The Japanese Pharmaceutical Companies Outlook

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H E A LT H C A R E

The Japanese Pharmaceutical Companies Outlook An analysis of key players and growth strategies

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Copyright © 2004 Business Insights Ltd This Management Report is published by Business Insights Ltd. All rights reserved. Reproduction or redistribution of this Management Report in any form for any purpose is expressly prohibited without the prior consent of Business Insights Ltd. The views expressed in this Management Report are those of the publisher, not of Business Insights. Business Insights Ltd accepts no liability for the accuracy or completeness of the information, advice or comment contained in this Management Report nor for any actions taken in reliance thereon. While information, advice or comment is believed to be correct at the time of publication, no responsibility can be accepted by Business Insights Ltd for its completeness or accuracy. Printed and bound in Great Britain by MBA Group Limited, MBA House, Garman Road, London N17 0HW. www.mba-group.com

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Table of Contents The Japanese Pharmaceutical Companies Outlook: An analysis of key players and growth strategies

Executive Summary

12

Introduction

12

Takeda

13

Sankyo

14

Yamanouchi

15

Eisai

16

Fujisawa

17

Daiichi

18

Mitsubishi

19

Shionogi

20

Chugai

21

Tanabe

22

Chapter 1

Takeda

26

Summary

26

Strategic position Strengths Weaknesses Opportunities Threats

27 27 28 28 29

Growth strategy

29

Alliance activity

31

Financial overview

34

Portfolio analysis Therapeutic focus Major marketed products Actos (pioglitazone hydrochloride)

35 35 36 36

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Prevacid/Takepron (lansoprazole) Blopress (candesartan cilexetil) R&D TAK-375

Chapter 2

Sankyo

38 39 41 42

46

Summary

46

Strategic position Strengths Weaknesses Opportunities Threats

47 47 48 48 48

Growth strategy

49

Alliance activity

50

Financial overview

52

Portfolio analysis Therapeutic focus Major marketed products Mevalotin (pravastatin) WelChol (colesevelam) Benicar/Olmetec (olmesartan) R&D Livalo (pitavastatin)

53 53 54 54 56 57 60 60

Chapter 3

Yamanouchi

64

Summary

64

The Yamanouchi/Fujisawa merger

65

Strategic position Strengths Weaknesses Opportunities Threats

66 66 67 67 68

Growth strategy

68

Alliance activity

69

Financial overview

70

Portfolio analysis Therapeutic focus Major marketed products Harnal (tamsulosin) Lipitor (atorvastatin)

71 71 73 73 74

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R&D YM-177 (celecoxib) YM-905 (solfenacin succinate) YM-087 (conivaptan)

Chapter 4

Eisai

77 77 78 79

82

Summary

82

Strategic position Strengths Weaknesses Opportunities Threats

83 84 85 85 85

Growth strategy

86

Alliance activity

88

Financial overview

89

Portfolio analysis Therapeutic focus Major marketed products Aricept (donepezil) Aciphex (rabeprazole) R&D Maxalt (rizatriptan benzoate) T-614 (careram)

90 90 91 92 95 96 97 98

Chapter 5

Fujisawa

102

Summary

102

The Yamanouchi/Fujisawa merger

103

Strategic position Strengths Weaknesses Opportunities Threats

104 105 105 105 106

Growth strategy

106

Alliance activity

107

Financial overview

108

Portfolio analysis Therapeutic focus Major marketed products Prograf (tacrolimus) Protopic (tacrolimus)

109 109 110 111 112

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R&D Funguard (micafungin)

Chapter 6

Daiichi

113 113

116

Summary

116

Strategic position Strengths Weaknesses Opportunities Threats

117 117 118 118 118

Growth strategy

118

Alliance activity

119

Financial overview

120

Portfolio analysis Therapeutic focus Major marketed products Cravit (levofloxacin) Panaldine (ticlopidine) R&D DV-7314 (clopidogrel)

121 121 122 123 123 124 125

Chapter 7

Mitsubishi

128

Summary

128

Strategic position Strengths Weaknesses Opportunities Threats

129 129 130 130 130

Growth strategy

131

Alliance activity

132

Financial overview

134

Portfolio analysis Therapeutic focus Major marketed products Radicut (edaravone) Theodur (theophylline) R&D

135 135 135 136 137 139

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Chapter 8

Shionogi

142

Summary

142

Strategic position Strengths Weaknesses Opportunities Threats

143 144 144 145 145

Growth strategy

145

Alliance activity

147

Financial overview

150

Portfolio analysis Therapeutic focus Major marketed products Flomox (cefcamate) Flumarin (flomoxef) Vancomycin (vancomycin) R&D SR-47436 (irbesartan) Crestor (rosuvastatin)

151 151 152 153 154 154 156 157 159

Chapter 9

Chugai

163

Summary

163

Strategic position Strengths Weaknesses Opportunities Threats

164 164 165 165 165

Growth strategy

165

Alliance activity

166

Financial overview

167

Portfolio analysis Therapeutic focus Major marketed products Epogin (epoetin alfa) Neutrogin (lenograstim) R&D Pegasys (pegylated interferon alfa-2a)

168 168 169 170 171 172 173

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Chapter 10

Tanabe

177

Summary

177

Strategic position Strengths Weaknesses Opportunities Threats

178 179 180 180 181

Growth strategy

181

Alliance activity

182

Financial overview

184

Portfolio analysis Therapeutic focus Major marketed products Herbesser (diltiazem) Ceredist (taltirelin hydrate) Remicade (infliximab) R&D

184 184 186 186 187 188 190

List of Figures Figure 1.1: Figure 1.2: Figure 1.3: Figure 2.4: Figure 2.5: Figure 2.6: Figure 3.7: Figure 3.8: Figure 3.9: Figure 4.10: Figure 4.11: Figure 4.12: Figure 5.13: Figure 5.14: Figure 5.15: Figure 6.16: Figure 6.17: Figure 6.18: Figure 7.19: Figure 7.20: Figure 7.21: Figure 8.22: Figure 8.23: Figure 8.24: Figure 9.25:

Takeda’s strategic position Takeda’s alliance network Takeda’s therapeutic focus, FY2002 Sankyo’s strategic position Sankyo’s alliance network Sankyo’s therapeutic focus, FY2002 Yamanouchi’s strategic position Yamanouchi’s alliance network Yamanouchi’s therapeutic focus, FY2002 Eisai’s strategic position Eisai’s alliance network Eisai’s therapeutic focus, FY2002 Fujisawa’s strategic position Fujisawa’s alliance network Fujisawa’s therapeutic focus, FY2002 Daiichi’s strategic position Daiichi’s alliance network Daiichi’s therapeutic focus, FY2002 Mitsubishi’s strategic position Mitsubishi’s alliance network Mitsubishi’s therapeutic focus, FY2002 Shionogi’s strategic position Shionogi’s alliance network Shionogi’s therapeutic focus, FY2002 Chugai’s strategic position

27 31 35 47 51 53 66 70 72 83 88 91 104 108 110 117 120 122 129 133 135 143 149 152 164

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Figure 9.26: Figure 9.27: Figure 10.28: Figure 10.29: Figure 10.30:

Chugai’s alliance network Chugai’s therapeutic focus, FY2002 Tanabe’s strategic position Tanabe’s alliance network Tanabe’s therapeutic focus, FY2002

167 169 178 183 185

List of Tables Table 1.1: Table 1.2: Table 2.3: Table 2.4: Table 3.5: Table 3.6: Table 4.7: Table 4.8: Table 5.9: Table 5.10: Table 6.11: Table 6.12: Table 7.13: Table 7.14: Table 8.15: Table 8.16: Table 9.17: Table 9.18: Table 10.19: Table 10.20:

Sales of Takeda’s leading products, FY2001-02 Takeda’s R&D pipeline, 2003 Sales of Sankyo’s leading products, FY2001-02 Sankyo’s R&D pipeline, 2003 Sales of Yamanouchi’s leading products, FY2001-02 Yamanouchi’s R&D pipeline, 2003 Sales of Eisai’s leading products, FY2001-02 Eisai’s R&D pipeline, 2003 Sales of Fujisawa’s leading products, FY2001-02 Fujisawa’s R&D pipeline, 2003 Sales of Daiichi’s leading products, FY2001-02 Daiichi’s R&D pipeline, 2003 Sales of Mitsubishi’s leading products, FY2001-02 Mitsubishi’s R&D pipeline, 2003 Sales of Shionogi’s leading products, FY2001-02 Shionogi’s R&D pipeline, 2003 Sales of Chugai’s leading products, FY2001-02 Chugai’s R&D pipeline, 2003 Sales of Tanabe’s leading products, FY2001-02 Tanabe’s R&D pipeline, 2003

36 41 54 60 73 77 92 96 110 113 122 125 136 139 152 156 169 173 186 190

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Executive Summary

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Executive Summary Introduction The Japanese pharmaceutical market is the second largest in the world, behind only the US, with estimated sales of $52bn in 2002. While its makes it an attractive target for Western companies’ expansion plans, low market growth (1% in 2002) has made the operating environment increasingly difficult for domestic players. Coupled with ongoing regulatory reforms and drug price cuts, which are largely intended to reduce the government’s healthcare bill, Japanese companies are being forced to adapt their operating strategies.

The Japanese Pharmaceutical Companies Outlook: An analysis of key players and growth strategies evaluates the strengths and weaknesses of the top 10 Japanese pharmaceutical firms’ strategic and financial positions, marketed portfolios and pipeline compounds. Chapters are ordered according to company size (determined by ethical sales), from Takeda in first place to Tanabe in 10th.

Readers should note that Japanese companies’ data pertain to the Japanese financial year (i.e. the year ending 31 March) rather than to the calendar year; 2002 sales data, for example, relate to the period ending 31 March 2003. Finally, an average 2002 exchange rate of ¥125.21937:$1 has been used to convert all Japanese data to US dollars.

Readers should also note that at the time of writing the Yamanouchi/Fujisawa merger had just been announced with limited details and therefore this report contains only brief mention of the nature and effects of that merger.

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Takeda ‰

Takeda is the largest pharmaceutical company in Japan and the 16th largest globally. It experienced strong ethical sales growth of 8.9% (excluding sales of vitamins) to $6,357m in 2002. However, sales growth is forecast to slow, increasing year-on-year by just 0.2% between 2002 and 2008.

‰

Future growth is at risk due to Takeda’s weak late stage pipeline and mature portfolio of marketed products. Some 55.5% of Takeda’s sales were at risk of generic competition in 2002. With only one pipeline product expected to be launched by 2008, the company must increase its investment in in-licensing.

‰

Takeda is currently an attractive licensing partner for smaller Japanese companies with negligible overseas presence. However, as these firms expand their international operations, they will seek alternative licensing partners and attempt to launch their drugs themselves, reducing licensing opportunities for Takeda.

‰

Partnerships and joint ventures have driven Takeda’s growth over recent years, with TAP, the joint venture with Abbott in the US, playing a major role. However, Takeda is now expected to operate increasingly independently. With the creation of Takeda Pharmaceuticals North America, the company has already signaled its intention to go it alone in the US.

‰

Takeda has adequate funds to implement several major strategic moves, with $6,610m of cash and short-term investments of $2,704m in 2002. It also has relatively little debt, with total liabilities of $3,602m.

‰

Takeda’s largest franchise is diabetes and endocrinology, sales of which reached $1,671m in 2002 and accounted for 26.3% of the company’s consolidated ethical sales. Actos dominates the franchise but its sales will decline by 2008 as the glitazone class becomes less popular and the drug loses patent protection in 2006.

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The company’s only phase III compound, the insomnia drug TAK-375, will not be launched until at least 2006 and will struggle to erode the competitive advantage gained by Pfizer/Neurocrine with their earlier launch of indiplon.

Sankyo ‰

As the second largest Japanese pharmaceutical company, Sankyo’s pharmaceutical division reported a 5.2% increase in sales over the period 2001-02, up from $3,368m to $3,542m. This growth was driven by ethical sales, which rose by 6.1% and accounted for 74.3% of the company’s total sales.

‰

As Sankyo’s best selling product, Mevalotin accounted for 41.7% of sales in 2002 but generic competition entered the Japanese market in mid-2003. Generic pravastatin is expected to reach the US in 2006.

‰

Therapeutic expansion is a key part of Sankyo’s strategy, with both in-house development and in-licensing broadening the company’s focus into new areas, such as diabetes and respiratory disorders.

‰

Sankyo has used partnerships and licensing extensively over recent years to supplement both its late and early stage pipeline, with nine new agreements signed since the beginning of 2002. The company’s early stage licensing activity highlights a willingness to fund a number of first-in-class products.

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The company has suffered from declining profitability over the last five years. Sankyo does not have the financial strength to undertake any major strategic moves at present, although it is able to continue to fund its licensing strategy.

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The bile acid sequestrant WelChol’s main advantage in a market dominated by statins is its non-systemic mode of action. However, the high pill burden associated with the drug and its potential for unpleasant side effects will limit sales growth to around $328m by 2008.

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‰

After delays triggered by safety concerns, both Lipovas and Calblock were approved in 2003. Although these products have lower sales potential than originally expected, they should go some way towards replacing lost sales of Mevalotin.

Yamanouchi ‰

In February 2004 Yamanouchi announced it was to buy Fujisawa in a deal worth $7.76bn with a planned completion date of April 2005. The deal creates Japan’s second largest sales force, a broad product portfolio and a strong platform for overseas expansion

‰

Yamanouchi’s pharmaceutical sales increased by 7.7% in 2002 to $3,285m. Future growth will be driven by a combination of in-house development and in-licensing of key products.

‰

With cash and short-term investments at $2.7bn in 2002, Yamanouchi is in a strong financial position, enabling it to invest in further strengthening its portfolio via licensing deals.

‰

Yamanouchi now has a US subsidiary, Yamanouchi Pharma America. This will allow the company to exploit the largest pharmaceutical market directly and to generate higher revenues by launching smaller drugs from its portfolio, rather than limiting its US exposure to larger drugs that attract licensing partners.

‰

Yamanouchi has three products in its portfolio that are blockbusters in terms of their total global sales: Harnal, Gaster and Lipitor. Marketing such drugs raises the profile of the company in the international pharmaceutical market, facilitating further licensing or partnership deals.

‰

Although Lipitor’s dominance is assured in the short-term, it will eventually face competition from third-generation statins, including Crestor and Livalo. Sales of

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Lipitor accruing to Yamanouchi are predicted to rise from $506m in 2002 to $774m in 2008. ‰

Yamanouchi is in a strong position to drive future growth, with 24 products in development. Key compounds include YM-177, YM-087 and YM-905, and should help the company overcome its major weakness: over reliance on mature products for growth.

Eisai ‰

In 2002, Eisai reported total consolidated sales of $3,527m, up 8.1% from the previous year. Sales of pharmaceutical products comprised 94.7% of the total and recorded an 8.9% increase over 2001.

‰

Eisai’s position is precarious, with the overall future of its pharmaceutical business dependent upon just two products, Aricept and Aciphex. Although this underlines the importance of the company’s focus on lifecycle management, this should not be at the expense of developing new compounds.

‰

Eisai is reducing its dependence on the Japanese market. It has forged codevelopment partnerships with major international players, restructured its management to resemble that of a Western company, and introduced a global incentive scheme for R&D contributors.

‰

The majority of Eisai’s future growth is projected to come from US operations, with the company targeting 15% sales growth for Eisai Inc. by capitalizing on the expansion of its sales force.

‰

To retain its position in Japan while focusing in-house R&D investment overseas, Eisai has in-licensed compounds from Western companies, including Abbott’s KES-524 and D2E7, and entered agreements with Aventis for the Japanese copromotion of Actonel and with Kyorin for the migraine treatment Maxalt.

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Aricept is regarded as the gold standard Alzheimer’s disease treatment in the seven major markets and is currently the only such therapy available in Japan. Eisai’s sales of Aricept could reach $1,305m in 2005 before declining to $1,277m in 2008.

‰

Phase III T-614 has unique potential both as a COX-II inhibitor and as a diseasemodifying anti-rheumatic drug. If successfully approved, it could generate sales of $169m in 2008.

Fujisawa ‰

In February 2004 Yamanouchi announced it was to buy Fujisawa in a deal worth $7.76bn with a planned completion date of April 2005. The deal creates Japan’s second largest sales force, a broad product portfolio and a strong platform for overseas expansion.

‰

Fujisawa is in a strong financial position, enabling it to fund a variety of strategic actions such as further geographic expansion and increased investment in R&D. Sales have risen 8.3% year-on-year since 1998, while operating profit has risen 16.8% year-on-year over the same period.

‰

Fujisawa has already achieved a strong international presence, with 41.9% of sales derived from overseas markets in 2002. This success has been achieved through sales of Prograf and Protopic but the company must broaden its overseas portfolio if it is to secure its future as a truly global pharmaceutical company.

‰

The tacrolimus franchise, including Prograf and Protopic, will remain Fujisawa’s key growth driver over the next five years. With combined sales of around $1.7bn in 2008, these products are forecast to account for nearly half of the company’s total ethical sales.

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Some 90% of US patients receiving a liver transplant are prescribed Prograf, as are 60% of patients who have kidney transplants. Forthcoming line extensions should help sales of the drug increase to $1,344m in 2008.

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A co-promotion agreement signed with GlaxoSmithKline for Protopic in June 2003 will considerably increase Fujisawa’s marketing strength in the US, enabling it to compete effectively against Novartis’ rival product, Elidel.

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In Japan, Fujisawa has driven recent growth by in-licensing drugs, mainly in the CNS therapy area. Myslee, in-licensed from Sanofi-Synthélabo, achieved sales growth of 73.9% in 2002, while Seroquel, in-licensed from AstraZeneca, achieved growth of 90.2%.

‰

Fujisawa launched Funguard, a new class of antifungal, in Japan in December 2002. With the company’s reputation in this area and an increase in the prophylactic use of antifungals, sales of the drug could approach $300m in 2008.

Daiichi ‰

Daiichi is in a relatively weak financial position following a year of declining sales and one-off costs relating to the establishment of Daiichi Suntory Pharmaceuticals. Thus, it is not currently able to make any significant strategic moves.

‰

Total sales declined by 3.2% to $2,572m in 2002. Such poor sales performance was due to reimbursement price cuts in Japan in 2002, increasing competition to core products and safety issues surrounding the antiplatelet drug Panaldine.

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Domestic sales accounted for 78.2% of Daiichi’s sales in 2002. However, geographic expansion forms a key part of the company’s growth strategy. As part of its 10 year plan, Daiichi aims to generate 40% of sales outside Japan. Growth is supported by the large number of trials being conducted overseas.

‰

Daiichi focuses on infectious and cardiovascular diseases. The importance of these therapy areas to the company’s sales will increase to 2008 following a decline in sales of non-core products.

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Daiichi’s lead product, Cravit, is patent protected in Japan until 2006 and in the US until 2010. Sales could rise to over $600m in 2005 but will decline thereafter as generic competition penetrates the domestic market.

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The company has a strong R&D pipeline, with two late stage products forecast to achieve significant sales by 2008: the antibacterial DU-6859a (sitafloxacin), in registration in Japan and in phase III trials overseas; and the in-licensed antithrombotic clopidogrel, which is in phase III in Japan.

‰

Daiichi’s stated R&D focus is on the development of anti-infectives, anticancer drugs and cardiovascular therapies. Although its pipeline reflects this commitment to some degree, it has only one anti-infective in late stage development.

Mitsubishi ‰

Although only the eighth biggest Japanese pharmaceutical company, Mitsubishi has the largest sales force, with 1,580 reps. However, this is still small compared with Pfizer’s Japanese subsidiary’s 3,493 reps.

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Mitsubishi recorded strong sales growth in 2002, up by 22.6% to $2,242m. However, the company’s net profits are low and it has cash/cash equivalents of only $222m.

