Japanese Pharmas Investing Heavily in Emerging Markets - BioJapan Conference

TOKYO - Major Japanese pharmaceutical companies are moving beyond their traditional comfort zones in a bid to evolve into global players, a Japanese pharma industry analyst said Oct. 8 at the BioJapan conference in Yokohama.

Japanese pharmaceutical companies "often use words like 'diversity' or 'flexibility' these days," said Masatake Miyoshi, senior advisor at healthcare market research firm IMS Japan K.K. "When I started out as a pharmaceutical analyst, this industry was more or less a monoculture. All companies were taking the same path down the road, the same way."

Miyoshi said things started to change when several companies broke ranks and based important operations outside of Japan in the United States. Then came Daiichi Sankyo's deal with India's generic drug maker Ranbaxy Laboratories (Also see "As Ranbaxy Founders Exit, Daiichi Sankyo Assumes Complete Control; New Management Expects To Resolve U.S. FDA Issue" - Scrip, 25 May, 2009.) and the spate of mergers and acquisitions with Western biotechs.

Japanese companies have been fanning out and expanding to different regions in the world, with unique strategic decisions, Miyoshi said.

Yasuo Ishii, representative director at Astellas Pharma, explained how his company has focused on expanding its presence in former Soviet Union nations including Russia, Ukraine, Kazakhstan, Belarus, Azerbaijan, Kyrgyzstan, Georgia, Moldova and Armenia.

"We've needed a large sales and marketing force to cover these areas," Ishii said.

Even before their merger to become Astellas in 2005, Yamanouchi Pharmaceutical and Fujisawa Pharmaceutical were separately marketing drugs in this region. Yamanouchi Europe was marketing such treatments as benign prostatic hyperplasia drug Omnic (tamsulosin), and Fujisawa Europe launched its immunosuppressant drug Prograf (tacrolimus), both expanding based on their agent businesses. Ishii said the companies' merger worked to their advantage, to increase their presence in the region.

"We're adding new drugs to these markets and trying to grow even more," Ishii said. "We can say that every emerging country carries a unique political and economic situation, healthcare system and pharmaceutical market and it's important to have a thoroughly studied, well thought-out business plan on factors such as sales projections and targeted sales profit ratios."

"I think we can count on Russia to see tremendous growth in the coming years," Ishii said. "I think 'flexibility' would be the key word for success in emerging economies."

In July, Astellas set up subsidiary Astellas Farma Brasil in Sao Paolo to enter the fast-growing Brazilian market. Brazil was the 10th-largest global pharmaceutical market with sales of $12.5 billion in 2008. Astellas will begin marketing Omnic there.

For Astellas, the move completed its strategic goal to have some sort of direct presence in all major emerging countries. Astellas expanded to Russia in 1992, to China in 1994 and to India in 2008 (Also see "Astellas Opens Brazilian Sales Affiliate, Completing Network In BRIC Countries" - Scrip, 22 Jul, 2009.).

Daiichi Sankyo-Ranbaxy Deal Game Changer For Japanese Pharma

George Nakayama, executive officer at Daiichi Sankyo, said that according to analysts' projections, by 2030 the total pharmaceutical market size of BRIC countries, together with Mexico and Turkey, could potentially be as high as $330 billion to $420 billion. It was $56 billion in 2006. The projected number is almost equal to the combined market size of North America and Japan in 2006, which was $354 billion.

Ranbaxy has a presence in 49 countries, more than half in emerging countries, which enabled Daiichi Sankyo to expand to 56 countries, up from the 22 it already had access to, adding sales networks in Eastern Europe, Asia and Africa.

Daiichi Sankyo is now in the process of marketeting its blockbuster hypertension drug Benicar (olmesartan) in India, South Africa, Mexico and East Europe, and its osteoporosis drug Evista (raloxifene) in Romania (Also see "Daiichi Sankyo, Ranbaxy To Start Joint Marketing In Mexico, Romania" - Scrip, 8 Oct, 2009.).

"I think mega-pharmas may see a huge growth area in branded generics, particularly with the emerging markets," Nakayama said. "Pfizer has reversed its decision with branded generics in India and this could be part of a trend." (Also see "Pfizer Goes Big On Generic Injectables With Acquisition Of 15 Products From India’s Claris" - Scrip, 21 May, 2009.).

Otsuka Looks To China, Korea For Attractive Resources

Mitsuo Hamamoto, senior operating officer at Otsuka Pharmaceutical, said the company has been aggressively developing drugs in Asian countries outside of Japan to address regional illnesses and take advantage of attractive resources.

Otsuka established a new drug R&D center in Shanghai in January, and has had a clinical center in Beijing since 2003 (PharmAsia News, Feb. 22, 2009).

"Western companies like Bayer, GSK, Pfizer and Novartis have left Japan to set up R&D centers in Beijing, Shanghai and Singapore," Hamamoto said. "The level of basic research in Japan is quite high, but compared to the cost and growth prospects, the appeal may be fading."

There's been a concentration of investment in the popular three Asia locations for a reason, he said.

In China's case, attracting bio and pharmaceutical manufacturers has been a national priority as China tries to shift from being a factory nation to an innovative nation, Hamamoto said.

Hamamoto said the draw for China was its large patient pool and quick patient recruitment, while challenges include a slow regulatory process and little experience conducting clinical trials based on ICH GCP standards.

Meanwhile, Hamamoto said Korea was the superior Asian destination for conducting clinical trials with an efficient regulatory agency, strong support from government, new clinical trial centers and qualified investigators.

Hamamoto said Korea had the highest number of global clinical Phase II and III trials since 2005 compared to Taiwan, Singapore, China and Japan.

Otsuka does have clinical trial centers in Europe and the United States, but also views Asian nations to be important strategic locations for clinical trials.

- Yuriko Nagano ([email protected])