Daiichi Sankyo Generics Entry Could Help Japan's Branded Generics Makers

Following Pfizer's step, Daiichi Sankyo is venturing into the generic drug business in Japan. The third-largest domestic branded drug maker Feb. 26 announced the establishment of generic subsidiary Daiichi Sankyo Espha, and a plan to start marketing products beginning in October. The announcement has stirred up a shock wave across the industry.

Viewing the entry as a new revenue stream for Daiichi, Japanese investors welcomed the news and helped add ¥18, or 1 percent to the Tokyo Stock Exchange-listed company shares.

However, stockholders of other Japanese generic makers deemed Daiichi's entry a threat. Shares of Nichi-Iko, Sawai and Towa Pharmaceutical all dropped on the day of the announcement, by ¥32, ¥50 and ¥20, respectively.

Utilizing its Indian subsidiary Ranbaxy's generic drug knowhow and a lower cost structure, Daiichi plans to further expand its product lineup through a broad network of domestic and overseas drug makers. The company said it also aims to enter the antibody and biosimilar business (Also see "Daiichi Sankyo Goes After Generics In Japan, Forms New Company With Ranbaxy" - Scrip, 26 Feb, 2010.).

Daiichi expects to generate ¥50 billion ($560 milllion) in generic sales by 2015, which will put it among top generic makers in Japan. For FY 2009, Niichi-Iko reported that annual sales increased 27.9 percent to ¥54.8 billion, and Saiwai estimated sales to reach ¥49 billion. With 20 staff for the subsidiary, the company said it will expand sales force as more products are added.

"For such a high-profile company to enter the generics market will bring a certain level of credibility to the whole generics sector in Japan," Synthon Asia Pacific VP Jo Kim told PharmAsia News. Kim added that Daiichi's presence will also contribute to promoting generics uptake with health professionals and patients and help to grow the overall market share for generics.

Three Focal Points

Daiichi Sankyo's generics market entry is closely tied to a fast-growing demand for generic products in Japan and a need to diversify business pressed by patent expirations for major drugs.

Facing mounting medical costs, the Japanese government has been promoting a series of policies to stimulate generic drug use. Japan Generic Association President Hiroyuki Sawai expects more such promotional policies in 2010 (PharmAsia News, Jan. 13, 2010).

Also in 2010, Daiichi's best-selling antibiotic agent Cravit (levofloxacin) will lose U.S. market exclusivity. In Japan, the patent expired in 2006 and the Ministry of Health, Labor and Welfare granted National Heath Insurance price listing to 23 generic makers for levofloxacin.

To offset the revenue loss, the company has set a global ambition to focus on both developed and emerging pharmaceutical markets, covering both innovative and generic drug products. The company plans to launch hypertension drug Azor (olmesartan) in Mexico and six African countries through its Ranbaxy subsidiary.

The company seized the huge growing potential in the Japanese generics market, which has attracted an increasing number of newcomers. Just two weeks ago, Tokyo-based digital imaging maker Fujifilm announced the establishment of Fujifilm Pharma, a generic drug subsidiary along with Mitsubishi and Toho Holdings (Also see "Fujifilm Focuses On Future Of Generics In Japan" - Scrip, 12 Feb, 2010.).

Also in February, Teva/Kowa, a 50/50 generic joint venture between Teva and mid-sized Japanese drug maker Kowa Pharmaceutical announced a plan to increase its generics sales force through consolidation with Taisho Pharmaceutical Industrials, which the company acquired in December (PharmAsia News, Feb. 18, 2010).

Besides major Japanese generics makers, Daiichi also faces an uphill battle with the world's largest drug maker Pfizer, which plans to launch 100 of its own established products and generics in Japan next year (Also see "Pfizer Leaps Into Japanese Generics Foray; Aims For 100 Generic Products By 2011" - Scrip, 23 Nov, 2009.).

"We believe that our understanding of the Japanese market and local presence, united with the global expertise of Ranbaxy in the generic arena, will enable us to achieve efficient and immediate entry into the generic market," said Daiichi Sankyo CEO Takashi Shoda.

The company said it will focus on quality assurance, information provision and stable supply to compete in the market.

Banking On Branded Generics Market

Like Pfizer, Daiichi is hoping to tap into its well-established and broadly recognized brand names to woo patients to its generic lineups, due largely to the fact that Japan is essentially a branded generics market.

Tetsuya Takada, president of Kobe-based TiPharmas and a registered Japanese pharmacist, told PharmAsia News that nearly 99 percent of prescriptions in Japan are dispensed as brand names, even for generic products.

Jo Kim of Synthon also noted the presence of a "luxury brand culture" in Asia in general, but especially so in Japan. "I think the scenario will depend very much on how Pfizer and Daiichi market their generics brand in market and their perceived so called 'brand value'."

Takada added that two other Japanese branded drug makers also took similar routes into the branded generics market: Eisai established generic subsidiary Elmed Eisai in 1996, and Mitsubishi Tanabe acquired mid-sized generics maker Choseido.

"How to utilize Ranbaxy formulations, generics knowhow to achieve success in the Japanese generics market, Daiichi-Sankyo may have to think beyond its brand," Kim said.

- Brian Yang ([email protected])