Nichi-Iko Aims For ‘Commanding Presence’ In Japan Generics Via Eisai Alliance
Executive Summary
Eisai has become the latest R&D-based pharma company in Japan to offload its non-innovative products as it seeks to maximize their sales and focus more on novelty and, by implication, the rewards this can bring under Japan’s evolving reimbursement pricing system.
In what the companies said was an alliance seeking “increased profit for both companies,” Eisai Co. Ltd. is gradually to transfer full ownership of its Elmed Eisai generics business in Japan to Nichi-Iko Pharmaceutical Co. Ltd., one of the country’s largest generics concerns.
The move seeks to build on the assets and strengths of both firms in their respective sectors, and will involve the acquisition of around JPY17bn ($160m) worth of shares in total. Significantly, it also marks an effective exit from generics by Eisai, which is looking to build its in-house innovative portfolio.
Eisai reported generic sales of JPY21.3bn in the nine months to Dec.31, with growth of around 3%; annual sales at Tokyo-based Elmed are around JPY28bn and the subsidiary has 135 employees.
Nichi-Iko is one of Japan’s largest generic manufacturers and is aiming to break into the global top 10; it is expecting net sales of around JPY200bn this fiscal year, and the Elmed portfolio will add further scale, at least domestically. The companies said the ultimate aim for the alliance is to enable Nichi-Iko to capture a 20% share of the generic market in Japan, up from around 16% presently if Elmed is added on a simple sum basis.
Nichi-Iko also has prior experience working in an alliance for an innovator company through its 2010 tie-up with Sanofi Japan, under which the companies worked together on selected generics.
Building Ownership
The Elmed operation, set up by Eisai in 1996, markets a range of generic products including mosapride, atorvastatin, clarithromycin and fexofenadine. Currently wholly owned by its parent, it focuses on adding value through for example easy to use oral-dissolving formulations, and its lines are co-promoted by Eisai.
Nichi-Iko has initially taken a 20% stake in Elmed on April 2, and depending on the progress of the alliance, a further 13.4% will be transferred on October 1 this year. All the remaining shares in Elmed Eisai are due to be acquired by Nichi-Iko on April 1, 2019.
The deal appears largely designed to allow each company to focus on their respective strengths in the innovative and generic sectors, while building a promotional and product supply alliance in Japan. Under this, Eisai will start to co-promote from October selected Nichi-Iko generics, which it suggested would include preparations for dementia, liver disease, and others, while Nichi-Iko will begin to co-promote Elmed products from the same date.
Eisai sees particular benefits of this aspect of the tie-up in liver disease (such as hepatitis and cirrhosis) through the addition of “content” to its “Total Inclusive Ecosystem” concept, under which it is aiming to provide a holistic range of products and services from patient identification and diagnosis, to family support as well as actual therapies. Elmed already markets the antiviral entecavir to prevent hepatitis recurrence, and Nichi-Iko a range of drugs including cisplatin for liver cancer.
APIs, Strategic Considerations
The other major facet of the alliance is the supply of active pharmaceutical ingredients (APIs). Around 130 products overlap between the two firms, 11 of which have a domestic market share of at least 50%, and here both companies said they will be seeking supply cost synergies through volumes.
To this end, Eisai will use its existing Vizag plant in India to produce stable supplies of Japan quality standard, bulk APIs to Nichi-Iko to help bring down costs. The companies are not saying what products will be supplied from the facility, but initially these are likely to be existing Elmed products already made at the site.
While not mentioned by Eisai, another strategic consideration for the company is likely to be a desire to focus on its innovative portfolio, as it is effectively fully divesting its generic operations through the Nichi-Iko alliance. Several innovator companies in Japan have taken similar steps to shed their older branded and genericized portfolios - which are usually low margin and hit by regular price cuts - over the past few years to generic companies, notably Takeda to a joint venture with Teva in 2016 and later Novartis Japan to India's Sun Pharmaceutical Industries. (Also see "Sun Enters Japan Through Divested Novartis Portfolio" - Scrip, 30 Mar, 2016.)
Although several R&D companies (such as Pfizer) retain generic interests in Japan, without the marketing expertise and volumes needed to drive lower margin generics, some innovative firms are preferring to focus their effort on novel drugs, which Japan is rewarding (with certain criteria) through ongoing revisions to its reimbursement pricing system. (Also see "Opdivo, Keytruda Hit Again As Japan Revises Prices" - Pink Sheet, 12 Mar, 2018.)
Meanwhile, dedicated generic companies set up to effectively market and promote such products have also been able to benefit from favorable policies in Japan over the past few years, which have included fee increases and moves to encourage doctors to prescribe generics. Generics currently account for around two-thirds by volume of the substitutable market in Japan, and the official government target is to raise this to 80% by late 2020, which might well be reached before this date.
For its part, Eisai has very much been stressing its innovative business, highlighting what it sees as a rich pipeline in oncology, led by Lenvima (lenvatinib) for expanded indications including liver cancer, and combinations, the antibody-drug conjugate MORAb-202, and other clinical stage projects in dementia and epilepsy.
From the editors of PharmAsia News.