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Although recent sales growth has been driven by benefits of the merger that created Mitsubishi Pharma in late 2001, the company now needs to focus its efforts on strengthening its weak late stage pipeline. Sales from a mature portfolio are forecast to remain stagnant to 2008.

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Mitsubishi’s marketed portfolio is dominated by its cardiovascular franchise, which accounted for nearly half of all sales in 2002. Although sales of this franchise will be static in the period to 2008, it will remain the largest.

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Sales of Mitsubishi’s lead drug, Radicut, are likely to dip in fiscal 2003 following safety concerns in July 2002. However, since the product is used in patients with 19

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potentially life-threatening illnesses, and is easier to use and more efficacious than its competitors, sales should recover. ‰

Supported by an increased stake by its parent company, Mitsubishi has set a goal of becoming a global, research-based pharmaceutical company in 10 years. In the meantime, it will need to in-license to supplement organic growth.

‰

Mitsubishi has nine new products in phase II clinical trials or above. However, only two of these, OC-108 and AS-013, are expected to be launched by 2008, and neither will have generated significant sales by this time.

‰

AS-013 has been in phase III trials for some time, reflecting the problems of developing treatments for peripheral arterial occlusive disease. Its long-term sales potential could be significant, although it will eventually face competition from gene therapy.

Shionogi ‰

Shionogi’s ethical sales declined by 31.3% in 2002 to $2,019m. This is partly due to the challenging domestic market, with an average 6.3% reduction in National Health Insurance drug prices implemented in April 2002.

‰

Shionogi’s ethical sales are forecast to record little growth over the period to 2008. A steady decline in sales of the company’s large but mature infectious disease franchise will negate growth elsewhere.

‰

The company’s core competency is its Japanese sales operations and it plans to concentrate its resources on the domestic marketing of new drugs. Shionogi’s aim, as part of a five year plan announced in 2000, is to have the largest sales force in Japan and to be the market leader in antibacterials.

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Although dependence on the Japanese market is expected to decrease as royalties from Crestor accrue and the joint venture established with GlaxoSmithKline bears

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fruit, Shionogi lags behind other major Japanese pharmaceutical companies in the development of its international operations. ‰

Shionogi has a healthy balance sheet, with relatively low long-term liabilities and a substantial cash reserve. However, it is less profitable than other Japanese companies. Profitability is expected to improve following the divestment of the loss-making wholesale business in 2002.

‰

In the face of increasing competition, sales of Shionogi’s lead product, Flomox, will display only limited growth, up from $274m to $295m from 2002-05.

‰

Shionogi is attempting to extend its reach beyond its current therapeutic markets, in-licensing compounds such as duloxetine from Lilly for the CNS market. However, Shionogi may struggle to penetrate this market, as it is inexperienced in this area and will face tough competition from Western companies.

‰

Crestor is the most promising of Shionogi’s pipeline products. Potential launch in Japan at the end of 2004 could drive sales to $250m in 2008.

Chugai ‰

Chugai is expected to show record sales growth over the next five years, initially driven by the consolidation of Nippon Roche’s products and then by the launch of up to six new products by 2008.

‰

As part of the Roche Group, Chugai has gained the backing of a far larger parent company with not only a strong pipeline but also the financial support to fund future strategic moves.

‰

One limiting factor of Chugai’s alliance with Roche is that it will further concentrate Chugai’s sales in the Japanese market, forcing it to expand its domestic sales in a difficult operating environment and at a time when most Japanese companies are looking overseas for future growth.

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Chugai’s traditional focus has been on its hematology, cardiovascular and oncology franchises. The merger with Nippon Roche has further increased its focus on oncology, while new product launches and licensing deals will enable it to penetrate the hepatitis and osteoporosis markets.

‰

Chugai’s key product is the anemia drug Epogin, which generated sales of $528m in 2002. Sales will continue to grow to $575m in 2005 but decline slowly thereafter as it loses market share to Kirin’s NESP and also potentially to generic erythropoietin.

Tanabe ‰

In 2002, 88% of Tanabe’s revenues were generated in Japan. The company must establish a more direct presence overseas to escape the downturn in the Japanese economy and ongoing domestic price cuts.

‰

In April 2000, Tanabe initiated ‘Bridge 21’, a three year reform plan. By reducing staffing levels and closing and integrating certain manufacturing facilities, it has been able to contain costs to achieve a 3.6% increase in operating profit.

‰

Most of Tanabe’s products have lost patent protection and are experiencing decreasing sales. In 2002, 68% of the company’s ethical sales were derived from products that were already in decline, mainly due to the loss of patent protection.

‰

Sales of Tanabe’s current lead product, Herbesser, are falling due to competition from generic versions of diltiazem and the increasing use of second generation calcium channel blockers and angiotensin II receptor blockers.

‰

By 2008, sales of the arthritis, immune and inflammatory disorders franchise will have increased as Remicade achieves uptake in arthritis and Crohn’s disease markets. The predicted success of this product should improve Tanabe’s inlicensing prospects in this therapy area.

‰

Despite expanding its therapeutic focus by investing in new therapy areas, Tanabe has a weak R&D pipeline with only six projects in development. 22

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‰

T-1095 is an anti-diabetes agent in early phase II trials. It has a novel mechanism of action whereby the blood glucose level is lowered by increasing glucose excretion into urine. However, it is not expected to reach market before 2008.

‰

Several of Tanabe’s early stage clinical compounds have been out-licensed for simultaneous development in the US and Europe. This reduces Tanabe’s R&D costs but also reduces future royalty payments it can expect to receive.

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CHAPTER 1

Takeda

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Chapter 1

Takeda

Summary ‰

‰

Takeda is the largest pharmaceutical company in Japan and the 16th largest globally. It experienced strong ethical sales growth of 8.9% (excluding sales of vitamins) to $6,357m in 2002. However, sales growth is forecast to slow, increasing year-on-year by just 0.2% between 2002 and 2008. Future growth is at risk due to Takeda’s weak late stage pipeline and mature portfolio of marketed products. Some 55.5% of Takeda’s sales were at risk of generic competition in 2002. With only one pipeline product expected to be launched by 2008, the company must increase its investment in in-licensing.

‰

‰

‰

‰

‰

Takeda is currently an attractive licensing partner for smaller Japanese companies with negligible overseas presence. However, as these firms expand their international operations, they will seek alternative licensing partners and attempt to launch their drugs themselves, reducing licensing opportunities for Takeda. Partnerships and joint ventures have driven Takeda’s growth over recent years, with TAP, the joint venture with Abbott in the US, playing a major role. However, Takeda is now expected to operate increasingly independently. With the creation of Takeda Pharmaceuticals North America, the company has already signaled its intention to go it alone in the US. Takeda has adequate funds to implement several major strategic moves, with $6,610m of cash and short-term investments of $2,704m in 2002. It also has relatively little debt, with total liabilities of $3,602m. Takeda’s largest franchise is diabetes and endocrinology, sales of which reached $1,671m in 2002 and accounted for 26.3% of the company’s consolidated ethical sales. Actos dominates the franchise but its sales will decline by 2008 as the glitazone class becomes less popular and the drug loses patent protection in 2006. The company’s only phase III compound, the insomnia drug TAK-375, will not be launched until at least 2006 and will struggle to erode the competitive advantage gained by Pfizer/Neurocrine with their earlier launch of indiplon.

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Strategic position A summary of Takeda’s strategic position is presented below. Figure 1.1: Takeda’s strategic position

Strengths

Weaknesses

International presence

Increasing penetration of US market without partner

Early stage pipeline Expansion into CNS therapy Financial position

Opportunities

Threats

Lack of potential in late stage pipeline

Increasing penetration of Japanese market by Western companies

Mature products Increasing international expansion of smaller Japanese companies reduces in-licensing opportunities

Business Insights

Source: Author’s research and analysis

Strengths Takeda’s main strengths are its: ‰

large international operations;

‰

broad early stage pipeline;

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‰

strong financial position.

Takeda’s significant international presence is a considerable strength, enabling the company to achieve greater sales from existing products and, as an attractive development and marketing partner for smaller Japanese firms, offering additional opportunities through in-licensing. Takeda also generates high net profits, at $2,170m in 2002, and large cash reserves. Its level of cash has increased year-on-year since 1998, rising by 41% from 2001 to $6,610m in 2002. With short-term investments of $2,704m and a low level of debt, Takeda is in an excellent position to support business expansion.

Weaknesses Takeda suffers from a lack of potential in its late stage pipeline and a mature marketed portfolio. The company only has one product in phase III trials: TAK-375, a treatment for insomnia. This is forecast to achieve sales of $224m in 2008, representing only 3.5% of the company’s sales in that year. Such a paucity of potential in its late stage pipeline is significant because a large proportion of Takeda’s products have been on the market for some time. In fact, 59.1% of the company’s sales in 2002 were derived from products that have been on the market for more than 10 years, and several such products are already losing sales to newer products and generics. Some 55.5% of Takeda’s sales were at risk of generic competition in 2002. Patents protecting Actos (pioglitazone), Prevacid (lansoprazole) and Leuplin (leuprolide acetate) will all expire within the next five years, increasing the risk that they will lose sales to generic competition. Combined with the lack of a strong late stage pipeline, Takeda faces the prospect of declining sales.

Opportunities Takeda must seek greater independent penetration of the US market and expand into new therapeutic markets. With the creation of Takeda Pharmaceuticals North America (TPNA), the company has already signaled its intention to operate independently in the US rather than through its joint venture with Abbott (TAP). The launch of Actos, the 28

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diabetes therapy that is being co-promoted with Eli Lilly in the US by TPNA, has been a success. This strategy should ensure that Takeda secures a greater proportion of sales and profits. Ultimately, once increased marketing experience has been gained, Takeda should be in a position to promote some products without a partner. However, as the company is unlikely to achieve the same degree of promotional strength as major US companies, it may continue to use co-promotion agreements to exploit the full potential of its products.

Takeda and Abbott have been in talks to alter the terms of the TAP joint venture, with Takeda keen to acquire Abbott’s share. However, in June 2003 Abbott announced that discussions had been abandoned. Consequently, the future of TAP is uncertain. Since Takeda has significant cash resources, acquiring Abbott’s share in TAP and merging it with TPNA could be a shrewd move.

Threats Takeda is at threat from the increasing international expansion of smaller Japanese companies, which reduces in-licensing opportunities. The company currently benefits from its position as an attractive global partner for smaller Japanese firms, allowing it to in-license products with attractive commercial potential to boost overseas sales. However, as increasing numbers of Japanese companies seek to increase revenue growth through overseas expansion, they will not only out-license these products to other Japanese companies but will also attempt to launch the products themselves.

Growth strategy Takeda has experienced rapid expansion in recent years through organic growth, in particular by launching a number of products with strong global potential. Leuplin, Prevacid and Actos have all driven growth through sales in the US. TAP markets Leuplin and Prevacid, while Actos is co-promoted by TPNA and Lilly. However, future organic growth prospects are weak as these products will lose momentum and there is

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little in Takeda’s late stage pipeline that promises to replace sales on this scale. It is possible that the early stage pipeline will yield future blockbusters but this still leaves a revenue gap in the short- to medium-term.

Takeda has undertaken a considerable amount of restructuring in its nonpharmaceutical business. In 2002, it formed joint ventures with Kirin Brewery for its food business and with Sumitomo for its agricultural business. Takeda also divested its rubber latex business to Nippon A&L. As a result, Takeda has sharpened its focus on the pharmaceutical sector and is now well placed to undertake a merger or acquisition to bolster its international presence. With a strong cash position and healthy debt/equity ratios, Takeda is likely to be a player in further industry consolidation.

Takeda has focused on international expansion, first achieving a strong presence in the US and more recently in Europe. The company has followed an initial strategy of penetrating new markets through joint ventures, before buying out its partners or establishing separate, wholly owned operations. In Europe it has already gained full control of most of its subsidiaries, while in the US Takeda is keen to buy out its partner (Abbott) in TAP and has also established TPNA, a wholly owned subsidiary. In January 2004, the Takeda Global Research and Development Center (TGRD) commenced operations in Illinois, US. The TGRD Center is a wholly owned subsidiary of TPNA. TPNA’s existing R&D division has been transferred to TGRD, while another of Takeda’s wholly owned development companies, UK-based Takeda Europe Research & Development Center, now reports directly to TGRD. TGRD will integrate Takeda’s clinical development activity in both the US and Europe.

As the pharmaceutical market in Japan shows no signs of improved growth prospects in the short-term, Takeda will continue to focus on driving its overall growth through international expansion. Going it alone will provide the company with greater returns on its investment but, to realize the maximum sales potential of its drugs, Takeda should continue to exploit co-promotion agreements.

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Alliance activity The following figure illustrates Takeda’s alliance network. Figure 1.2: Takeda’s alliance network Beth Israel Deaconess Medical Center

MSI Pharmaceutical Development Consortium (PDC) Kirin American Gastrointestinal Association (AGA)

BASF

Albany Molecular Research Biosense

(bulk vitamins)

Kissei Pharmaceutical Evotec Neurosicence

(KAD-1229)

Takeda

Gene Logic

Meiji Milk (MT-201)

ScheringPlough KK

Welfide

(animal health products)

(Y-138)

Wyeth Lederle

Taisho Dainippon

MitsubishiTokyo Pharmaceuticals

(mosapride citrate/antidiabetic drug)

(MCC-135)

Celera Genomics

Abbott (Actos)

Product related agreement

R&D agreement

Two product related agreements In -licensing licensing deals

Outlicensing -licensing deals

Co-marketing/co marketing/codevelopment agreements

Non -product related deals

Business Insights

Source: Author’s research and analysis

Takeda has used partnerships and licensing as a key growth strategy, with the creation of TAP, a joint venture with Abbott, in the US. The company also used joint ventures to establish a presence in several European markets. TAP was established to exploit the potential of Takeda’s portfolio in the US, using Abbott’s market expertise to maximize drug penetration. The partnership has focused on marketing two highly successful drugs: the proton pump inhibitor Prevacid (lansoprazole), which posted revenues of

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$3,157m for TAP in 2002, and the prostate cancer drug Lupron (leuprolide acetate), with sales of $876m.

Takeda and Abbott have been in talks for some time about the possible acquisition of the whole venture by either party. It is considered most likely that Takeda will buy out Abbott, although in June 2003 it was announced that talks had collapsed and that the joint venture would continue. The creation of TPNA and the co-promotion of Actos with Lilly highlight Takeda’s intention to operate independently in the US and that the company is gaining the necessary marketing expertise. The next logical step for Takeda would be to acquire the remaining shares in TAP and to merge the business with TPNA. This would follow the strategy that the company has used in Europe, where it initially established a presence through joint ventures before buying out its partners.

While TAP has been successful in the past, a number of factors limit the joint venture’s future revenue potential: ‰

implications of the Lupron investigation by the US Department of Justice;

‰

Takeda’s increasing direct penetration of the US market;

‰

rising competition to its lead products.

TAP, Takeda and Abbott all came under investigation in 2000 in connection with allegations of violations of state or federal law in connection with the pricing and marketing of Lupron. In October 2001, TAP was fined $875m. In addition, Chief US District Judge William Young placed TAP on probation for five years, putting the operation under pressure to monitor its operations carefully. It is unclear to what extent this will affect the future of the business but it is likely to be a negative factor in either Takeda or Abbott’s decision to promote further products through the joint venture.

At the time of establishing TAP, Takeda had virtually no presence in the US and TAP was its sole promotional vehicle. Takeda’s position as an innovative player and the

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leading company in Japan meant that this was a lucrative opportunity for Abbott. However, now that it has gained a working understanding of the US market through TAP, Takeda has established its own US subsidiary and set up new partnerships, such as that with Lilly for Actos, to gain a greater share of revenues. Takeda is likely to continue this route for new products, so the direct supply of innovative drugs to TAP may diminish.

A third factor that will be detrimental to the future of TAP is growing competition to its lead products. Prevacid faces a tough time following the launch of generic competition to its main rival, AstraZeneca’s Losec (omeprazole). While TAP has striven to prove that its drug is superior to Losec and AstraZeneca’s successor, Nexium (esomeprazole), the launch of generic omeprazole in late 2002 will have affected Prevacid’s sales to some extent in 2003. In the meantime, Lupron faces competition from Abbott’s own atrasentan in the prostate cancer market.

However, it is not only among established products that the competitive environment is heating up. The erectile dysfunction drug Uprima (apomorphine) has been a major hope for TAP but suffered delays in the hands of US regulators. The drug has lost any earlyto-market advantage it may have had over other entrants, such as Lilly’s Cialis (tadalafil) and Bayer/GlaxoSmithKline’s Levitra (vardenafil). TAP may not have sufficient marketing capabilities to compete effectively against such strong rivals.

Takeda is using licensing agreements to improve its pipeline. As the Japanese pharmaceutical company with the greatest international presence, it is an attractive development partner for smaller Japanese players and is able to in-license global rights excluding Japan. Agreements with Mitsubishi-Tokyo Pharmaceuticals in July 2001 and Dainippon in February 2001 illustrate this trend. However, although Takeda has considerably strengthened its early stage pipeline, it needs to in-license more late stage products if it is to maintain strong sales growth in the short-term. Although it has historically turned to smaller Japanese companies for such opportunities, these players

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are beginning to expand internationally themselves, so Takeda should widen its search to source products from smaller biotechnology companies.

Financial overview Takeda is in a strong financial position, with adequate funds to implement a number of major strategic moves. The company has cash funds of $6,610m and short-term investments worth a further $2,704m. It also has relatively little debt, with total liabilities of $3,602m. In 2002, Takeda’s net profit margin was 26%, providing the company with a strong source of further funds.

Takeda’s overall 4.1% growth in 2002 was driven by its pharmaceutical business, which comprises sales of ethical drugs, consumer healthcare and vitamins. The pharmaceutical business accounted for 88.7% of the company’s total sales in 2002. Sales of the bulk vitamin and food business fell by 31.7% as a result of the transfer of the food business in April 2002 to the joint venture Takeda-Kirin Foods. The chemical product group recorded a 2% decline in sales to $396m in 2002.

Sales of the agricultural business declined by 57.7% from $298m in 2001 to $126m in 2002, in part as a result of its spin-off in November 2002 to another joint venture, Sumitomo Chemical Takeda Agro.

Takeda’s operating profit rose by 10.5% from $2,246m in 2001 to $2,481m in 2002. Its operating profit margin increased by 6.1% to 29.7%. Net profit increased by 15.4% to $2,170m from $1,882m in 2001, while the net profit margin rose by 10.8% to 26%.

Sales in Takeda’s domestic market fell by 3.1% to $5,082m in 2002. European markets experienced the fastest growth at 33.5% year-on-year, although this was from the smallest base, while US sales grew by 13.1%.

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Portfolio analysis Therapeutic focus Takeda’s largest franchise, and one of the fastest growing in the short-term, is diabetes and endocrinology. Sales reached $1,671m in 2002, representing 26.3% of the company’s consolidated ethical sales. Actos dominated this franchise in 2002, with sales of $1,240m, but its sales will decline by 2008 as the glitazone class becomes less popular and the drug loses patent protection in 2006. Takeda has achieved strong growth for Actos primarily through international sales, which are boosted by a comarketing agreement with Lilly in the US.

