Japan’s drugs companies open up to western treatment

December 1, 2013 5:26 pm

Japan’s drugs companies open up to western treatment

By Andrew Jack

The decision by one of Japan’s largest pharmaceutical groups to name a European as its chief executive designate reflects growing international openness in the world’s second-largest medicines market at a time of intensifying competition. Christophe Weber, who trained in France and worked for most of his career atGlaxoSmithKline, is set to take over as chief executive of Takeda from Yasuchika Hasegawa, who will become chairman of the Osaka-based group next summer.Japanese companies are expanding their own operations abroad; and a more gradual acceptance led by Takedaunder Mr Hasegawa’s leadership to bring more senior western expertise into boardrooms.

“The Japanese market has very slow growth. We were left behind. We have no choice but globalisation,” he told the FT.

Helped by the strength of the yen, several Japanese groups have undertaken acquisitions abroad in recent years, including Daiichi-Sankyo’s costly purchase of Ranbaxy in India, and Takeda’s expansion, including its acquisition of Nycomed.

Japanese companies face new threats to their domestic market. The government, concerned at the rising costs of medical care for its ageing population, has been seeking price reductions for medicines by encouraging the fledgling local generic industry to compete with cut-price versions of off-patent drugs.

Eiichi Machida, a director of Nichi-Iko, a leading generic company, says: “Our sales are skyrocketing. The situation has changed completely in Japan because the government needs to save money.”

Innovative Japanese companies are also feeling pressure with the reduction in the country’s longstanding “drug lag”: the delay between approval of innovative medicines in other countries and their launch in Japan.

That was partly due to additional trials that regulators required to reflect the genetic differences of Japanese patients, but which critics saw as defending domestic producers’ own products and market.

“In the past people were concerned, but right now there are no lags,” says Tatsuya Kondo, Japan’s chief medicines regulator. “I believe we did have a little protectionism in the past but that is going away. Now Japan is much quicker than foreign countries.”

Analysts suggest accelerated approval partly reflects growing frustration about slow access within Japan to the best new treatments developed globally. In 2006, for instance, Takashi Yamamoto, a politician who contracted cancer, denounced the quality of care, describing those with the condition as “refugees who wander in search of food, water and someone who can help”.

In 2009, the flu pandemic also triggered demand for rapid regulatory approval of western-produced vaccines, given that there is scant Japanese domestic production – a shortfall Takeda is now also helping to reverse by means of its own niche research and manufacturing.

Multinational groups have been attracted by the “catch-up” in approving drugs often long ago launched in other markets and a continued willingness to pay relatively high prices. That contrasts with compliance and reimbursement difficulties in emerging markets, and cuts in European healthcare budgets. As a result, for many companies Japan has joined the US, the world’s largest medicines market, as the region of greatest focus.

For example, GSK posted third-quarter revenues in the country up 2 per cent to £360m and margins of nearly 58 per cent, higher than for all other regions except the US. Sir Andrew Witty, chief executive, said: “Japan is a very positive environment for GSK. It was an innovation desert but now our growth markets are the US and Japan. The environment is almost [the] opposite of that in Europe.”

This year, Pascal Soriot, the new chief executive of AstraZeneca who himself spent much of his career in Asia including Tokyo, cited Japan as one his “five key growth platforms” to reinvigorate the struggling Anglo-Swedish group.

In advance of exchange rate effects caused by the rising yen, it reported sales up 5 per cent in the third quarter to $611m: just a 10th of group revenues but the only growing market in the developed world and in line with growth in the emerging markets.

In its first half this year, Roche of Switzerland reported Japanese sales up 2 per cent, twice the rate of Europe. It has been helped by a bold move in 2002 to buy Chugai, a Japanese business, and to establish its own presence in the country. Most of its rivals have instead traditionally licensed their products to Japanese companies to sell on their behalf.