnson & Johnson's Remicade drug since 2002. The medicine for autoimmune diseases, including arthritis, was Tanabe's best-selling drug in the nine-month period, with sales of 15.1 billion yen, up 37 per cent from a year earlier.

Osaka-based Mitsubishi Pharma's best-selling drug is Radicut, a medicine for post-stroke tissue protection. The company is developing treatments for asthma, diabetes and gout and announced plans a year ago to open a US drug sales unit by 2010. Mitsubishi Chemical makes plastics as well as raw materials for polyester fiber, paints and adhesives.

The companies plan to cut 1,000 jobs from their combined workforce of 7,500 by 2010, Tanabe president Hayama said at a press conference in Tokyo. The structure of the transaction will enable the new drug company to be publicly traded, the companies said.