Takeda’s therapeutic focus is illustrated in the pie chart below. Figure 1.3: Takeda’s therapeutic focus, FY2002 Other 13.8%

Diabetes and endocrinology 26.3%

Infectious diseases 8.3%

Oncology 16.6% Gastrointestinal 18.2% Cardiovascular 16.9% Business Insights

Source: Author’s research and analysis

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Major marketed products The table below summarizes sales of Takeda’s leading products. Those with greatest future commercial potential are discussed in more detail in the following paragraphs. Table 1.1: Sales of Takeda’s leading products, FY2001-02

Brand

Generic

Indication

Actos Prevacid Blopress Leuplin Others

pioglitazone hydrochloride lansoprazole candesartan cilexetil leuprolide acetate n/a

Diabetes GERD Hypertension Cancer Various

Total

Sales ($m) Growth FY2001 FY2002 FY2001-02 (%) 962 912 618 783 2,560

1,240 1,064 842 839 2,372

28.9 16.7 36.2 7.2 (7.3)

5,835

6,357

8.9

GERD = gastroesophageal reflux disease n/a = not applicable Source: Company reports; author’s research and analysis

Business Insights

Actos (pioglitazone hydrochloride) Actos is a member of the glitazone family, a class of antidiabetic drugs with a novel mode of action that treats the underlying causes of the disease rather than just the symptoms. Glitazones are thiazolidinediones and are highly selective peroxisome proliferator activated receptor gamma (PPARγ) agonists. Activation of this receptor leads to the increased transcription of genes involved in the insulin response, which results in greater control of glucose and fatty acid metabolism.

Actos is approved for use both as a monotherapy and in combination with insulin, sulphonylureas and Bristol-Myers Squibb’s Glucophage (metformin). Research suggests that the drug offers significant therapeutic benefits, not only in terms of improved glycemic control of type II diabetes, but also in lowering the plasma levels of lipids. In contrast to other compounds within the same class, Actos has not been shown to raise levels of LDL-cholesterol, an adverse marker of cardiovascular disease.

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Actos was launched in Japan in December 1999 and received fast track approval from the FDA in July 1999. In the US the drug is co-marketed by TPNA and Lilly. In March 2000, Takeda announced an agreement with Abbott Laboratories that gave Abbott exclusive rights to market Actos in nine Latin American countries. In October 2000, Takeda received European marketing authorization for Actos. Actos was approved in June 2002 in Japan for the additional indication of concomitant use with an alfa glucosidase inhibitor.

In 2002 Takeda reported global sales of $1,240m for Actos, an increase of 28.9% from $962m in 2001. The company’s co-promotion partner in the US, Eli Lilly, recorded revenues of $437m. Sales of Actos in Japan rose by 24.6% to $76m.

Actos is in direct competition with GlaxoSmithKline’s (GSK) Avandia (rosiglitazone), which was launched in June 1999 and achieved annual sales growth of 14.4% to $1,214m in 2002. The once-daily formulations of the two drugs appear to have similar efficacy. However, Avandia has the option of a higher, twice-daily dose, which significantly lowers blood sugar levels compared with Actos, although administration of Avandia can increase cholesterol levels. In October 2002, GSK also received approval for Avandamet, a combination pill of Avandia and metformin.

A key factor that will influence the success of Actos will be the outlook for glitazones within the overall diabetes market over the next six years. While the total diabetes market is expected to grow at a compound annual growth rate (CAGR) of 9.7% between 2001 and 2007 to $20bn, glitazones are expected to outperform many of the older drug classes. One of the key factors that may limit growth of all oral antidiabetic therapies will be the emergence of new delivery routes for insulin. The use of insulin at early stages of diabetes therapy is considered desirable by many physicians but has been limited in the past by the need for non-patient-friendly injectable regimens. With the advent of inhaled and oral insulin formulations, potentially from 2005, the use of oral antidiabetic therapies may be slightly curtailed by the earlier use of insulin.

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Sales of Actos are forecast to rise to $1,406m in 2003 and $1,573m in 2005 before declining to $870m in 2008 as US sales are affected by generic competition.

Prevacid/Takepron (lansoprazole) Prevacid, marketed in Japan by Takeda as Takepron, is a proton pump inhibitor (PPI) that is used in the treatment of peptic ulcers. It was launched in 1992 and is indicated for the short-term treatment of duodenal and gastric ulcers, and for the long-term treatment of hypersecretory conditions, as well as for the maintenance treatment of healed erosive esophagitis. Drugs in this class act directly to inhibit the action of the acid-producing pump within the stomach and are more potent than older H2 receptor antagonists. Lansoprazole is a second generation PPI and offers significant benefits over existing therapies, principally by exerting a greater effect on gastric pH.

In Japan, Takepron has been approved for the additional indication of reflux esophagitis and is in phase II trials for gastritis. Lansoprazole is in registration for the treatment of non-ulcer dyspepsia in the US, where it is marketed by TAP. Since Takeda receives 50% of TAP’s profits, the performance of lansoprazole in the US is key to Takeda’s bottom line growth.

In June 1999, the FDA approved new administration options for Prevacid delayedrelease capsules. The approval allows patients suffering from acid-related disorders, such as gastroesophageal reflux disease, and those who have difficulty swallowing capsules to open the capsules and sprinkle the granules on soft foods or into juices.

In December 2000, TAP announced that the FDA had approved lansoprazole for the treatment of ulcers resulting from the administration of non-steroidal anti-inflammatory drugs. It will compete directly with AstraZeneca’s Nexium, approved in February 2001, and generic versions of Losec.

Takeda’s domestic sales of Takepron reached $222m in 2001, up from $125m in 2000. Takeda reported global sales of Prevacid of $912m in 2001, rising to $1,064m in 2002. 38

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The leading PPI in 2002 was Losec, although the entry of Schwarz’s generic version of omeprazole in December has affected its sales. Prevacid has a key advantage that could boost its position in this lucrative market. Approval has been granted to market Prevacid in combination with clarithromycin and amoxicillin as a triple therapy for the eradication of H. pylori in patients with active or recurrent duodenal ulcers. In two US studies, Prevacid triple therapy was administered for two weeks and H. pylori was eradicated in 86-92% of patients studied. This is the first two-week triple therapy to be approved for this indication.

The future performance of Prevacid in the US will depend mainly on the approval of the drug for new indications. It will also be affected by the increasing intensity of competition from generics, following Losec’s loss of patent protection and the launch of over-the-counter Losec in the US in late 2003. In Japan, the performance of the drug largely depends on the rate at which physicians switch from H2 blockers to PPIs, and on whether Takepron gains approval for new indications. An additional threat is presented by the fact that Sepracor has been developing a single isomer version of the drug, to be launched as soon as key patents on the compound expire in 2009. However, it is not clear whether Sepracor is still developing its compound.

Until recently, H2 blockers were more popular than PPIs in Japan, which accounts for the relatively slow growth of Takepron in the Japanese market compared to the US. In addition, Takepron is not approved for the maintenance therapy of gastritis, which accounts for almost 66% of the total ulcer market in Japan.

Total sales of Prevacid are forecast to rise slightly to $1,088m in 2003, falling to $950m in 2005 and $764m in 2008.

Blopress (candesartan cilexetil) Candesartan cilexetil is an angiotensin receptor blocker (ARB) used in the treatment of hypertension. The compound was launched by Takeda in Europe in December 1997 as Ambias in the UK and as Blopress in Germany. Takeda and AstraZeneca co-market 39

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candesartan in the UK, Germany, France and Italy, while Takeda retains the rights for Japan and South East Asia.

Blopress, whose primary indication is for the treatment of hypertension, is expected to receive approval for a broader range of treatments related to cardiac failure. The drug is in phase III trials in Europe and the US and in registration in Japan for the additional indication of chronic heart failure. Furthermore, Takeda has developed a drug that combines candesartan with a diuretic for the treatment of hypertension, which was filed in Japan in December 2002. Blopress is also in phase II trials in Japan for the treatment of diabetic nephropathy.

Blopress experienced relatively rapid uptake, with Takeda’s global sales climbing to $618m in 2001 from $397m in 2000. In 2002 sales rose a further 36.2% to $842m. In Japan, sales rose steeply from $245m in 2000 to $441m in 2001. Sales were driven by Takeda’s existing presence in the hypertension market and by the product’s efficacy and attractive side effect profile.

In September 2002, AstraZeneca announced that it had secured a labeling change, making candesartan the only ARB to boast superiority over the market leader and first entrant, Merck’s Cozaar (losartan), in terms of blood pressure lowering. However, the strongest competition to candesartan will continue to be Sanofi-Synthélabo/BristolMyers Squibb’s Avapro (irbesartan), a product that, like Blopress, is relatively new to the market but is growing rapidly. In 2002, Bristol-Myers Squibb recorded Avapro sales of $586m, 20.3% up on 2001.

Pfizer’s Norvasc (amlodipine), a calcium channel blocker, leads the Japanese hypertension market. Blopress was the second ARB to reach the Japanese market, following Banyu’s Nu-lotan (losartan), which was launched in August 1998. However, launches of other ARBs, including Novartis’ Diovan (valsartan) and Shionogi’s Avapro (irbesartan), in-licensed from Sanofi-Synthélabo, have made the Japanese ARB market increasingly competitive. Nevertheless, given Takeda’s strength in Japan, candesartan’s

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second-to-market advantage and the fact that candesartan is considered to be a second generation ARB, Blopress is expected to continue to perform well.

Benicar (olmesartan), due to be launched in Japan by Sankyo in 2004, represents one of the greatest threats to sales of Blopress in this market. In trials, Benicar has been shown to have greater efficacy than Cozaar and Diovan. Nevertheless, all agents in the class will benefit from continued uptake of ARBs in Japan and, as the class leader, Blopress will benefit most. With potential to expand its indications and clinical trial results that prove it to be superior to losartan, Blopress is expected to be a key revenue driver for Takeda. Sales of $1,085m are forecast for 2003, rising to $1,447m in 2005 and $1,646m in 2008.

R&D The following table presents an overview of Takeda’s R&D pipeline. Table 1.2: Takeda’s R&D pipeline, 2003 Code

Indication

Stage

Forecast sales FY2008 ($m) Launch year

TAK-375 TAK-677 TAK-559 TAK-428 TAK-370 TAK-637 TAK-013 TAK-427 TAK-475 MCC-135 TAK-165 TAK-201 TAK-128 TAK-220 TRM-1 TAK-147

Insomnia Diabetes Diabetes Diabetes GERD Incontinence Endometriosis Rhinitis Dyslipidemia Heart failure Cancer Rhinitis Diabetic nerve damage HIV Cancer Alzheimer’s disease

Phase III Phase II Phase II Phase II Phase II Phase II Phase II Phase II Phase II Phase II Phase I Phase I Phase I Phase I Preclinical Terminated

224 n/l n/l n/l n/l n/l n/l n/l n/l n/l n/l n/l n/l n/l n/l n/l

2006 >2008 >2008 >2008 >2008 >2008 >2008 >2008 >2008 >2008 >2008 >2008 >2008 >2008 >2008 n/a

GERD = gastroesophageal reflux disease n/a = not applicable or not available n/l = not launched Source: Company reports; author’s research and analysis

Business Insights

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TAK-375 TAK-375 is a melatonin receptor agonist that is in phase III trials in the US and Europe and phase II development in Japan for the treatment of primary insomnia and circadian rhythm sleep disorders. Results from early stage trials suggest that TAK-375, under development by TPNA for chronic and transient insomnia, is a highly selective ML-1 receptor agonist. The ML-1 receptor is a key mediator of natural sleep and may be an important new target for sleep agents. According to the results of phase II trials presented in June 2003 at the annual meeting of the Associated Professional Sleep Societies, TAK-375 showed a statistically significant improvement in sleep parameters with no significant adverse events.

The most common treatments for insomnia are benzodiazepines. These drugs work by binding to gamma-aminobutyric acid (GABA) receptors in the brain, resulting in stimulatory effects on GABAergic transmission and hyperpolarization of neuronal membranes. This mechanism has been shown to confer sedative, anxiolytic, muscle relaxant and anticonvulsant properties. Benzodiazepines have been widely used since the 1960s and their popularity is due to their good efficacy and side effect profiles, and because they are safe to use at high doses. Nevertheless, patients can become psychologically dependent on benzodiazepines and there are additional risks of tolerance and withdrawal side effects. Moreover, benzodiazepines can disturb sleep patterns.

The launch of second-generation hypnotics such as Sanofi-Synthélabo’s Ambien (zolpidem) has had a significant impact on the insomnia market. Ambien achieved sales of $1.4bn in 2002, after the former Pharmacia transferred its rights to the product to Sanofi-Synthélabo at the beginning of the year. These therapies are short-acting nonbenzodiazepines that can induce sleep with fewer side effects than benzodiazepines. They also have fewer morning side effects, such as sedation and memory loss (although these can occur to some degree).

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Although the market for the treatment of chronic insomnia has considerable potential, TAK-375 is at a disadvantage compared with two pipeline drugs that will reach the market first: Pfizer/Neurocrine’s indiplon and Sepracor’s Estorra (eszopiclone). With strong trial data and the marketing power of Pfizer behind it, indiplon is expected to be a key growth driver in the insomnia market. These new drugs are clearly being targeted at the elderly patient segment, which has the highest patient population (responsible for around 50% of total treatments in the insomnia market). This segment is dominated by the need for drugs that can provide a safe profile in the context of chronic use and low levels of drug-drug interaction.

Antidepressants and anxiety drugs are being used off-label in place of insomnia drugs, as non-benzodiazepine sleep drugs are tightly regulated, given the potential for abuse, and because chronic use has not been evaluated in clinical trials. Physicians are more concerned with the safety of insomnia products than with the lack of efficacy of using antidepressants/anxiety treatments in insomnia. Gaining a chronic use label from the FDA could drive market growth, as the drugs could be used longer term.

TAK-375 is predicted to reach the US market in 2006 at the earliest, since it has only recently entered phase III trials. If launch occurs in this year, first-year sales of $80m are forecast, rising to $224m by 2008.

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CHAPTER 2

Sankyo

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Chapter 2

Sankyo

Summary ‰

‰

‰

‰

‰

‰

‰

As the second largest Japanese pharmaceutical company, Sankyo’s pharmaceutical division reported a 5.2% increase in sales over the period 200102, up from $3,368m to $3,542m. This growth was driven by ethical sales, which rose by 6.1% and accounted for 74.3% of the company’s total sales. As Sankyo’s best selling product, Mevalotin accounted for 41.7% of sales in 2002 but generic competition entered the Japanese market in mid-2003. Generic pravastatin is expected to reach the US in 2006. Therapeutic expansion is a key part of Sankyo’s strategy, with both in-house development and in-licensing broadening the company’s focus into new areas, such as diabetes and respiratory disorders. Sankyo has used partnerships and licensing extensively over recent years to supplement both its late and early stage pipeline, with nine new agreements signed since the beginning of 2002. The company’s early stage licensing activity highlights a willingness to fund a number of first-in-class products. The company has suffered from declining profitability over the last five years. Sankyo does not have the financial strength to undertake any major strategic moves at present, although it is able to continue to fund its licensing strategy. The bile acid sequestrant WelChol’s main advantage in a market dominated by statins is its non-systemic mode of action. However, the high pill burden associated with the drug and its potential for unpleasant side effects will limit sales growth to around $328m by 2008. After delays triggered by safety concerns, both Lipovas and Calblock were approved in 2003. Although these products have lower sales potential than originally expected, they should go some way towards replacing lost sales of Mevalotin.

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Strategic position A summary of Sankyo’s strategic position is presented below. Figure 2.4: Sankyo’s strategic position

Strengths

Weaknesses

Positive strategic action

Delays to regulatory approval of key products in Japan

Increasing pharmaceutical focus

Lack of growth in domestic market

Opportunities

Threats

Drive global expansion through the development of novel products

A more rapid decline in sales of Mevalotin than currently forecast

Accelerate the R&D process

Business Insights

Source: Author’s research and analysis

Strengths Sankyo has outlined a clear commitment to increasing its focus on its pharmaceuticals business. The restructuring of the company’s non-pharmaceutical businesses has already resulted in the establishment of the crop protection and special merchandise divisions as separate companies, and has led to the amalgamation of the remaining businesses. 47

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Sankyo is in a vulnerable position but its positive strategic responses to challenges that it faces is a major strength. The company’s main sales driver, Mevalotin (pravastatin), is already threatened by generic competition in Japan, with generics expected to reach the US in 2006. A number of products that were expected to replace Mevalotin have experienced regulatory delays, thereby reducing their sales potential. However, although many Japanese companies have set targets and produced five year growth plans, Sankyo actually appears to be making changes to achieve its goals. Recent inlicensing activity, through which it has acquired the Japanese rights to a number of promising products, is an indicator that the strategy is working.

Weaknesses Sankyo’s main weakness results from delays to regulatory approval of key products in Japan. With the threat of generic competition to Mevalotin from 2003, Sankyo has been attempting to find a replacement growth driver. In particular, pitavastatin (NK-104) and, to a lesser extent, Calblock (azelnidipine) were regarded as the products that could enable Sankyo to maintain its cardiovascular strength. A combination of safety concerns and associated delays in gaining regulatory approval have considerably diminished the potential of these drugs to replace lost Mevalotin sales, particularly over the short-term.

Opportunities Sankyo has a large R&D pipeline, with compounds in development from phase I through to phase III, but delays in bringing products to market have affected the company’s sales growth. Sankyo must, therefore, focus on bringing products to market more rapidly and on providing extensive safety data in order to avoid the regulatory delays that have hampered recent product approvals.

Threats The greatest threat that Sankyo faces is if generic competition in Japan has a greater impact on Mevalotin sales than expected. Mevalotin accounted for 41.7% of Sankyo’s

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sales in 2002 and generic competition entered the Japanese market in mid-2003. However, brand loyalty is far stronger among physicians in Japan than among their US counterparts, and generic drugs are priced only around 20% below the branded version, so the impact of their launch is expected to be gradual. Even so, continuing government attempts to constrain costs and recent increases in co-payments for much of the population could result in a greater impact on Mevalotin sales.

Growth strategy Sankyo has experienced considerable organic growth in the past, notably through Mevalotin. There is potential for further such growth, both from newly marketed products such as Benicar (olmesartan) and Sankyo’s in-house pipeline. However, organic growth is unlikely to be the company’s main growth driver.

Sankyo has not traditionally used mergers or acquisitions (M&A) to drive growth, although it acquired the small French company, Laboratoires Fornet, in 2002. The most significant acquisition in recent years was that of Warner-Lambert’s share in the two companies’ joint venture. Sankyo and Warner-Lambert established a joint venture in 1996, principally to market their co-developed diabetes therapy Rezulin/Noscal (troglitazone), which was later withdrawn. However, the venture was always intended to be a means for Sankyo to gain a standalone presence in the US, as a buy-back option was written into the original contract.

With its focus on innovative therapies and continued desire to expand overseas, Sankyo could look for further acquisitions to accelerate its expansion. However, it may have decided that independent companies maintain innovation better than large consolidated companies and is, therefore, focusing on building a strong network of alliances.

In terms of geographic expansion, M&A provides a far faster route to accomplishing strategic objectives than organic growth, particularly in the highly competitive US

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market where Sankyo competes against the leading cardiovascular players. Although at present it has chosen to use a marketing partner, Forest Laboratories, to supplement its own sales force, an acquisition would offer a longer term solution. The acquisition of Forest itself could be one option, as the company has a large sales force and some presence in the cardiovascular market, which would be beneficial to Sankyo. However, Forest maintains a high share price and consequently high market cap, which could price it out of Sankyo’s financial capabilities.

Geographic expansion is key to Sankyo’s growth strategy and will continue over the next few years as Benicar drives sales growth in the US and Europe. However, over the longer term Sankyo will need to either in-license global rights to products with high sales potential or develop suitable products in-house. The fact that a large number of Japanese pharmaceutical companies are following the same strategy will increase competition and make it harder for Sankyo to succeed.

Alliance activity The following figure illustrates Sankyo’s alliance network. Sankyo has used partnerships and licensing extensively over recent years to supplement both its late and early stage pipeline, with nine new agreements signed since the beginning of 2002. These agreements vary from early stage development collaborations, such as those with Biota and Tularik, to late stage marketing agreements, such as those with Aventis, GSK and Novartis. It is evident that Sankyo has developed a strong network of partners to aid its development.

