TOKYO, Aug 1 (Reuters) - Japan's Otsuka Pharmaceutical

said on Thursday it would pay more than $1 billion to

acquire U.S.-based Jnana Therapeutics as it looks to expand its

drug pipeline.

Otsuka will pay $800 million to Jnana shareholders along

with up to $325 million in development and regulatory

milestones, the Japanese company said in a statement. The deal

is expected to be completed in the third quarter of this year.