Astellas Offloads Japan Product Basket To Private Equity Group
Executive Summary
Astellas has joined the growing ranks of research-based pharma firms offloading their older products in Japan, amid rising pricing and generic pressures and an increasing desire to focus on innovation.
Astellas Pharma Inc. is divesting a portfolio of 16 of its older drugs in Japan, in the latest in a string of similar moves by innovative pharma firms in the country to move out of low-margin products amid rising price pressures and generic competition.
In a deal due to close at the end of April, the Japanese firm will transfer to LTL Pharma Co., Ltd. for JPY20.1bn ($181m) the marketing authorizations in Japan for the basket of drugs, which comprises several former big sellers that are now well past their heyday.
These include various formulations of the H2-antagonist anti-ulcer Gaster (famotidine), the 5HT3 antagonist for chemotherapy-induced nausea and vomiting Nasea (ramosetron), the cephalosporin antibiotics Cefzon (cefdinir) and Cefamezin (cefazolin), and the calcium antagonist antihypertensive Perdipine (nicardipine). A number of antibiotics, blood pressure and other drugs are included in the transfer.
The asset divestment covers active pharmaceutical ingredients and any royalty streams related to the products, although any of the transferred products currently sold outside Japan by Astellas subsidiaries will continue to be sold through these channels. While Astellas will maintains commercial responsibility in this case, product supplies will come from LTL Pharma.
Combined sales of the portfolio - which will be transferred gradually by April 2020 - were around JPY29.0bn in the fiscal year ended March 31, 2016, and Astellas expects no financial impact in its current financial term ending this March 31.
Private Equity Interest
Tokyo-based LTL Pharma is a new wholly owned subsidiary of Japan Established Medicines Corp. (JEMCO), an entity specializing in older products formed by Unison Capital Partners IV, LPS and Unison Capital Partners IV(F), L.P., which are both funds under the Japanese private equity group Unison Capital.
This Tokyo-based company was co-founded in 1998 by three former senior employees of Goldman Sachs in Japan, and specializes in providing financial support for the growth of multi-sector, mid-cap companies formed from management buyouts or spun off from larger firms.
Unison Capital does have some prior pharma experience through the 2015 purchase of Santen Pharmaceutical Co. Ltd.'s rheumatism division to form a new venture, Ayumi Pharmaceutical Corp., which subsequently also acquired Showa Yakuhin Kako's medical business last year.
The LLP Conundrum
Branded so-called long-listed products (LLPs) in Japan have typically been on the national health insurance reimbursement tariff for 10 years or more and are usually subject to generic competition. Sales are often not significant but besides the price pressure, other costs are associated with continued promotion, administration, and production, and also if a regulatory delisting were to be pursued.
The price pressures and associated discounting, and Japan's pricing recalculation rules, also mean that LLPs are commonly subject to relatively large price cuts in the country's system of regular biennial price reductions.
Given all these factors, originators are increasingly preferring to focus on higher margin new drugs and to concentrate limited resources on novel products, for which Japan has for the past few years been offering an "innovation premium" that exempts these from price cuts for the duration of their patent life.
Against this background, several companies took similar steps to reduce their LLP exposure last year, with two Indian firms acquiring mature product portfolios in Japan - Sun Pharmaceutical Industries Ltd. from Novartis Pharma KK and Lupin Ltd. from Shionogi & Co. Ltd. (Also see "Sun Enters Japan Through Divested Novartis Portfolio" - Scrip, 30 Mar, 2016.) and (Also see "Lupin Buys Shionogi Brands As Japan Market Opens To Indian Firms" - Scrip, 2 Aug, 2016.)
Sun subsequently entered into a local commercial partnership for the products with Mitsubishi Tanabe Pharma Corp. (Also see "Sun Taps Mitsubishi For Ex-Novartis Japan Portfolio" - Scrip, 7 Sep, 2016.)
Trailblazer Takeda
But the trend to shift ageing drugs to a partner looking to expand its portfolio and more willing and able to maximize sales was really kicked off by Takeda Pharmaceutical Co. Ltd.'s 2015 deal to transfer a basket of product to a new Japanese joint venture with Teva Pharmaceutical Industries Ltd., which began operations in April 2016.
Astellas confirmed in a statement on the LTL Pharma deal that the move would aid in "reallocating internal resources to activities that drive our competitive advantage," while Unison Capital said that JEMCO is aiming for the stable, long-term supply of long-listed drugs.
The company will also be supporting the expansion of LTL's product portfolio "by actively seeking opportunities to acquire LLPs from various pharmaceutical companies," it added
From the editors of PharmAsia News.