Sankyo’s early stage licensing highlights the company’s willingness to fund the development of novel compounds, a strategy which is enabling it to participate in the development of a number of first-in-class products. Additionally, Sankyo has committed to invest $75m in the Thomas Weisel Partners Healthcare Venture Fund. This venture capital fund invests in early stage biotech companies with novel

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technologies and innovative products in any therapeutic or diagnostic area. Through this investment Sankyo retains the right of first refusal to make any additional investments in the fund’s portfolio of companies and may use the opportunity to establish new research relationships. Figure 2.5: Sankyo’s alliance network

Aventis (Ketek)

Metabasis Therapeutics

Fujisawa (CS-758)

Eresearch Technology

X-Ceptor Therapeutics

Eli Lilly (CS-747)

FibroGen

Sankyo

GSK

Biota

(Avandia/Relenza)

Kureha Chemical Industries

Suzuken (SNK-860)

(CPA 926)

Forest Labs (Benicar)

Syrrx Novartis (Xolair)

Tularik

Product related agreement

R&D agreement

Two product related agreements In-licensing licensing deals

Out-licensing licensing deals

Co-marketing/co-development agreements

Non-product related deals

Business Insights

Source: Author’s research and analysis

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Financial overview Sankyo does not have the financial strength to undertake any major strategic moves at present, although it is able to continue to fund its licensing strategy.

The company has suffered from declining profitability over the last five years. Its operating profit margin declined to 14% in 2002 and net profit margin fell to 5.9%. Operating profits declined by 0.9% from $644m in 2001 to $638m in 2002. Net profits declined more sharply, falling by 12.9% from $310m to $270m. Although the company does have some funds available in terms of short-term investments and cash, it also maintains a fairly high level of liabilities.

Sankyo’s total sales rose by 3.8% from $4,384m in 2001 to $4,551m in 2002. The company’s pharmaceutical division reported a 5.2% increase in sales over the same period, up from $3,368m to $3,542m. This growth was driven by ethical sales, which rose by 6.1% and accounted for 74.3% of the company’s total sales. Sales of the overthe-counter division fell by 10.6% from $180m in 2001 to $161m in 2002 as a result of a decline in market growth and severe price competition. Sankyo’s other divisions recorded an overall slight decline in 2002 of 0.7%.

Sankyo derives the majority of its sales from Japan, although sales outside the US are driving growth. In 2002, the company’s Japanese sales declined by 2%, representing 86.2% of total sales compared to 91.4% in 2001. Sales in North America accounted for 8.8%, up from 5.5% in the previous year, while sales in other countries also rose.

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Portfolio analysis Therapeutic focus Sankyo’s ethical sales rose by 6.1% in 2002 to $3,381m, driven by the company’s cardiovascular franchise, which grew by 9.5% to $2,191m to account for 64.8% of total ethical sales in 2002.

Sales in the infectious disease franchise fell by 2.9% from $250m in 2001 to $246m in 2002. The franchise accounted for 7% of ethical sales in 2002. The two main products in this franchise, both antibacterials, recorded declining sales.

The arthritis, immune and inflammatory disorders franchise accounted for 8.9% of ethical sales in 2002, although sales of the main product, Loxonin (loxoprofen), declined by 4.6%. Sankyo continued to generate significant sales outside of its traditional franchises, with its remaining products recording sales of $653m and representing 19.3% of total ethical sales. Figure 2.6: Sankyo’s therapeutic focus, FY2002 Other 19.3%

Infectious diseases 7.0% AIID 8.9%

Cardiovascular 64.8%

AIID = arthritis, immune and inflammatory disorders Business Insights

Source: Author’s research and analysis

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Major marketed products The table below summarizes sales of Sankyo’s leading products. Those with greatest commercial potential are discussed in more detail in the following paragraphs. Table 2.3: Sales of Sankyo’s leading products, FY2001-02

Brand

Generic

Indication

Mevalotin WelChol Benicar Other

pravastatin colesevelam olmesartan n/a

Dyslipidemia Dyslipidemia Hypertension Various

Total

Sales ($m) Growth FY2001 FY2002 FY2001-02 (%) 1,398 79 0 1,711

1,410 136 10 1,825

0.9 72.2 n/a 6.7

3,188

3,381

6.1

n/a = not applicable Source: Company reports; author’s research and analysis

Business Insights

Mevalotin (pravastatin) Mevalotin is a first generation statin that is indicated for both low density lipid and total cholesterol reduction. Mevalotin was developed by Sankyo, which markets the drug in Japan and East Asia. Bristol-Myers Squibb (BMS) has marketing rights in all other markets where it sells the product as Pravachol.

Mevalotin was the first statin to reach the Japanese market where it was launched in 1989. Due to Sankyo’s size and marketing power, the drug achieved substantial sales before other statins were launched. The success of Mevalotin has made Sankyo the leading cardiovascular company in Japan. Mevalotin generated global sales of $1,410m in 2002, rising from $1,398m in 2001. In 2002, 62.7% of sales were derived from Sankyo’s domestic market; the remainder was derived from Sankyo’s direct sales in other Asian markets and from bulk sales to BMS.

The arrival of statins on the Japanese market has been slow relative to the situation in Western countries. Mevalotin’s launch in Japan in 1989 was followed in 1991 by that

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of simvastatin, marketed as Lipovas by Banyu (which recorded sales of $401m in 2002), and in 1998 by fluvastatin, co-promoted by Novartis and Tanabe as Lochol. In 1999, Baycol (cerivastatin), co-marketed as Certa by Takeda, became the first of the second-generation statins to be launched in Japan. However, the drug was discontinued in August 2001 after Bayer withdrew it globally due to safety concerns. In May 2000, Yamanouchi Pharmaceutical launched Pfizer’s Lipitor (atorvastatin), which has since experienced rapid sales growth. Yamanouchi reported sales of $506m in 2002, an increase of 37.7% on the previous year’s sales.

The Japanese market is constrained by the fact that only limited doses of statins are reimbursable. Many Japanese physicians believe that these doses are too low and that more potent treatments are needed. Japanese physicians have long believed that the launch of Lipitor would fulfill this need and its rapid sales growth suggests that it is having a similar effect on the Japanese market as it has elsewhere, taking the majority of new statin prescriptions. The need for a more potent statin also means that Lipitor should continue to boost growth in the statin market overall.

BMS’ sales of pravastatin under the Pravachol brand are forecast to rise slightly in the short-term, but will decline as the loss of patent protection in first Europe (2004) and then the US (2006) impacts sales.

The greatest short-term effect on Mevalotin sales will come from the launch of generic pravastatin in Japan. Following the loss of patent protection in October 2002, a large number of generics companies and some of the larger pharmaceutical companies have announced plans to launch generic pravastatin. Although generic drug prices, as set by the Ministry of Health, Labor and Welfare, are only 20% below those of their branded forebears, this will still have a significant impact on sales of Mevalotin.

Furthermore, competition in the Japanese statin market is increasing as a result of the continued impact of Lipitor, generic competition to both pravastatin and simvastatin, and new product launches over the next couple of years. One future threat comes from

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Sankyo’s own pipeline product, Livalo (pitavastatin), which is expected to reach the Japanese market towards the end of 2003, having been filed in 1999. The launch of Crestor (rosuvastatin), which will be co-marketed by AstraZeneca and Shionogi in the Japanese market, is expected in 2004. Additionally, Sankyo will lose significant royalty and bulk sales income from BMS after Pravachol loses patent protection in Europe in 2004 and in the US in 2006. Consequently, sales of Mevalotin are forecast to drop slightly to $1,289m in 2003, declining further to $856m in 2005 as a result of generic competition and switching to pitavastatin.

WelChol (colesevelam) WelChol is a bile acid sequestrant that was originated by GelTex Pharmaceuticals and developed in collaboration with Genzyme in the EU and Sankyo Pharma in the US. Genzyme subsequently acquired GelTex Pharmaceuticals and now receives royalties from Sankyo Pharma. WelChol was launched in the US in September 2000 and generated sales of $5m between September and December 2000. The drug experienced first full year sales of $79m in 2001, rising to $136m in 2002.

WelChol’s main advantage in a market dominated by statins is its non-systemic mode of action; it is not absorbed by the body and instead works in the gastrointestinal tract. However, the high pill burden associated with the drug and its potential for unpleasant side effects will limit sales growth. Furthermore, Sankyo simply does not have the marketing power necessary to compete with Pfizer and Merck & Co.

WelChol is the second product derived from GelTex Pharmaceutical’s novel, nonabsorbed polymer technology to receive FDA approval for the treatment of hypercholesterolemia. While the drug has been evaluated as a monotherapy, Sankyo is attempting to position the drug as suitable for concomitant therapy with statins. WelChol is reported to have fewer side effects than currently available bile acid sequestrants so could, therefore, be a useful agent in combination therapy with statins. This approach is likely to be the most successful way to ensure rapid uptake. However,

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there are potential problems with patient compliance with WelChol because patients are required to take at least six tablets per day and each tablet is relatively large.

Although statins are widely regarded as the most efficacious type of antidyslipidemic and are, therefore, generally the therapy of choice, the statin class is also the most expensive and this type of therapy is not suitable for all dyslipidemic patients. This presents GelTex Pharmaceuticals/Sankyo with two main marketing opportunities: ‰

to optimize WelChol’s share of first-line hypercholesterolemic prescriptions through the use of a competitive pricing strategy;

‰

to promote WelChol’s use as a second-line treatment in patients who are unresponsive or intolerant to statin therapy.

Future threats will come from the introduction of generic statins, as well as combination

statin

therapies

such

as

Merck/Schering

Plough’s

Zocor/Zetia

(simvastatin/ezetimibe) combination. The net effect of these challenges will result in sales of $183m in 2003, rising to $328m in 2008.

Benicar/Olmetec (olmesartan) Benicar is an orally active non-peptide angiotensin II receptor blocker (ARB) that was developed by Sankyo and approved in the EU and US in April 2002; it is awaiting approval in Japan. Forest announced in December 2001 that it had agreed to copromote Benicar with Sankyo in the US. The co-promotion deal is believed to be for six years. In March 2001, Sankyo announced that it had entered into a pan-European co-marketing agreement for Benicar with Menarini. In June 2003, the FDA approved Benicar

HCT,

a

combination

version

of

olmesartan

with

the

diuretic

hydrochlorothiazide.

The pharmacokinetics of olmesartan are independent of age and the compound effectively reduces systolic as well as diastolic blood pressure, enabling it to be effective in elderly patients with hypertension, a large segment of the patient 57

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population. Furthermore, with side effects comparable to placebo, a defining characteristic of ARBs, the compound is well tolerated in all segments of the patient population.

In comparative trials Benicar was shown to be more effective than its main competitors, Merck & Co.’s Cozaar (losartan) and Novartis’ Diovan (valsartan), which achieved sales of $2,190m and $1,658m in 2002, respectively. Despite this advantage, Benicar is unlikely to pose a threat to such established products globally due to the comparative weakness of Sankyo’s marketing support and the drug’s late market entry. Indeed, the majority of its growth is likely to be derived from greater use of the class as a whole.

ARBs are the fastest growing segment of the anti-hypertensive market. As the only class of anti-hypertensive remaining entirely patent protected over the decade, and as an increasing amount of clinical trial data in both hypertension and additional indications becomes available, ARBs can be expected to dominate the anti-hypertensive market.

In Japan, physicians have commented that the use of ARBs is likely to increase significantly, despite their delayed entry compared to Western markets. Calcium channel blockers have traditionally formed the mainstay of anti-hypertensive therapy in Japan due to the relatively high prevalence of vasopressor angina in the Japanese population compared with Western populations. However, since the only ARBs currently available in Japan are Banyu’s Nu-lotan (losartan), Novartis’ Diovan and Takeda’s Blopress (candesartan), with the other ARBs in registration, it seems likely that newer ARBs will have less of a first-to-market advantage over olmesartan in Japan than in the EU and US.

Olmesartan will certainly have an advantage over several of its competitors in Japan, where Sankyo is the leading company in terms of cardiovascular sales and in second place overall. Furthermore, the delay in the launch between olmesartan and some of its major competitors, such as irbesartan and telmisartan, will be less pronounced in Japan, meaning that clinical use of some older ARBs will be less entrenched. Even in this

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Japan though, Benicar will face strong competition from candesartan, which is marketed by Takeda.

Outside Japan, Benicar lacks the marketing support of many of its competitors. Although Sankyo is increasing its presence in the US following the buy-out of the Sankyo-Parke Davies joint venture company, Benicar is only the second cardiovascular drug to be launched by Sankyo in the US. The company does not benefit from marketing the anti-dyslipidemic pravastatin in the US as it does in Japan, due to the terms of the co-marketing agreement that Sankyo entered into with BMS. This will make the promotion of Benicar in the US more difficult for Sankyo. Although the company will be supported by Forest, which has experience in the anti-hypertensives sector, these companies will be unable to challenge the marketing might of Merck & Co. and BMS. Similarly, although Menarini will co-promote Olmetec in Europe, this represents relatively weak marketing support compared with the drug’s competitors. Consequently, global sales of olmesartan are forecast to rise slowly to $91m in 2003 and further to $1,014m in 2008.

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R&D The following table presents an overview of Sankyo’s R&D pipeline. Table 2.4: Sankyo’s R&D pipeline, 2003 Brand/code

Generic

Indication

Stage

Livalo/NK-104 Ketek Calblock IGE025 LX-A CS-011 CS-917 Fidalestat CPA-926 CS-003 CS-801 CS-872 CS-600G CS-502 CS-712 CS-706 CS-526 R-125224 R-142440

pitavastatin telithromycin azelnidipine omalizumab n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a

Dyslipidemia Bacterial infections Hypertension Asthma Anti-inflammatory Diabetes Diabetes Diabetes Osteoarthritis Asthma Incontinence Diabetes Anti-inflammatory Anti-inflammatory Rhinitis Cancer Ulcers Rheumatoid arthritis Osteoporosis

Approved Approved Approved Phase III Phase III Phase II Phase II Phase II Phase II Phase II Phase II Phase I Phase I Phase I Phase I Phase I Phase I Preclinical Preclinical

Forecast sales Launch FY2008 ($m) year 153 143 57 20 n/l n/l n/l n/l n/l n/l n/l n/l n/l n/l n/l n/l n/l n/l n/l

2003 2003 2003 2007 >2008 >2008 >2008 >2008 >2008 >2008 >2008 >2008 >2008 >2008 >2008 >2008 >2008 >2008 >2008

n/a = not available n/l = not launched Source: Company reports; author’s research and analysis

Business Insights

Livalo (pitavastatin) Livalo was co-developed by Nissan Chemical and Kowa and, as a third-generation statin, is expected to have higher potency and attract a sizable share of the Japanese statin market. The 1mg and 2mg doses of Livalo were approved in July 2003. After its launch, Nissan Chemical, the drug’s originator, will be in charge of pharmaceutical bulk production and Kowa will control production and sales. In May 1999, Nissan Chemical and Kowa agreed to co-market Livalo with Sankyo in order to increase the drug’s penetration of the Japanese market. Sankyo will also market the drug in the US and in August 2000 the company announced that it was to expand its sales force

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accordingly. Novartis will market the product in Europe. Although Livalo is believed to have considerable potential, recent safety concerns and regulatory delays in Japan have reduced its projected sales.

Livalo will enter a highly competitive market in both the US and Japan. Sankyo has a clear advantage in the Japanese market as its statin Mevalotin is the market leader, so it is in a strong position to launch a new product. Although the arrival of generic competitors to Mevalotin in 2003 is a negative factor for Livalo, it does mean that Sankyo is likely to switch its marketing support to the newer product to protect its revenues.

In the US Sankyo does not have the marketing power to compete with Pfizer and Merck & Co. Furthermore, generic versions of Merck’s Zocor are expected to reach the US market in 2006, the same year that Livalo should be launched there. As generics typically have a far greater impact in the US than in Japan, because branded products command a larger premium, this could have a significant impact on Sankyo’s pricing of the drug.

Pitavastatin’s success outside the Japanese market is less assured and, as a US marketing partner, Sankyo will not have as great a promotional reach as an established US-based company. Although the Kowa/Nissan/Sankyo partnership is undoubtedly compatible, and Sankyo will have extended its US infrastructure by the time of pitavastatin’s launch in 2006, the drug may not flourish as it would under the management of a company with a long-standing influence in the US market. Furthermore, AstraZeneca’s Crestor, launched in 2003, should be an established product by 2006. There is also a risk that Sankyo will not be able to secure FDA approval as a result of safety concerns surrounding higher doses of pitavastatin. Consequently, total sales of the drug are forecast to reach $30m in 2003, rising to $153m in 2008.

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CHAPTER 3

Yamanouchi

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Chapter 3

Yamanouchi

Summary ‰

‰

‰

‰

‰

‰

‰

In February 2004 Yamanouchi announced it was to buy Fujisawa in a deal worth $7.76bn with a planned completion date of April 2005. The deal creates Japan’s second largest sales force, a broad product portfolio and a strong platform for overseas expansion. Yamanouchi’s pharmaceutical sales increased by 7.7% in 2002 to $3,285m. Future growth will be driven by a combination of in-house development and inlicensing of key products. With cash and short-term investments at $2.7bn in 2002, Yamanouchi is in a strong financial position, enabling it to invest in further strengthening its portfolio via licensing deals. Yamanouchi now has a US subsidiary, Yamanouchi Pharma America. This will allow the company to exploit the largest pharmaceutical market directly and to generate higher revenues by launching smaller drugs from its portfolio, rather than limiting its US exposure to larger drugs that attract licensing partners. Yamanouchi has three products in its portfolio that are blockbusters in terms of their total global sales: Harnal, Gaster and Lipitor. Marketing such drugs raises the profile of the company in the international pharmaceutical market, facilitating further licensing or partnership deals. Although Lipitor’s dominance is assured in the short-term, it will eventually face competition from third-generation statins, including Crestor and Livalo. Sales of Lipitor accruing to Yamanouchi are predicted to rise from $506m in 2002 to $774m in 2008. Yamanouchi is in a strong position to drive future growth, with 24 products in development. Key compounds include YM-177, YM-087 and YM-905, and should help the company overcome its major weakness: over reliance on mature products for growth.

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The Yamanouchi/Fujisawa merger On the 25th February, 2004 Yamanouchi announced it was to buy rival Fujisawa in a deal worth $7.76bn. The planned completion date for the deal is April 2005. The deal should provide a strong foundation for growth and expansion outside Japan, as there is little overlap between both companies’ therapeutic focuses (see Figure 3.9 and Figure 5.15). While Yamanouchi has a broad therapeutic focus, Fujisawa is more reliant on a smaller range of therapy areas, with strengths in infectious diseases and arthritis, immune and inflammatory diseases. The move will also greatly strengthen Fujisawa’s R&D pipeline, which was quite weak in the short term, whereas Yamanouchi has a relatively strong short term R&D pipeline.

Both companies are in strong financial positions and grew at a CAGR of 5.3% (Yamanouchi) and 8.3% (Fujisawa) respectively between 1998 and 2002. Historically, Yamanouchi has derived the majority of its revenues from the domestic market while Fujisawa has a stronger overseas focus, with 26.8% of sales coming from North America and 12.8% from European markets. However, in 2002, Yamanouchi established a US subsidiary and overall the merged company will have a much stronger overseas platform looking forward. Domestically, the company will have the second largest sales force of 2,400, second only to that of Pfizer.

The merger has been explicitly described as a move towards putting Yamanouchi into the top 10 global pharmaceutical companies, either through organic growth or partnership. The company has stated that existing licensing deals, including a major alliance with Pfizer, will remain unchanged.

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Strategic position A summary of Yamanouchi’s strategic position is presented below. Figure 3.7: Yamanouchi’s strategic position

Strengths

Weaknesses Reliance on a few key products

Broad therapeutic focus Strong global presence

Relatively mature portfolio Strong balance sheet

Opportunities

Threats Termination of in-licensing agreements

Potential to penetrate the US market directly Exploitation of large R&D pipeline Potential of in-licensed products Develop new oncology AIID franchise

Business Insights

Source: Author’s research and analysis

Strengths Yamanouchi’s main strengths are its: ‰

broad therapeutic focus;

‰

portfolio of globally significant products;

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TLFeBOOK

‰

healthy balance sheet.

Yamanouchi has three products in its portfolio that are blockbusters in terms of their total global sales. The company’s flagship product is Harnal (tamsulosin), which generated $882m for Yamanouchi in 2002. The second best selling product is Gaster (famotidine), with sales of $708m in 2002, followed by Lipitor (atorvastatin), with sales of $506m. Marketing such products raises the profile of Yamanouchi in the international pharmaceutical market, facilitating further licensing or partnership deals.

With cash and short-term investments at $2.7bn in 2002, Yamanouchi is in a strong financial position. This will enable the company to support its products with potent marketing, invest in R&D and exploit in-licensing or acquisition opportunities.

Weaknesses Yamanouchi’s major weaknesses are its reliance on a few key products and the relative maturity of its portfolio. Over 52% of the company’s sales in 2002 came from products that have been available for over 10 years. The company needs to ensure that it introduces new growth drivers to the portfolio, as it is expected that three-quarters of forecast sales in 2008 will still come from older products.

Opportunities Major opportunities that Yamanouchi could exploit include: ‰

strong R&D pipeline;

‰

strength of in-licensed products – the company has in-licensed some important drugs, including Lipitor and more recently Micardis (telmisartan), that will boost its portfolio;

‰

development of new oncology and/or arthritis, immune disorders and inflammation franchise(s);

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TLFeBOOK

‰

potential to penetrate the US market directly.

In April 2002, Yamanouchi established a US subsidiary, Yamanouchi Pharma America. This will allow the company to exploit the largest pharmaceutical market directly and reap higher rewards from marketed products than those achieved from out-licensing deals. The company will also be able to generate higher revenues by launching the smaller drugs from its portfolio and pipeline, rather than limiting its US exposure to larger drugs that attract licensing partners.

Threats Yamanouchi could be threatened by the termination of several in-licensing agreements. Of key importance is Lipitor, which was Yamanouchi’s third-largest drug in 2002, and which also had one of the highest growth rates over the year. Some pivotal R&D products are also in-licensed. Clearly, if the company were to lose such in-licensing deals, it would also experience a significant decline in revenues, although this is not considered to be a high risk at present.

Growth strategy Yamanouchi’s pharmaceutical sales increased by 7.7% in 2002 to $3,285m. The pharmaceutical segment accounted for 81.2% of the company’s total sales. Yamanouchi’s expansion has been largely achieved through organic growth, although this has been supplemented by in-licensing.

Yamanouchi has an established presence as a research-based developer of pharmaceuticals and has introduced several world-class drugs to the international market, including the H2 antagonist Gaster, the calcium antagonist Perdipine (nicardipine), and Harnal, a treatment for functional symptoms of benign prostatic hyperplasia.

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The company has a large pipeline of internally developed products that will fuel future organic growth. In terms of pharmaceutical sales, Yamanouchi’s existing portfolio is forecast to drive organic growth at a CAGR of 3.2% from 2002 to 2008. The company may be able to boost this by exploiting its existing drugs through marketing and lifecycle management, or by using alliances to enter new markets.

Yamanouchi has a ‘medium-term plan’, revised in September 2002, which sets out what the company needs to do to achieve further growth over the long-term. It is a fixed three year plan that will run through to March 2005 (in effect 2.5 years). The company aims to sustain consolidated operating profit growth to fund US investment.

Alliance activity Yamanouchi uses its strong product portfolio to attract corporate relationships and has been able to in-license key products, most notably Lipitor from Pfizer. In-licensing appears to be a key part of its long-term strategy to gain access to products with high potential for the domestic market.

The company has also used out-licensing to market its products abroad, although its new US subsidiary will eventually reduce such activity. Yamanouchi was behind the discovery and development of several drugs marketed in the US, but had used outlicensing deals to sell them in this market. In collaboration with its clinical development subsidiary, YUSA, Yamanouchi out-licensed Perdipine (nicardipine) to Syntex/Roche, Cefotan (cefotetan) to AstraZeneca, Foradil (formoterol) to Novartis, and Gaster to Merck & Co. Through these licensing activities, the company gained experience of product development in the US and formed relationships and alliances within the pharmaceutical industry. As a result, it has been able to develop its independent US operations, although it is still likely to continue to use co-promotion alliances to maximize product sales, as it has done with GSK and YM-905.

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Figure 3.8: Yamanouchi’s alliance network Medtronic Sofamor Danek Glaxo Wellcome K.K.

(YM484)

GSK (YM905)

Phytopharm Celera Genomics

(PYM50028)

Chugai Taisho Pharmaceutical

(Euglucon / Lanirapid )

Yamanouchi Medtronic

Boehringer Ingelheim

(InductOs)

(telmisartan)

Taiho (IPD-1151T)

Transgenic

Metabolex, Inc.

Gedeon Richter

Zeria Pharmaceutical (Z-338)

(famotidine polymorphism)

Product related agreement In-licensing licensing deals

Out-licensing licensing deals

R&D agreement Co-marketing/co-development agreements

Non- product related deals

Business Insights

Source: Author’s research and analysis

Financial overview Yamanouchi is in a very strong financial position, with $2.7bn of cash and short-term investments in 2002, so it is unlikely that the company’s growth will be hindered by a lack of funding. Total sales grew with a CAGR of 4.6% between 1998 and 2002, while in 2002 the company’s sales grew by 5.3% to $4,046m.

Yamanouchi’s revenues are derived from three key divisions: pharmaceuticals, nutritional and personal care products, and food and roses. Sales were driven by the

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pharmaceutical division, which accounted for 81.2% of overall sales in 2002 and 79.3% in 2001. The food and roses business was the second largest, contributing 12.4% of total sales in 2002, followed by the nutritional and personal care products division, which posted sales of $245m in 2002. Yamanouchi derives other sales mainly from real estate. Income from this small segment decreased by 1.8% in 2002 and its contribution of 0.4% was the same as in 2001.

Yamanouchi’s total costs have grown with a CAGR of 5.3% between 1998 and 2002, reaching $3,363m in 2002. Operating costs, which were $3,202m in 2002, grew at a slightly lower CAGR of 4.7% over the same period, while operating profit increased with a CAGR of 4.3% to $844m in 2002, up 12.1% on 2001. The company’s pretax profit increased by 0.2% in 2002 to $743m. Retained profit in 2002 was $402m, an increase of 9.2% over 2001.

The majority of the company’s revenues still originate from its domestic market. Japan contributed 63.9% of pharmaceutical sales in 2002 and 62.7% in 2001. Sales from Japan in 2002 were $2,586m, an increase of 7.2% over 2001.

Portfolio analysis Therapeutic focus Yamanouchi’s therapeutic focus is illustrated in the pie chart below. The company’s largest franchise in 2002 was cardiovascular, which represented 29.6% of sales, compared with 27.4% in 2001. Revenue from this portfolio increased by 16.3% from $835m in 2001 to $971m in 2002. Such growth was above average and was mainly attributable to the increase in Lipitor sales. The franchise overtook urology, which had dominated in 2001.

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Figure 3.9: Yamanouchi’s therapeutic focus, FY2002 Diabetes and endocrinology 5.1% Infectious diseases 5.5%

Other 6.2% Cardiovascular 29.6%

Gastrointestinal 24.2%

Urology 29.5% Business Insights

Source: Author’s research and analysis

The franchise showing the greatest decline in 2002 was the gastrointestinal portfolio, with a decrease in sales of 4.9% to $794m. This franchise, the third largest in 2002, accounted for 24.2% of ethical sales, down from 27.4% in 2001. The main product in this franchise, Gaster, performed badly in 2002 following the entry of generic competition. The gastrointestinal franchise is also the most mature.

The fastest-growing franchise in 2002 was infectious diseases, with an increase in sales of 29.1% to $182m. This franchise, the fourth largest, accounted for 5.5% of ethical sales in 2002, up from 4.6% in 2001. This performance was the result of growth in Advaferon (interferon alfacon-1) sales.

Overall, Yamanouchi is forecast to experience slow growth over the next six years, with ethical sales predicted to rise with a CAGR of just 3% in the period to 2008.

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Major marketed products The table below summarizes sales of Yamanouchi’s leading products. Those with greatest commercial potential are discussed in more detail in the following paragraphs. Table 3.5: Sales of Yamanouchi’s leading products, FY2001-02 Sales ($m) Growth FY2001 FY2002 FY2001-02 (%)

Brand

Generic

Indication

Harnal Gaster Lipitor Other

tamsulosin famotidine atorvastatin n/a

Benign prostatic hyperplasia Ulcers Dyslipidemia Various

Total

775 745 367 1,162

882 708 506 1,189

13.8 (5.0) 37.9 2.3

3,049

3,285

7.7

n/a = not applicable Source: Company reports; author’s research and analysis

Business Insights

Harnal (tamsulosin) Harnal is an uroselective alfa blocker indicated for the treatment of functional symptoms of benign prostatic hyperplasia (BPH). Harnal interferes with the nerve impulses of the urethra and the bladder neck, which helps with the symptoms of hesitancy, intermittency, force of urine stream, sensation of incomplete emptying and daytime frequency and nocturia.

Yamanouchi originated the product and markets the drug as Harnal in Japan and Asia and as Omnic in Europe. Boehringer Ingelheim and Abbott market the drug as Flomox in the US and Europe, GSK markets it in the UK and Aventis markets it in Germany. In 2002, Yamanouchi reported sales (including bulk revenues and royalties) of Harnal of $882m, up 13.8% on 2001. Harnal has become the leading treatment in the global BPH market and commands a 56.3% share of the Japanese market.

Harnal’s main competitors include Pfizer’s Cardura (doxazosin), Merck & Co.’s Proscar (finasteride) and Abbott’s Hytrin (terazosin). However, unlike other alfa

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blockers used for the treatment of both hypertension and BPH, Harnal acts specifically on alfa receptors in the urinary tract, reducing the potential for cardiovascular side effects such as hypertension. The drug can usually be administered without the need for dose titration, reducing the time for optimal response to occur after initial administration of the therapy.

Yamanouchi is developing Harnal for the additional indication of lower urinary tract symptoms in women and men who do not suffer from BPH. The extension of the potential patient population to include women is expected to expand the market for Harnal considerably. Yamanouchi is also developing TOCAS (Tamsulosin Oral Controlled Absorption System), a drug delivery system that controls the systemic absorption of the once-daily administration of Harnal, enabling smoother control of systemic blood concentration. TOCAS gradually releases the drug as the tablet travels through the digestive tract, including the colon, where drug release is difficult to achieve. TOCAS is in phase III development in Europe and is expected to be launched in 2005. Yamanouchi is also considering ways to commercialize over-the-counter (OTC) versions of Harnal, particularly because the company retains OTC development, manufacturing and marketing rights in North America.

These three opportunities have the potential to counteract the potential loss of sales that would result from the loss of patent protection in the medium-term. A more immediate risk is that of larger National Health Institute price reductions in Japan. Sales of Harnal are forecast to reach $1,106m in 2005 and $908m in 2008.

Lipitor (atorvastatin) Lipitor, a second-generation anti-hyperlipidemic, is a hydroxy-3-methylglutaryl coenzyme A reductase inhibitor (also known as a statin). Originally developed by WarnerLambert and now under the control of Pfizer, Lipitor was launched in the US and the UK in February 1997. Yamanouchi co-promotes the product in Japan with Pfizer, where it was launched in May 2000.

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Between 2002 and 2010, total sales of anti-atherosclerosis therapies are expected to grow substantially, as a result of a rise in atherosclerosis prevalence and steady increases in diagnosis and drug treatment rates in all major national markets. Sales of statins will be responsible for the majority of the market’s value in the medium-term. However, it is likely that the total value of the statin market will fall due to generic price erosion and the launch of successful novel therapies.

The Japanese statin market is worth approximately $2bn and is led by Sankyo’s Mevalotin (pravastatin), with around 45% of the market. Lipitor is in second place, with a market share of 22%, followed closely by Banyu’s Lipovas (simvastatin). Novartis’ Lochol (fluvastatin) is also available in Japan.

Lipitor is the most potent statin available in Japan. A common unmet need identified by Japanese doctors is that the doses at which statins may be reimbursed are too low. Since Lipitor is effective at low doses, it should continue to achieve a high prescription uptake in Japan over the next few years.

In the medium- to long-term, a threat to Lipitor is the alliance between Merck and Schering-Plough to combine Zocor (simvastatin) and Zetia (ezetimibe). These two drugs combined have the same effects as Lipitor but clinical trials are needed to prove that the combination is as or more effective than Lipitor. The combination of simvastatin and ezetimibe is in phase I development in the US. Zetia is not in development in Japan, so it is not an immediate threat.

In anticipation of generic competition, both from other class members and directly upon Lipitor’s US patent expiry in 2010, Pfizer has investigated a number of opportunities to boost sales of Lipitor, such as a combination product and additional indications. Such lifecycle management could be beneficial in Japan as well.

Lipitor’s dominance seems guaranteed in the short-term but will be threatened by the launch of AstraZeneca’s ‘superstatin’ Crestor (rosuvastatin), which is expected to

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become one of the leading statins. Crestor was filed for approval in the US and the EU in June 2001, and in Japan in April 2002 where it will be co-marketed with Shionogi. Another third-generation statin, which has also demonstrated higher potency than Lipitor in clinical trials, is Kowa/Nissan Chemical/Sankyo’s new statin, pitavastatin DCI. This threat may prove more imminent for Yamanouchi’s Lipitor sales. Sankyo has acquired rights in the US and will co-market the product with Kowa in Japan. Novartis has the rights in Europe, Africa and Canada. With its higher potency, pitavastatin has the potential to take a significant share of the market from Lipitor. Another potential competitor, Sankyo’s Livalo (pitavastatin), was approved in 2003.

The launch of more potent statins will not have as significant an impact on sales of Lipitor as it will on Zocor or Lipovas because the majority of Lipitor patients have well controlled symptoms. However, Lipitor will still face competition from these newer statins as it is commonly prescribed to patients on the basis of its potency. Therefore, the potency of third-generation statins, which represents one of their most important distinctions over already marketed statins, will influence sales of Lipitor. Sales of the latter accruing to Yamanouchi are predicted to rise to $603m in 2003 and $774m in 2008.

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R&D The following table presents an overview of Yamanouchi’s R&D pipeline. Table 3.6: Yamanouchi’s R&D pipeline, 2003 Brand/code

Generic

Indication

Stage

YM-177 YM-905

celecoxib solifenacin succinate oprelvekin perflutren multiporous gelatin particles finasteride conivaptan minodronate nitroglycerin n/a valdecoxib zonampanel GP Iib/IIIa n/a gantofiban n/a n/a n/a pimagedine n/a interleukin-12 n/a n/a n/a

Arthritis Incontinence

Registration Registration

Thrombocytopenia Contrast medium Arterio-embolization BPH Hyponatremia Cancer Heart failure Dyspepsia Arthritis Stroke Stroke Cancer Thrombosis Stroke Hypertension Diabetes Diabetes n/a Hepatitis Cancer Diabetes Alzheimer's disease

YM-294 YM-454 YM-670 YM-152 YM-087 YM-529 SK-878 Z-338 Bextra YM-872 YM-337 YM-598 YM-028 n/a YM-430 YM-440 n/a IPD-115IT rhIL-12 YM-511 YM-178 PYM-50028

Forecast sales Launch FY2008 ($m) year 161

2004

Registration Registration Registration

85 46 13 13

2005 2004 2004 2004

Registration Phase III Phase III Phase III Phase II Phase II Phase II Phase II Phase II Phase II Phase II Phase II Phase II Phase II Phase II Phase II Phase II Phase II Phase I

n/a 214 25 n/a 35 10 5 5 5 4 n/l n/l n/l n/l n/l n/l n/l n/l n/l

>2008 2006 2006 >2008 2008 2008 2008 2008 2008 2008 >2008 >2008 >2008 >2008 >2008 >2008 >2008 >2008 >2008

BPH = benign prostatic hyperplasia n/a = not available n/l = not launched Source: Company reports; author’s research and analysis

Business Insights

YM-177 (celecoxib) YM-177 is a first-generation selective cyclo-oxygenase-II (COX-II) inhibitor that was initially developed by Searle before being licensed to Pfizer as part of a co-development and co-promotion deal established in March 1998. Pfizer secured the worldwide codevelopment and marketing rights to celecoxib, excluding Japan, where it has been 77

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licensed to Yamanouchi. The former Pharmacia and Yamanouchi jointly submitted an NDA for Celebrex in December 2002. Pfizer acquired full rights to the product following its merger with Pharmacia, effective April 2003.

Yamanouchi has development and commercialization rights to the product only for Japan, where it is in phase III clinical trials for the treatment of arthritis pain and inflammation. Yamanouchi and Pfizer will co-promote the drug with an estimated 4,200 marketing representatives: 1,300 from Yamanouchi, 800 from the former Pharmacia and 2,100 from Pfizer.

Competitors to YM-177 in Japan include Sankyo’s Loxonin, which has beneficial antiinflammatory COX-II inhibition effects, and Vioxx (rofecoxib), which is in phase III trials with Banyu.

The market is characterized by high unmet needs because all treatments available are effective only in the first years; patients then need to be switched to other therapies. Therefore, new products are in high demand. Since Celebrex has been so successful in the US, YM-177 can be expected to generate high sales and market share. Launch is expected in 2004. Since the drug is a blockbuster abroad, it would also appear to have great potential in Japan. Considering its rapid uptake in the US and the advantage of being first-to-market, sales of celecoxib could reach $71m in 2005 and $161m in 2008.

YM-905 (solfenacin succinate) YM-905 is being developed for the relief of urinary frequency, urinary urgency and incontinence associated with overactive bladder. YM-905 is a muscarinic M3 antagonist that acts on M3 receptors in the smooth muscle of the bladder. The product has been filed in the US and Europe and is in phase III clinical trials in Japan. In August 2003, Yamanouchi signed an agreement to co-promote YM-905 with GSK in the US, where it will go under the brand name of Vesicare.

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A key competitor already on the market is Pfizer’s Detrol (tolterodine tartrate). Another potential competitor is darifenacin, a selective muscarinic M3 antagonist similar to YM-905, which is in development by Novartis. Data released to date suggest that YM905 is superior to Detrol in terms of dry mouth side effects, which can manifest as painful ulcers, and is one of the main inhibitors of Detrol’s sales growth. Another key product on the market is Johnson & Johnson’s Ditropan XL (oxybutynin), but this drug causes dry mouth to such a degree that most patients discontinue treatment after six months.

Key findings of a phase II, double-blind, randomized, placebo- and Detrol-controlled clinical study were positive. Once daily doses of 2.5mg, 5mg, 10mg and 20mg of YM905 were associated with dose-related reductions in micturitions per 24 hour period (the primary endpoint). Reductions with YM-905 were also greater at 5mg, 10mg and 20mg than for 4mg Detrol (given twice daily at 2mg). The incidence of dry mouth was 14% at 5mg and 10mg of YM-905 compared with 24% for Detrol. Side effects with YM905 became noticeably more pronounced at 20mg, so it was decided to proceed with phase III studies up to a 10mg dose.

YM-905 is likely to be launched in FY2005 and could generate sales of $85m in 2008.

YM-087 (conivaptan) YM-087 is a vasopressin antagonist in phase III trials in the US and phase II trials in Europe for the treatment of hyponatremia, heart failure, edema and congestive heart failure. The compound, which is being developed by Yamanouchi in both oral and injectable formulations, is an antagonist against both vasopressin V1 and V2 receptors. As it reduces circulating antidiuretic hormone, it is expected to be effective in treating heart failure by improving cardiac function, reducing cardiac hypertrophy, pulmonary congestion and edema, and regulating sodium levels. Hyponatremia, or low concentration of sodium in the blood, is a smaller indication because it can easily be treated with salty food and drinks containing sodium. Heart failure is normally treated with anti-hypertensive drugs, primarily ACE inhibitors and ARBs.

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Considering the strong competition and the increasing preference of physicians for ARBs, it is unlikely that YM-087 will ever achieve blockbuster status. However, the drug still has the potential to strong high sales. It is expected to be launched in 2006 and could generate sales of $214m in 2008.

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CHAPTER 4

Eisai

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Chapter 4

Eisai

Summary ‰

‰

‰

‰

‰

‰

‰

In 2002, Eisai reported total consolidated sales of $3,527m, up 8.1% from the previous year. Sales of pharmaceutical products comprised 94.7% of the total and recorded an 8.9% increase over 2001. Eisai’s position is precarious, with the overall future of its pharmaceutical business dependent upon just two products, Aricept and Aciphex. Although this underlines the importance of the company’s focus on lifecycle management, this should not be at the expense of developing new compounds. Eisai is reducing its dependence on the Japanese market. It has forged codevelopment partnerships with major international players, restructured its management to resemble that of a Western company, and introduced a global incentive scheme for R&D contributors. The majority of Eisai’s future growth is projected to come from US operations, with the company targeting 15% sales growth for Eisai Inc. by capitalizing on the expansion of its sales force. To retain its position in Japan while focusing in-house R&D investment overseas, Eisai has in-licensed compounds from Western companies, including Abbott’s KES-524 and D2E7, and entered agreements with Aventis for the Japanese copromotion of Actonel and with Kyorin for the migraine treatment Maxalt. Aricept is regarded as the gold standard Alzheimer’s disease treatment in the seven major markets and is currently the only such therapy available in Japan. Eisai’s sales of Aricept could reach $1,305m in 2005 before declining to $1,277m in 2008. Phase III T-614 has unique potential both as a COX-II inhibitor and as a diseasemodifying anti-rheumatic drug. If successfully approved, it could generate sales of $169m in 2008.

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Strategic position A summary of Eisai’s strategic position is presented below. Figure 4.10: Eisai’s strategic position

Strengths

Weaknesses

Reduced dependence on domestic market

High proportion of long-listed drugs in domestic portfolio

Collaboration with strong overseas partners

Absence of new product launches over next five years

Strong management and incentive systems

Over-dependence on Aricept and Aciphex

Opportunities

Threats

In-license products to prevent decline in domestic sales

Failure to gain approval for vascular dementia indication for Aricept

Enter into drug discovery alliances to source products with potential to penetrate international markets

Incursion of western pharma companies into Japanese market Further drug price cuts in Japan Business Insights

Source: Author’s research and analysis

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Strengths Eisai’s main strengths are: ‰

reduced dependence on domestic market;

‰

collaboration with strong overseas partners;

‰

strong management and incentive systems.

Eisai generated 46.3% of its revenues from outside its domestic market in 2002. In absolute terms, overseas sales increased by $247m, accounting for 88.5% of Eisai’s consolidated net sales gain in 2002. This reduced dependence on the Japanese market is a great advantage for Eisai, given the difficult operating environment that persists in Japan.

Eisai has successfully forged co-development partnerships with major players in international pharmaceutical markets, including Pfizer and Johnson & Johnson. These partnerships have been instrumental to the development of Eisai’s international business. However, in contrast to many other Japanese pharmaceutical companies, which lack the resources to develop their products overseas and thus out-license them at an early stage, Eisai carried out US development of Aricept (donepezil) and Aciphex (rabeprazole) independently, only seeking partnerships for their marketing and promotion. This allowed the company to secure a greater share of profits from its partners’ sales of the two drugs.

In support of its increasing internationalization, Eisai has restructured its management to resemble that of Western companies. In another break with Japanese tradition, Eisai has introduced a worldwide incentive system for R&D contributors, which aims to boost R&D productivity and thus increase the number of available products to drive Eisai’s success in global markets.

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Weaknesses In contrast to its strengths, Eisai’s main weaknesses include: ‰

absence of new product launches over next five years;

‰

high proportion of long-listed drugs in its domestic portfolio;

‰

over-dependence on Aricept and Aciphex.

Most of Eisai’s products are sold only in Japan and are what are termed by the Japanese government as ‘long-listed drugs’. This means that they have been on the market for a significant length of time and in most cases are no longer patent protected. These are exactly the drugs that are targeted for enforced priced reductions by the Japanese Ministry of Health, Labor and Welfare. As a result, excluding Aricept and Aciphex, Eisai’s ethical sales are forecast to decline between 2002 and 2008. With a lack of new product launches over the next five years, this will leave the company entirely dependent on its top two products for growth unless it invests heavily in in-licensing.

Aricept and Aciphex accounted for 59.6% of Eisai’s ethical revenues in 2002. In the longer term, this over-dependence on just two products puts Eisai in a precarious position, since it has little in its pipeline to replace sales following Aricept’s loss of US patent protection in 2010 and that of Aciphex in 2009.

Opportunities In response to Eisai’s weaknesses, it must in-license new products to prevent a decline in domestic sales and enter into drug discovery alliances to source compounds with potential to penetrate international markets.

Threats Eisai’s mid-term growth strategy is centered on the lifecycle management of its two key products, Aricept and Aciphex. Eisai has a large range of additional indications in its

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pipeline for Aricept, and the supplemental New Drug Application for the first of these, vascular dementia, was submitted to the FDA in September 2002. However, in July 2003, the FDA issued a not approvable letter for the indication and Eisai continues its discussions with the regulatory body.

The lifecycle management program for Aciphex seems to be progressing more smoothly. The drug was approved for symptomatic gastro-esophageal reflux disease (GERD) in the US in February 2002, seven-day H. pylori eradication in the US in November 2002, and GERD maintenance therapy in Japan in July 2003. However, sales of Aciphex are threatened by the launch of additional generic versions of omeprazole in the US from 2003 onwards.

Growth strategy International expansion is the key driver of Eisai’s growth and the company is continuing to put in place the infrastructure necessary to exploit the patient potential of overseas markets. For example, Eisai acquired the French company Biodim in February 2002 and in November 2001 announced that it was preparing to establish a wholly owned Spanish subsidiary, Eisai Farmaceutica.

Having established its US subsidiary, Eisai Inc., in 1981, the company continues to expand its operations there. In 2002, it announced plans to expand its manufacturing and R&D site in Research Triangle Park, North Carolina, and to establish a new clinical research company in the US called Eisai Medical Research.

Eisai has set a target of recording total consolidated sales of 500 billion yen (approximately $3,993m) in 2003, an increase of 7% over 2002. The majority of this growth is projected to come from US operations, with the company targeting 15% sales growth for Eisai Inc., by capitalizing on the expansion of its sales force. In January 2003, Eisai announced that it would double its US sales force to 500 to support

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independent US marketing efforts and by July 2003 had increased its number of US sales representatives to 400, an increase of 150.

Aricept and Aciphex are expected to be key growth drivers for the US business, with Eisai focusing on the lifecycle management of these products and establishing improved deals with large managed care organizations, which it hopes will increase the profitability of its business.

In November 2002, Eisai agreed to transfer its veterinary and livestock feed products business to Meiji Seika, effective from 1 February 2003. This should provide funding for ongoing international expansion, as well as allowing it to concentrate its resources on the pharmaceutical business.

In Japan, Eisai is targeting 6% sales growth in 2003 and plans to improve the effectiveness of its existing infrastructure. The company had 1,000 sales representatives in Japan in 2002 and gains additional access to physicians by hosting research meetings and conferences. In 2002, Eisai began to integrate these features of its domestic operation with its strong relationships with wholesalers. According to Eisai, this new strategy boosted sales in the second half of 2002, with sales in February and March equaling market growth (Eisai’s domestic growth had lagged behind the overall market in 2002).

Eisai could consider M&A as a means of accelerating its geographic expansion or use it to consolidate its domestic position in the face of increasing competition from Western companies in Japan. However, given that Eisai’s primary focus for growth is the international market, it seems unlikely that the company will follow the latter option. Furthermore, Eisai has established an independent presence in the US through comarketing agreements and has recently invested in organic expansion of its US sales force. The R&D incentive scheme introduced in April 2001 highlights Eisai’s dedication to driving organic growth by developing its own drugs that it can launch globally.

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Alliance activity The following figure illustrates Eisai’s alliance network. Figure 4.11: Eisai’s alliance network

Eurand (Nitorol-R)

Teva

Kyorin

(rasagiline)

(Maxalt)

Abbott

Mitsui Knowledge Industry

(E7010)

Teikoku Chemical Industries

Neurogenetics

(TKS1044)

Eisai

Elan

Pfizer

(NeuroBloc)

(Cerebyx)

Incyte Genomics

ChemBridge

Aventis

Neurogenetics

(Actonel)

Product related agreement In-licensing licensing deals

Out-licensing licensing deals

R&D agreement Co-marketing/codevelopment marketing/coagreements

Non- product related deals

Business Insights

Source: Author’s research and analysis

Overseas marketing collaborations have been critical to Eisai’s recent success. Comarketing agreements with Pfizer and Janssen for Aricept and Aciphex have driven sales growth of these two products.

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Just as co-marketing agreements have been vital to Eisai’s international development to date, so co-development agreements are expected to be key to its future growth. Eisai needs to supplement its in-house pipeline with novel products that have global commercial potential. In view of this, Eisai has established research collaborations with specialty companies such as Neurogenetics and with academic institutions such as the University of Texas Southwestern Medical Center. The company has also entered into a US co-development and marketing collaboration with Teva for rasagiline. Collaborations like this will be vital if Eisai is to develop further promising compounds to take the place of its current key growth drivers and fill gaps in its pipeline.

In an effort to replace declining sales of its existing domestic portfolio, Eisai has inlicensed compounds from Western companies, including Abbott’s KES-524 and D2E7, for development in Japan. More recently, it entered agreements with Aventis for the Japanese co-promotion of the osteoporosis therapeutic agent Actonel (risedronate), and with Kyorin for the migraine treatment Maxalt (rizatriptan). These collaborations are interesting because they will allow Eisai to retain its position in the domestic market, while focusing in-house R&D investment overseas.

Financial overview In 2002, Eisai reported total consolidated sales of $3,527m, up 8.1% from the previous year. Sales of pharmaceutical products comprised 94.7% of the total and recorded an 8.9% increase over 2001. In the ‘other products’ segment, which includes animal health products, food additives and chemicals, sales declined by 4.8% to $199m. The animal health business was divested in February 2003.

In 2002, sales in Japan increased slightly to $2,001m, driven by growth in sales of Aricept, which were up 59.9% from 2001, and Methycobal, up by 4.7%. However, these strong performances were offset by pressure on other products resulting from price cuts implemented by the Japanese Ministry of Health, Labor and Welfare in April

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2002. Elsewhere, revenues grew strongly, with overseas sales increasing from 42.9% of total sales in 2001 to 46.3% in 2002. This performance was driven by higher sales of Aricept and Aciphex/Pariet in the US, Europe and Asia.

Eisai’s COGS ratio improved from 23.5% of sales in 2001 to 22.0% in 2002, mainly as a result of efforts to reduce costs as well as an enhanced product mix, with higher sales of Aricept and Aciphex. R&D expenses increased by 8.4% during 2002 to account for 12.8% of sales, while S,G&A expenses increased from 46.9% of sales in 2001 to 49.0% in 2002.

Overall, Eisai’s operating profit increased by 4.5%. In the US, however, operating income fell due to an increase in royalty payments to the parent company.

At the end of 2002, Eisai had significant levels of liquid assets for a company of its size, with cash and short-term investments amounting to $1,091m. The company also had low long-term liabilities relative to its shareholders’ funds, which will enable it to raise funds through debt if required.

Eisai is prioritizing US expansion over profit growth, with revenues being ploughed back into R&D or investment in US infrastructure. While this is necessary for the continued global expansion of the company, it could threaten shareholder confidence as investors are incurring risks (of R&D failure or US entry) without the potential for additional returns on their investment.

Portfolio analysis Therapeutic focus Eisai’s main areas of focus are its CNS and gastrointestinal franchises, although the company also markets a number of cardiovascular products. Aricept accounted for 74.3% of CNS sales and Aciphex contributed 81.4% of gastrointestinal sales. Thus, 90

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although Eisai’s pharmaceutical sales appear to come from a broad base in terms of their therapeutic spread, they are in fact heavily dependent on the success of just two products.

Aricept and Aciphex had combined sales of $1,859m, or 59.6% of total ethical sales, in 2002, and grew by 20.4% and 18.9% respectively compared with 2001. Many of Eisai’s other products are mature and suffering from stagnant or declining sales, and are primarily marketed in Japan. Consequently, Eisai is forecast to experience slow growth over the next six years. Growth will be driven by the CNS franchise, while cardiovascular sales will decline. Figure 4.12: Eisai’s therapeutic focus, FY2002 Other 15.5%

Cardiovascular 7.8%

CNS 39.7%

Gastrointestinal 36.9% Business Insights

Source: Author’s research and analysis

Major marketed products The table below summarizes sales of Eisai’s leading products. The company’s two main growth drivers – Aricept and Aciphex – are discussed in more detail below.

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Table 4.7: Sales of Eisai’s leading products, FY2001-02 Sales ($m) Growth FY2001 FY2002 FY2001-02 (%)

Brand

Generic

Indication

Aricept Aciphex/Pariet Methycobal Other

donepezil rabeprazole mecobalamin n/a

Alzheimer’s disease Peptic ulcers Peripheral neuropathy Various

Total

765 789 237 1,085

921 938 248 1,013

20.4 18.9 4.6 (6.6)

2,876

3,120

8.5

n/a = not applicable Source: Company reports; author’s research and analysis

Business Insights

Aricept (donepezil) Aricept was approved in the US, its first market, for the symptomatic treatment of mildto-moderate Alzheimer’s disease in November 1996 and launched in January 1997. The drug was approved in the UK in March 1997 and launched in Germany in October that year and was subsequently mutually recognized by 11 European countries. In August 1998, an application was filed in Japan, which was approved in September 1999.

Aricept was originally developed by Eisai but is being co-marketed by Eisai and Pfizer in the US. Eisai Inc. submitted the US NDA for donepezil and all US trials were conducted by Eisai Inc. Eisai and Pfizer co-market the product in France and Germany, although Pfizer is the sole marketer in the rest of Europe and various other countries including Canada and Australia. Eisai markets Aricept in Japan and other Asian countries. In South America, Eisai out-licensed the rights to Wyeth.

Aricept was launched four years after the first disease-specific therapy for Alzheimer’s disease, Cognex (tacrine), was launched by Parke-Davis (now a subsidiary of Pfizer). Side effects and safety concerns had dogged Cognex and in June 1997, after the launch of Aricept, Parke-Davis stopped marketing the product. Until recently, the only other

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products marketed for Alzheimer’s disease were Novartis’ Exelon (rivastigmine) and Shire’s Reminyl (galantamine), both of which belong to the acetylcholinesterase inhibitor (AChEI) class.

In late 2002, Lundbeck launched Ebixa (memantine) in the UK as the first treatment for severe Alzheimer’s disease (US launch is anticipated in 2004). As the first of a new class of compounds (N-methyl D-aspartate receptor antagonists), Ebixa has a different mode of action to existing treatments and is likely to be used in combination with them. Indeed, phase III trials in the US showed that patients taking Ebixa and Aricept obtained greater benefits than those taking Aricept alone.

Aricept is regarded as the gold standard Alzheimer’s disease treatment in the seven major markets. However, in terms of efficacy, physicians see little difference between Aricept, Exelon and Reminyl, and choose Aricept for its easy two-step dosage scaling and convenient once-daily formulation. Moreover, most physicians regard the side effects of Aricept as being better tolerated than those of Exelon, and sometimes Reminyl. Physicians are also more familiar with Pfizer/Eisai’s product, as it has been on the market for longer and see no reason to switch.

Unlike Reminyl and Exelon, Aricept is not available in liquid form. Therefore, older patients who are unable to swallow solids will not be prescribed Pfizer/Eisai’s drug. Eisai is thus developing a rapidly disintegrating tablet and seeking to increase the patient potential of Aricept. Trials are ongoing in a number of indications, including vascular dementia, dementia associated with Parkinson’s disease and migraine prophylaxis.

In September 2002, Eisai filed an sNDA for use of Aricept in the treatment of vascular dementia. However, in July 2003 the company received a non-approvable letter from the FDA for this indication. In response, Eisai said that it would stick to its mid-term sales target of boosting global Aricept sales to 180 billion yen ($1.4 billion) in 2006/07. The company claims that it can achieve this target by promoting Aricept’s use in the 3.4

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million US Alzheimer’s patients who are in the early-to-mid stages of the disease, and especially for the 1.8 million patients who are not taking any medication for the condition. Eisai’s US unit expanded its sales force from 250 to 400 by April 2003.

There are three AChEIs in late stage development: Takeda’s zanapezil, Axonyx’s phenserine and Chiesi’s ganstigmine. Phenserine appears to be the most promising of the three, as trials have indicated that it offers an improved side effect profile over existing AChEIs. More importantly, however, the drug may have the potential to delay disease progression by inhibiting amyloid plaque formation via the inhibition of betaAPP. However, Axonyx has yet to produce evidence that this property confers tangible clinical benefits in Alzheimer’s patients. Consequently, its drug is unlikely to have a large impact on the market and will not threaten sales of approved drugs.

Aricept is the only Alzheimer’s drug that has been approved in Japan, but new competitors could be on the horizon. In July 2003, a health ministry research group developed medical guidelines on Alzheimer’s disease for the first time, recommending that the government allow pharmaceutical firms to introduce two foreign-made drugs into Japan as soon as possible. The guidelines, which the group compiled after studying around 600 research papers, stress the importance of drug treatment in managing the disease. They call for an early introduction of two drugs not yet approved in Japan: Johnson & Johnson/Shire’s Reminyl and Novartis’ Exelon.

Aricept is clearly in a strong position, beating its rivals to market in the US by over two years. Furthermore, Exelon and Reminyl have yet to show significant advantages over the current leader in terms of efficacy, safety or dosage regimens. Eisai’s sales of Aricept in 2002 were $921m, $175m of which were recorded in Japan. In calendar 2002, Pfizer recorded sales of $203m for those territories where it records sales directly. Eisai’s sales of Aricept are forecast to reach $1,305m in 2005 before falling to $1,277m in 2008.

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Aciphex (rabeprazole) Aciphex is a proton pump inhibitor (PPI) indicated for the treatment of gastritis and peptic ulcers. It is known by the brand name Pariet in Japan. In February 2002 Aciphex’s US indications were expanded to include treatment of symptoms of GERD and in November 2002 it was approved by the FDA as part of the first seven-day treatment for H. pylori infection, in combination with amoxicillin and clarithromycin.

In July 2003 Eisai received an approval letter from the Ministry of Health, Labor and Welfare in Japan for rabepazole as a maintenance therapy for GERD. With this approval, Pariet may be administered for more than eight weeks for recurrent GERD.

Eisai and Johnson & Johnson’s subsidiary, Janssen, co-promote Aciphex in the US, the UK, Germany and France, with Janssen having exclusive or semi-exclusive marketing rights in a number of other countries. In 2002, Aciphex generated sales of only $46m in Japan, while Eisai’s total sales for the product reached $938m. This represented an 18.9% increase over 2001, with growth being driven by US sales of $829m, up 19.3%.

The runaway leader in the PPI market is AstraZeneca’s Losec/Prilosec (omeprazole), with 2002 sales of $4,623m. Sales were, however, down 17.1% on 2001 because AstraZeneca switched patients to its new product Nexium (esomeprazole) as Losec lost patent protection in October 2001. Generic competition entered the market in December 2002, with the launch of KUDCo’s version of omeprazole. Generic omeprazole represents the greatest competitive threat to the continued growth of Aciphex, which competes at a similar price point to Prilosec in the US. As more generic competitors are launched, the price differential between branded PPIs and generic omeprazole will increase, and Aciphex will lose market share. Nexium exerts further pressure, as it is able to claim a superior level of intragastric acid control compared with Aciphex.

Despite the success of new competitors, the rapid expansion of the overall market should ensure sales growth. In 2001, Janssen supplied a further 1,000 representatives to 95

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carry out an aggressive promotional campaign, stressing that Aciphex was fast-acting and that it maintained therapeutic blood concentrations for 24 hours.

Eisai sees Aciphex as a mainstay product and assigned 180 medical representatives to its sales effort in the US. The combination of an aggressive marketing campaign, expansion of the overall market and additional indications will boost sales, but generic penetration will slow this growth. Thus, sales of Aciphex/Pariet are forecast to reach $1,184m in 2005 and $1,086m in 2008.

R&D The following table presents an overview of Eisai’s R&D pipeline. Table 4.8: Eisai’s R&D pipeline, 2003 Brand/code

Generic

Indication

Stage

Forecast sales Launch FY2008 ($m) year

Maxalt rasagiline T-614 E-2014 E-2007

rizatriptan n/a careram n/a n/a

Launched (Japan) Pre-registration Phase III Phase II Phase II

Tambocor KE-S524 D2E7 E-5564

n/a n/a adalimumab n/a

E-3620 E-7070 E-5555 E-2070 E-7389

n/a n/a n/a n/a n/a

Migraine Parkinson’s disease Rheumatoid arthritis Cervical dystonia Multiple sclerosis, Parkinson’s dyskinesia, epilepsy Atrial fibrillation Obesity Rheumatoid arthritis Sepsis, endotoxinrelated complications after coronary artery bypass graft surgery Chronic gastritis, IBS Cancer Acute coronary syndrome Neuropathic pain Cancer

82 n/l 168 n/l n/l

2003 2004 2005 >2008 >2008

Phase II Phase II Phase II Phase II

n/l n/l n/l n/l

>2008 >2008 >2008 >2008

Phase II/preclinical Phase I/II Phase I Phase I Phase I

n/l n/l n/l n/l n/l

>2008 >2008 >2008 >2008 >2008

IBS = irritable bowel syndrome n/a = not available n/l = not launched Source: Company reports; author’s research and analysis

Business Insights

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Maxalt (rizatriptan benzoate) Merck originally in-licensed Maxalt from Banyu and launched the drug in 1998 for the treatment of migraine. It is an orally active, selective agonist at serotonin 1D receptor. Maxalt is reported to have better oral bioavailability and a faster onset of action than the leading anti-migraine treatment, GSK’s Imigran/Imitrex (sumatriptan), which had sales of $1,197m in 2002 compared to $295m for Maxalt. However, although Maxalt can demonstrate some degree of superiority over other triptans, such as AstraZeneca’s Zomig (zolmitriptan), such comparisons are not significant enough to confer a competitive advantage. Instead, the focus of competition has become brand based.

In February 2003, Kyorin and Eisai signed an agreement that covers the marketing of Maxalt in Japan. Kyorin, which has exclusive Japanese marketing rights, applied for approval to import Maxalt and received authorization in July 2003. The companies are awaiting National Health Institute drug price listing, before launching the drug. Kyorin and Eisai were initially to have co-promoted the product, with each taking a share of the profits, but a July 2003 amendment to the original agreement was announced and Maxalt will now be promoted solely by Eisai.

Pfizer’s Relpax (eletriptan) was approved in the US in December 2002 and had already gained approval in Japan and in Europe. Relpax will compete on the basis of its fast onset of action and efficacy, which is superior to that of Imitrex. Pfizer will have to counter the high coronary side effect profile of the product that may render it unsuitable for patients with coronary conditions. This will have only a minor effect on a market that is overwhelmingly composed of adult women, but may be responsible for the product’s delay in registration with the FDA.

The Japanese migraine market is the smallest of all the seven major markets, primarily due to low awareness of the condition and the reluctance of patients to take time off work to visit a physician. The lack of availability of modern treatments such as triptans has also limited growth of the market in the past, so the introduction of such products may go someway to ending this stagnation. The launch of Imitrex and Zomig in 2001

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should have paved the way for Maxalt’s launch in September 2003. Assuming that Eisai consolidates Japanese sales, sales of Maxalt could reach $15m in 2003, rising to $84m in 2008 as acceptance of triptans grows.

T-614 (careram) T-614 is a formylamino derivative that is in phase III development. The product was inlicensed for co-development and co-marketing from Toyama. T-614 inhibits the synthesis of pro-inflammatory cytokines through the inhibition of COX-II, which is required for the induction of prostaglandins.

T-614 affects the activity of COX-II on two levels: it inhibits the induction of COX-II itself and it inhibits the activity of COX-II through the regulation of pro-inflammatory cytokines and immunoglobulin production. This dual effect may prove to be more potent compared with other COX-II inhibitors that solely affect activity of the COX-II enzyme.

The compound is being investigated in the treatment of rheumatoid arthritis (RA) as it has been shown to act both as a disease-modifying anti-rheumatic drug (DMARD), slowing the progression of RA through inhibition of COX-II mRNA and production o/f immunoglobulins, and as an anti-inflammatory agent, providing relief from RA symptoms without gastrointestinal side effects. This unique set of attributes sets T-614 apart from other DMARDs in that, if it continues to be proven safe and efficacious, it has potential to be used as a first-line therapy in the treatment of RA by simultaneously providing pain relief and slowing the progression of disease. For this to be achieved, however, the drug must be priced competitively.

In terms of potential competition to T-614, Yamanouchi has submitted an NDA to the Japanese Ministry of Health, Labor and Welfare for Celebrex (celecoxib). The application covers several indications, including osteoarthritis (OA) and RA. With submission at the very end of 2002, the launch of celecoxib remains on course for 2004, which would make Celebrex the first COX-II available in Japan. 98

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While Toyama and Eisai had originally intended to submit an NDA for T-614 in 2002, this is now planned for the second quarter of 2003. While T-614 can be classified as a COX-II inhibitor in development, it can just as easily be classified as a DMARD. With this in mind, Toyama and Eisai are initially looking to launch the drug for the treatment of RA in Japan, a strategy that is based on the unique nature of the compound. Further studies of the compound’s toxicity and anti-inflammatory effects will be required for a broader approval, but the potential for a COX-II inhibitor with the ability to modify the advancement of inflammation may ultimately allow T-614 to compete across several drug classes.

Sales of T-614 could reach $50m upon launch in 2005, rising to $169m in 2008. Eisai has co-marketing and development rights to the product only in Japan, with Toyama conducting trials in the UK. Should Eisai secure rights to the product outside Japan, this would clearly significantly boost potential sales of the drug for the company.

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CHAPTER 5

Fujisawa

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Chapter 5

Fujisawa

Summary ‰

‰

In February 2004 Yamanouchi announced it was to buy Fujisawa in a deal worth $7.76bn with a planned completion date of April 2005. The deal creates Japan’s second largest sales force, a broad product portfolio and a strong platform for overseas expansion. Fujisawa is in a strong financial position, enabling it to fund a variety of strategic actions such as further geographic expansion and increased investment in R&D. Sales have risen 8.3% year-on-year since 1998, while operating profit has risen 16.8% year-on-year over the same period.

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Fujisawa has already achieved a strong international presence, with 41.9% of sales derived from overseas markets in 2002. This success has been achieved through sales of Prograf and Protopic.. The tacrolimus franchise, including Prograf and Protopic, will remain Fujisawa’s key growth driver over the next five years. With combined sales of around $1.7bn in 2008, these products are forecast to account for nearly half of the company’s total ethical sales. Some 90% of US patients receiving a liver transplant are prescribed Prograf, as are 60% of patients who have kidney transplants. Forthcoming line extensions should help sales of the drug increase to $1,344m in 2008. A co-promotion agreement signed with GlaxoSmithKline for Protopic in June 2003 will considerably increase Fujisawa’s marketing strength in the US, enabling it to compete effectively against Novartis’ rival product, Elidel. In Japan, Fujisawa has driven recent growth by in-licensing drugs, mainly in the CNS therapy area. Myslee, in-licensed from Sanofi-Synthélabo, achieved sales growth of 73.9% in 2002, while Seroquel, in-licensed from AstraZeneca, achieved growth of 90.2%. Fujisawa launched Funguard, a new class of antifungal, in Japan in December 2002. With the company’s reputation in this area and an increase in the prophylactic use of antifungals, sales of the drug could approach $300m in 2008. 102

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The Yamanouchi/Fujisawa merger On the 25th February, 2004 Yamanouchi announced it was to buy rival Fujisawa in a deal worth $7.76bn. The planned completion date for the deal is April 2005. The deal should provide a strong foundation for growth and expansion outside Japan, as there is little overlap between both companies’ therapeutic focuses (see Figure 3.9 and Figure 5.15). While Yamanouchi has a broad therapeutic focus, Fujisawa is more reliant on a smaller range of therapy areas, with strengths in infectious diseases and arthritis, immune and inflammatory diseases. The move will also greatly strengthen Fujisawa’s R&D pipeline, which was quite weak in the short term, whereas Yamanouchi has a relatively strong short term R&D pipeline.

Both companies are in strong financial positions and grew at a CAGR of 5.3% (Yamanouchi) and 8.3% (Fujisawa) respectively between 1998 and 2002. Historically, Yamanouchi has derived the majority of its revenues from the domestic market while Fujisawa has a stronger overseas focus, with 26.8% of sales coming from North America and 12.8% from European markets. However, in 2002, Yamanouchi established a US subsidiary and overall the merged company will have a much stronger overseas platform looking forward. Domestically, the company will have the second largest sales force of 2,400, second only to that of Pfizer.

The merger has been explicitly described as a move towards putting Yamanouchi into the top 10 global pharmaceutical companies, either through organic growth or partnership. The company has stated that existing licensing deals, including a major alliance with Pfizer, will remain unchanged.

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Strategic position A summary of Fujisawa’s strategic position is presented below. Figure 5.13: Fujisawa’s strategic position

Strengths

Weaknesses Lack of pipeline products with global potential

Potential of tacrolimus product line Significant US market presence Reputation as a leading CNS player in Japan

Opportunities

Threats

Approval for additional indications to expand potential of Prograf and Protopic

Over-dependence on tacrolimus franchise

Business Insights

Source: Author’s research and analysis

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Strengths Fujisawa’s key strengths include: ‰

increasing presence in the US – North American sales have risen 21.2% year-onyear since 1998, enabling Fujisawa to drive strong overall sales growth despite the challenging operating environment in Japan;

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strong position in the Japanese CNS market – this has facilitated recent in-licensing deals, such as the agreement with AstraZeneca that provided the Japanese marketing rights to Seroquel (quetiapine fumarate);

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potential of the tacrolimus product line.

Fujisawa’s tacrolimus compound, marketed as Prograf (oral formulation) and Protopic (ointment), is also in trials for additional indications and has yet to be approved in a number of potential national markets. Combined sales of these two formulations are forecast to reach $1,701m in 2008. In February 2002, Fujisawa announced that it had out-licensed the rights to develop an eye drop formulation of tacrolimus to Sucampo Pharmaceuticals, and in June 2003 it initiated a co-promotion agreement with GSK in the US. Prograf and Protopic will drive Fujisawa’s growth over the next few years through geographic and therapeutic expansion.

Weaknesses Fujisawa has a lack of products in its pipeline with global potential. This may render the company unable to sustain its recent growth and its international expansion over the longer term.

Opportunities Gaining additional indications will drive further growth of the Prograf and Protopic brands, supporting Fujisawa’s continued geographic expansion.

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Threats In 2002, the two tacrolimus brands, Prograf and Protopic, accounted for 31.2% of Fujisawa’s ethical sales, and in 2008 they are forecast to account for just over 42%. If these products were to lose sales due to new competitors, the early entry of generic versions or safety concerns, a considerable proportion of the company’s revenue would be at risk.

Growth strategy Fujisawa has driven strong growth over recent years through the international expansion of its arthritis, immune and inflammatory disorders franchise and the domestic growth of its in-licensed CNS products. The company’s key growth driver has been the internally developed tacrolimus product line, comprising Prograf and Protopic, which Fujisawa markets in both the US and European markets. In the US Prograf is used in 90% of patients receiving a liver transplant and 60% of those receiving a kidney transplant. The company aims to continue driving growth from Protopic, which was only launched in 1999 and is now co-promoted in the US by GSK. Fujisawa is also investing heavily in developing tacrolimus for additional indications for rheumatoid arthritis, ulcerative colitis and lupus nephritis.

Although in the short- to medium-term Fujisawa should be able to continue to drive strong overseas sales growth from its tacrolimus products and its new antifungal, Funguard (micafungin), it needs to develop strong products in-house if this growth is to be sustained over the longer term. There are no clear candidates in the pipeline offering the necessary level of commercial potential.

In Japan, Fujisawa has driven recent growth by in-licensing drugs, mainly in the CNS therapy area. Myslee (zolpidem tartrate), in-licensed from Sanofi-Synthélabo, achieved sales growth of 73.9% in 2002, while Seroquel, in-licensed from AstraZeneca, achieved growth of 90.2%. The company has in-licensed products to boost its infectious disease

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franchise in its domestic market and for niche indications to strengthen its overseas pipeline.

Alliance activity Fujisawa has an extensive alliance network that it has used to improve its pipeline at home and abroad, and to strengthen its marketing abilities to realize the maximum potential of its marketed products. The co-promotion agreement signed with GSK for Protopic in June 2003 will considerably increase Fujisawa’s marketing strength in the US, enabling it to compete effectively against Novartis’ rival product, Elidel (pimecrolimus).

Other recent deals have focused on improving Fujisawa’s R&D pipeline, both through the direct in-licensing of products and through collaborations and information licensing. Fujisawa has in-licensed separate R&D products for both the Japanese and overseas markets.

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The following figure illustrates Fujisawa’s alliance network. Figure 5.14: Fujisawa’s alliance network Servier (strontium ranelate)

Sorin Biomedica Cardio

GlaxoSmithKline Protopic (US) / SmithKline Beecham (Famvir)

Pharmagenisis -

IGI

Arena Pharmaceuticals

Astex

Suntory

Sumitomo

(Hanp)

Fujisawa Chugai

MerLion Pharma

(Keiten)

Sankyo TaiGen

(CS-758)

Sucampo

Toray

Aventis

(TRK-820)

(Synercid/Ketek)

Protein Design Labs

Xian-Janssen Pharmaceutical

Product related agreement In-licensing deals

Out-licensing deals

R&D agreement Co-marketing/co-development agreements

Multiple agreements Non-product related deals

Business Insights

Source: Author’s research and analysis

Financial overview Fujisawa is in a strong financial position, enabling it to fund a variety of strategic actions such as further geographic expansion and increasing investment in R&D. Sales have risen 8.3% year-on-year since 1998, while operating profit has risen 16.8% yearon-year over the same period. In 2002 the company recorded sales of $3,051m, an operating profit of $496m and a net profit of $229m. Although initially necessitating a high level of debt burden, international expansion is now reaping the rewards in terms of higher sales and higher profits, allowing Fujisawa to reduce its level of debt. The

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company’s 2002 operating profit margin was good at 16.3%, while the net profit margin was 7.5%.

In 2002, 89.4% of Fujisawa’s revenues were derived from its ethical operations (including royalty income and processing fees). Remaining income was earned by its OTC, medical supplies, chemicals and home care businesses. However, in October 2003 Fujisawa announced that it would merge its OTC business with that of Yamanouchi to form a 50:50 joint venture, effective from 1 October 2004. This will leave the company increasingly focused on its ethical business.

Geographically, Fujisawa’s sales are increasingly derived from outside its domestic market. In 2002, 58.1% of sales were generated in Japan, 2.3% from the rest of Asia, 26.8% from North America and 12.8% from European markets.

Portfolio analysis Therapeutic focus Fujisawa’s therapeutic focus (illustrated below) is split between arthritis, immune and inflammatory disorders (AIID) and infectious diseases, which account for 31.3% and 25.4% of the company’s sales, respectively. The infectious disease market is Fujisawa’s traditional focus, with the AIID franchise emerging as a key growth driver since the launch of Prograf in 1993. By 2008, the AIID franchise will account for almost half of the company’s sales and will be the only franchise to achieve sales of more than $1bn. Although the infectious disease franchise will achieve some growth, the CNS franchise will grow more rapidly, benefiting from recent in-licensing agreements and expansion of the overall Japanese CNS market.

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Figure 5.15: Fujisawa’s therapeutic focus, FY2002 Other 11.3% AIID 31.3%

CNS 15.1%

Cardiovascular 16.9%

Infectious diseases 25.4% Business Insights

Source: Author’s research and analysis

Major marketed products The table below summarizes sales of Fujisawa’s leading products, as evaluated in more detail in the following paragraphs. Table 5.9: Sales of Fujisawa’s leading products, FY2001-02 Sales ($m) Growth FY2001 FY2002 FY2001-02 (%)

Brand

Generic

Indication

Prograf Cefzon Protopic Other

tacrolimus cefdinir tacrolimus n/a

Transplant rejection Bacterial infections Atopic dermatitis Various

Total

578 227 70 1,410

716 235 104 1,571

23.9 3.5 48.6 11.4

2,285

2,626

14.9

n/a = not applicable Source: Company reports; author’s research and analysis

Business Insights

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Prograf (tacrolimus) Tacrolimus is a macrolide immunosuppressant isolated from the soil fungus, Streptomyces tsukubaensis. Developed in-house, Prograf has been licensed to Johnson & Johnson in Australia and New Zealand and is sold by Fujisawa in the rest of the world. Prograf was launched in Japan in 1993 for liver transplant rejection and has since been launched in 24 countries, including the US and China, for a variety of transplant related indications.

Fujisawa recorded sales of Prograf of $716m in 2002, compared with $578m in 2001. This 23.9% growth in sales reflects rising levels of use due to its increased availability in the US and Europe, and its wide therapeutic range.

Prograf’s key competitor is Novartis’ Sandimmun/Neoral (cyclosporin), which achieved sales of $1,032m in 2002, representing a decline of 12.2% compared with 2001. A five year randomized, open label, multi-center study in the US involving 412 patients showed that kidney transplantation patients treated with Prograf had better kidney survival rates than those treated with cyclosporin. Prograf patients also experienced fewer problems with elevated cholesterol and blood pressure. Generic versions of cyclosporin are also available, increasing competition in the transplant drug market.

Other competitors include Roche’s CellCept (mycophenolate mofetil), launched in 1995. CellCept is an immunosuppressant with a novel mode of action that helps to prevent the body’s natural rejection of transplanted kidneys. CellCept generated sales of $771m in 2002.

Prograf has already achieved a strong position within the transplant rejection market. Some 90% of US patients receiving a liver transplant are prescribed the drug, as are 60% of patients who have kidney transplants. Forthcoming line extensions (for rheumatoid arthritis, ulcerative colitis and lupus nephritis) should help sales of the drug increase to $1,136m in 2005 and $1,344m in 2008. 111

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Protopic (tacrolimus) Tacrolimus was approved in Japan in June 1999 for the treatment of atopic dermatitis for patients over 16 years of age, under the brand name Protopic. An application was filed in Japan late in 2001 for pediatric atopic dermatitis. In March 1999, Fujisawa completed phase III trials for tacrolimus ointment for the treatment of atopic dermatitis in the US, and in December 2000 the FDA approved the ointment form of the drug.

Fujisawa has emphasized the psychological benefits of Protopic for atopic dermatitis sufferers as well as the economic benefits of using the product. Research supported by Fujisawa showed that tacrolimus ointment could be cost-effective compared with high potency topical steroids, as determined by cost per disease controlled day.

A co-promotion agreement with GSK for the US market, which began in July 2003, should provide a considerable boost for the product’s sales in the US. GSK’s sales force will target pediatricians, while Fujisawa will continue to target dermatologists. While the additional marketing support should enable Fujisawa to drive considerably higher sales in the US, it will reduce the profit margin on the drug.

Although Protopic fills a clear unmet clinical need in providing a non-steroidal topical therapy for atopic dermatitis, its uptake has been disappointing. Limitations of the drug stem from its potency and its relegation to second-line therapy. In approving Protopic, the FDA recommended that it be reserved for second-line treatment due to its powerful immunosuppressant properties as well as the limited amount of long-term safety data available.

Novartis’ Elidel, approved in its topical formulation in December 2001, is the only other non-steroidal treatment for atopic dermatitis. However, due to its good safety profile it is likely to be targeted mainly at the mild-to-moderate market and thus will not be a direct competitor to Protopic. Fujisawa recorded Protopic sales of $104m in 2002. Forecasts position the product at around $357m in 2008, overtaking Cefzon (cefdinir) as Fujisawa’s second highest selling drug in 2004/05. 112

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R&D The following table presents an overview of Fujisawa’s R&D pipeline. As the most recent product to emerge from the company’s pipeline, the commercial potential of Funguard (micafungin) is assessed in more detail below. Table 5.10: Fujisawa’s R&D pipeline, 2003 Brand/code

Generic

Indication

Stage

Funguard TRK-820

micafungin n/a

Approved Registration

dapsone MBI-226 JTE-522 FK778 FK352b

n/a n/a tilmacoxib n/a n/a

CVT-3146

n/a

DTI-0009 FK960

n/a n/a

FK614 FK228 abciximab

n/a n/a n/a

Fungal infections Dialysis-related uremic pruritis Acne Microbial infections Arthritis Transplant rejection Dialysis-related hypotension Pharmacologic stress agent for use in cardiac perfusion imaging studies Heart failure Cognitive impairment in schizophrenia Type II diabetes Cancer Prevention of cardiac ischemic complications after PTCA

Forecast sales Launch FY2008 ($m) year 292 11

2003 2004

Phase III Phase III Phase II Phase II Phase II

22 n/l 17 n/l n/l

2006 >2008 2007 >2008 >2008

Phase II

n/l

>2008

Phase II Phase II

n/l n/l

>2008 >2008

Phase II Phase II Phase II

n/l n/l n/l

>2008 >2008 >2008

n/a = not available n/l = not launched Source: Company reports; author’s research and analysis

Business Insights

Funguard (micafungin) Funguard is an injectable antifungal agent that has a novel mode of action and is a member of a new class of drugs, the echinocandins. Echinocandins are a novel group of products that are fungicidal in action, breaking down fungal cell walls and initiating cell death. They have been described as a breakthrough in the treatment of fungal infections and will be particularly effective in the treatment of systemic infections. Micafungin is targeted at one type of fungal infection: deep-seated mycosis. The drug is

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active against candida and aspergillus, the major fungi involved in this type of infection. Funguard was launched in Japan in December 2002 and is in registration in the US and Europe.

Funguard demonstrates increasing efficacy levels as its dosage is increased. It can be used safely in prophylaxis and is being developed to counteract the growing problem of fungal infection among the immunocompromised population. The major advantage of the drug, however, is its diversity of use. While effective as a preventive measure, it is also efficacious enough to be used as a late stage therapy. As consistent drug usage is popular with both physicians and patients, this may prove to be the key to rapid market growth.

Funguard will compete with many other antifungals, in particular with Pfizer’s Diflucan (fluconazole), which generated global sales of $1,112m in 2002, Fujisawa’s own AmBisome (amphotericin), and Merck & Co.’s Cancidas (caspofungin), which was approved by the FDA in January 2001 and achieved sales of $105m in 2002. Another competitor is Pfizer’s Vfend (voriconazole), which was approved in the US in May 2002. Development stage echinocandins include Bristol-Myers Squibb’s ravuconazole (BMS-207147), which is in phase III trials.

Such high levels of competition may reduce Funguard’s sales potential. However, given that Fujisawa has greater experience in the antifungal market, it may have an edge over Merck, which is new to the sector. Funguard may also benefit from already being widely known by physicians, especially in the Japanese market. With the increasing use of antifungals as prophylactics, patient potential in this field is also expected to increase dramatically. Thus, sales of Funguard are forecast to reach $42m in 2003 and $292m in 2008.

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CHAPTER 6

Daiichi

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Chapter 6

Daiichi

Summary ‰

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Daiichi is in a relatively weak financial position following a year of declining sales and one-off costs relating to the establishment of Daiichi Suntory Pharmaceuticals. Thus, it is not currently able to make any significant strategic moves. Total sales declined by 3.2% to $2,572m in 2002. Such poor sales performance was due to reimbursement price cuts in Japan in 2002, increasing competition to core products and safety issues surrounding the antiplatelet drug Panaldine. Domestic sales accounted for 78.2% of Daiichi’s sales in 2002. However, geographic expansion forms a key part of the company’s growth strategy. As part of its 10 year plan, Daiichi aims to generate 40% of sales outside Japan. Growth is supported by the large number of trials being conducted overseas. Daiichi focuses on infectious and cardiovascular diseases. The importance of these therapy areas to the company’s sales will increase to 2008 following a decline in sales of non-core products. Daiichi’s lead product, Cravit, is patent protected in Japan until 2006 and in the US until 2010. Sales could rise to over $600m in 2005 but will decline thereafter as generic competition penetrates the domestic market. The company has a strong R&D pipeline, with two late stage products forecast to achieve significant sales by 2008: the antibacterial DU-6859a (sitafloxacin), in registration in Japan and in phase III trials overseas; and the in-licensed antithrombotic clopidogrel, which is in phase III in Japan. Daiichi’s stated R&D focus is on the development of anti-infectives, anticancer drugs and cardiovascular therapies. Although its pipeline reflects this commitment to some degree, it has only one anti-infective in late stage development.

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Strategic position A summary of Daiichi’s strategic position is presented below. Figure 6.16: Daiichi’s strategic position

Strengths

Weaknesses

Deep R&D Pipeline

Vulnerable financial position

Opportunities

Threats

Geographic expansion driven through overseas R&D operations

Decline in sales of Cravit

Business Insights

Source: Author’s research and analysis

Strengths Daiichi has a deep R&D pipeline. With a large number of compounds in trials for a variety of indications both in Japan and overseas, it should support the company’s future growth. Drugs are also in trials for indications with high sales potential, including cancer, thrombosis and diabetes. A high proportion of these are being

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conducted overseas, increasing the potential returns on the company’s investment in R&D.

Weaknesses Daiichi is in a fairly weak financial position following a year of declining sales and one-off costs relating to the establishment of Daiichi Suntory Pharmaceuticals. Thus, it is not currently in a position to make any significant strategic moves.

Opportunities Daiichi should focus on increasing its international sales. It has a large number of products in clinical trials overseas, which could drive the company’s future sales growth. To achieve the greatest return from these products, Daiichi will need to market them itself internationally, rather than entering into out-licensing agreements, but it is debatable whether the company currently has sufficient expertise to do this. Under the company’s 10 year plan, ‘Global 10’, it has set a target of achieving 40% of its sales from overseas, twice the current level of 20%.

Threats A decline in sales of Daiichi’s highest selling product, the antibacterial Cravit (levofloxacin), which accounted for 24.2% of sales in 2002, would have a significant deleterious effect on overall revenues. Although several pipeline products are expected to be launched between 2003 and 2008, none has sufficient sales potential to replace Cravit.

Growth strategy Daiichi has used a combination of organic growth and small scale acquisitions to drive its sales growth. For example, in 2002 the company acquired a 66% stake in the newly formed Daiichi Suntory Pharmaceutical Company, which transferred all of Suntory’s

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Pharmaceutical Division to the new company. In 2001 Daiichi acquired the pharmaceutical business of Snow Brand Milk Products, thereby boosting its pipeline.

Daiichi is thought to be looking for M&A opportunities in European markets to strengthen its overseas presence. This would enable the company to build a stronger marketing platform in Europe and to strengthen its R&D pipeline at the same time. Daiichi may not have sufficient funds to make such a strategic move, due to its currently weak financial position. However, in January 2004 the company announced that it was transferring its Japanese vetinary and livestock feed business to Meiji Seika, as of 1 June 2004, which will enable to Daiichi to focus its resources on its pharmaceutical business. The funds raised through the divestment are likely to be ploughed into small scale corporate and/or product acquisitions.

Daiichi’s international plans are focused on establishing a strong R&D presence overseas, both through its own operations and those of Daiichi Suntory. It has announced its intention to transfer control of its global drug development from Japan to the US. The company hopes that this shift will boost the efficiency of its R&D. Once compounds have progressed through clinical trials overseas, Daiichi may enlarge its marketing operations as the returns to be gained from marketing its own products are far greater than those from out-licensing. In the short-term, however, the decision to out-license its new antibacterial (DK-507k) to Pfizer indicates that Daiichi is not ready to take such a bold step.

Alliance activity Daiichi’s alliance network (illustrated below) mainly comprises deals related to pipeline products, in-licensing from other Japanese pharmaceutical companies and outlicensing its own products overseas. However, there are also a number of discovery collaborations, such as the collaborative research program in genomic drug discovery with Celestar Lexico-Sciences that was set up in May 2000. Daiichi has been involved

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in a number of alliances with biotechnology companies over recent years, including agreements with AnGes and MedGene Bioscience. Figure 6.17: Daiichi’s alliance network

Fujisawa (HANP)

Kaken

Microcide Pharmaceuticals

(Norinyl T28)

Celestar Lexico Sciences

Pfizer (DK -507k)

Daiichi

Teikoku Hormone

Zeria

(TZT-1027)

(HANP)

MedGene BioScience

AnGes MG

Kissei Pharmaceutical (KMD -3213)

Suntory

R&D agreement

Product related agreement In-licensing -licensing deals

Out -licensing licensing deals

Co--marketing/co -development

Non -product related

agreements

deals

Business Insights

Source: Author’s research and analysis

Financial overview Daiichi is not in a sufficiently strong financial position that it can fund major strategic moves. Therefore, although the company may look to licensing to boost its portfolio, it is unlikely to undertake large-scale M&A.

Over the last five years sales have risen by 2.9% year-on-year. However, Daiichi’s total sales declined by 3.2% from $2,657m in 2001 to $2,572m in 2002. Operating profit

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declined by 19.5% to $420m in 2002 and net profit declined by 57% to $288m. The poor sales performance was due to reimbursement price cuts implemented in Japan in 2002, increasing competition and safety issues surrounding the company’s anti-platelet drug Panaldine (ticlopidine). The sharp decline in profitability was caused by the poor sales performance and an increase in R&D investment, which rose by 15.8% to $426m, and by the amortization of consolidation difference relating to the company’s acquisition of shares in Daiichi Suntory Pharmaceuticals. Daiichi’s operating profit margin declined to 16.3% in 2002, while the net profit margin fell to 4.2% from 9.4% in the previous year.

Ethical sales represented 81.2% of Daiichi’s total sales in 2002, with the rest accounted for by the company’s diagnostics and radiopharmaceuticals, OTC, animal products and other businesses. In January 2004, Daiichi transferred its veterinary and livestock feed products business to Meiji Seika, effective 1 June 2004.

Domestic sales accounted for 78.2% of Daiichi’s sales in 2002, with 15.4% coming from the Americas, 3.9% from Europe and 2.5% from the rest of the world. Thus, the company is still heavily focused on its domestic market, having chosen to out-license products abroad rather than to market them itself.

Portfolio analysis Therapeutic focus Daiichi focuses on infectious and cardiovascular diseases. The importance of these therapy areas to the company’s sales will increase to 2008 following a decline in sales of non-core products. Daiichi’s highest selling drug, Cravit, accounted for 24.2% of the company’s total sales in 2002.

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In terms of R&D focus, Daiichi will seek to maintain its position in the cardiovascular and infectious disease markets, while expanding into cancer and CNS over the longer term. Figure 6.18: Daiichi’s therapeutic focus, FY2002 Infectious disease 32.4% Others 43.2%

Cardiovascular 24.4% Business Insights

Source: Author’s research and analysis

Major marketed products The table below summarizes sales of Daiichi’s leading products. The commercial potential of Cravit and Panaldine is discussed in more detail below. Table 6.11: Sales of Daiichi’s leading products, FY2001-02 Sales ($m) Growth FY2001 FY2002 FY2001-02 (%)

Brand

Generic

Indication

Cravit Panaldine Other

levofloxacin Bacterial infections ticlopidine HCl Thrombosis n/a Various

Total

561 311 1,295

519 257 1,289

(7.5) (17.4) (0.5)

2,167

2,065

(4.7)

n/a = not applicable Source: Company reports; author’s research and analysis

Business Insights

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Cravit (levofloxacin) Cravit, a quinolone, is indicated for the treatment of gram-positive and gram-negative bacterial infections. Daiichi originated the product and out-licensed it to Johnson & Johnson, which launched it in the US in January 1997 as Levaquin. Aventis markets Cravit in Europe as Tavanic. Levofloxacin has also been out-licensed to Santen, which received FDA approval in August 2000 for an ophthalmic formulation, branded Quixin.

Cravit has a powerful, rapid and broad spectrum antibacterial activity, particularly against pneumococci, which makes the drug efficacious even for penicillin-resistant patients. It has proven its efficacy against three of the most difficult to treat bacterial respiratory infections, which collectively affect more than 50 million people each year in the US.

Cravit was the leading antibacterial drug in Japan in 2001 and was launched in China in the same year. However, Cravit faces strong competition from Kyorin’s Gatiflo (gatifloxacin), which was launched in June 2002 and is co-marketed by Kyorin and Dainippon. In 2002, Kyorin and Dainippon recorded sales of Gatiflo of $38m and $42m, respectively, while Cravit generated sales of $519m, a decrease of 7.5% since 2001.

Cravit is patent protected in Japan until 2006 and in the US until 2010, providing Daiichi with the opportunity to drive further sales growth. Sales could thus rise as high as $626m in 2005, followed by a drop to $599m in 2008 as generic competition affects sales in the domestic market.

Panaldine (ticlopidine) Panaldine is a platelet aggregation inhibitor indicated for the treatment of circulatory disorders. The drug was launched in 1981 and has been off patent since 1992. In 2002, it generated sales of $257m, a decrease of 17.4% compared with 2001.

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Panaldine reduces the tendency of blood to clot, which makes it useful for elderly people who are at risk of stroke. Its sales are twice as large as those of its nearest competitor, Otsuka’s Pletaal (cilostazol), due to its cerebral/brain indication, which accounts for almost two-thirds of its sales.

One of the side effects of Panaldine is the suppression of bone marrow blood cell production. Daiichi reported that there had been 34 deaths in the period 1999-2001 as a result of hospitals not following proper instructions when prescribing the drug. The company has since published guidelines recommending regular blood tests during the first two months of treatment to minimize the number of cases of serious side effects. However, as there are no valid alternatives to Panaldine for serious conditions such as cerebral thrombosis, the product will continue to be used.

Panaldine has been on the market for 20 years and generic competitors are already available. It is considered as an ‘old term listed’ product and thus faces further price cuts that could be in the range of 10-12%, compared with 5-6 % for new drugs. Thus, over the next few years Panaldine will experience a continued decline in sales as a result of its maturity and pricing pressures in the Japanese market. Consequently, sales of $169m are forecast in 2005 and $130m in 2008.

R&D The following table presents an overview of Daiichi’s R&D pipeline. The company has stated that its R&D focus is on the development of anti-infectives, anticancer drugs and cardiovascular therapies. Its late stage pipeline reflects this focus to some extent, although the infectious disease franchise contains only one late stage product.

Six of Daiichi’s late stage pipeline products are forecast to be launched by 2008, but only two are expected to achieve high sales: the antibacterial DU-6859a (sitafloxacin), which is in registration in Japan and phase III overseas, and the anti-thrombotic DV7314 (clopidogrel sulfate), which is in phase III trials in Japan. DV-7314 (clopidogrel)

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is in-licensed from Sanofi-Synthélabo, which markets it as Plavix in Europe. This drug is assessed in more detail below. Table 6.12: Daiichi’s R&D pipeline, 2003 Brand/code

Generic

Indication

Stage

DU-6859a DF-098 DL-404 DV-7314 KMD-3213 DX-8951f DX-9065a Hepatocyte growth factor DNA plasmid SUN-Y4936r SUN-N4057 SUN-Y7017 DJ-927 TZT-1027 TRK-820 Oral factor Xa inhibitor DK-507k SUN-N8075 SUN-E7001 DE-310 DR-3305

sitafloxacin n/a n/a clopidogrel silodosin exatecan n/a n/a

Bacterial infections Influenza vaccine n/a Thrombosis Dysuria Cancer Thrombosis Vascular regeneration therapy

Registration Registration Registration Phase III Phase III Phase III Phase II Phase II

carperitide n/a memantine n/a n/a n/a n/a

Heart failure Stroke Alzheimer's disease Cancer Cancer Pruritis Thrombosis

n/a n/a n/a n/a ebselen

Bacterial infections Stroke Diabetes Cancer n/a

Forecast sales Launch FY2008 ($m) year 159 37 20 340 11 8 n/l n/l

2004 2004 2004 2005 2006 2005 >2008 >2008

Phase II Phase II Phase II Phase II Phase II Phase II Phase I

n/l n/l n/l n/l n/l n/l n/l

>2008 >2008 >2008 >2008 >2008 >2008 >2008

Phase I Phase I Preclinical Terminated Terminated

n/l n/l n/l n/a n/a

>2008 >2008 >2008 >2008 >2008

n/a = not available n/l = not launched Source: Company reports; author’s research and analysis

Business Insights

DV-7314 (clopidogrel) Clopidogrel was developed by Sanofi-Synthélabo and Bristol-Myers Squibb and launched in 1998 in both the US and Europe under the brand name Plavix. Daiichi inlicensed the marketing rights for Japan, where an application is expected to be submitted in 2004.

Clopidogrel blocks the adenosine diphosphate receptors on the surface of platelets, thereby interfering with one of the routes by which platelets are activated and 125

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subsequently bind to one another via the adhesion of fibrin to GPIIb/IIIa receptors. The main competitor to clopidogrel is aspirin, the gold standard antiplatelet, which is highly effective, well tolerated and almost completely genericized.

In Japan clopidogrel will be the first of its class to reach the market, offering Daiichi the potential to secure a strong position. Thus, sales of $340m are forecast in 2008 after launch in 2005.

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CHAPTER 7

Mitsubishi

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Chapter 7

Mitsubishi

Summary ‰

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Although only the eighth biggest Japanese pharmaceutical company, Mitsubishi currently has the largest sales force, with 1,580 reps. However, this is still small compared with Pfizer’s Japanese subsidiary’s 3,493 reps. Mitsubishi recorded strong sales growth in 2002, up by 22.6% to $2,242m. However, the company’s net profits are low and it has cash/cash equivalents of only $222m. Although recent sales growth has been driven by benefits of the merger that created Mitsubishi Pharma in late 2001, the company now needs to focus its efforts on strengthening its weak late stage pipeline. Sales from a mature portfolio are forecast to remain stagnant to 2008. Mitsubishi’s marketed portfolio is dominated by its cardiovascular franchise, which accounted for nearly half of all sales in 2002. Although sales of this franchise will be static in the period to 2008, it will remain the largest. Sales of Mitsubishi’s lead drug, Radicut, are likely to dip in fiscal 2003 following safety concerns in July 2002. However, since the product is used in patients with potentially life-threatening illnesses, and is easier to use and more efficacious than its competitors, sales should recover. Supported by an increased stake by its parent company, Mitsubishi has set a goal of becoming a global, research-based pharmaceutical company in 10 years. In the meantime, it will need to in-license to supplement organic growth. Mitsubishi has nine new products in phase II clinical trials or above. However, only two of these, OC-108 and AS-013, are expected to be launched by 2008, and neither will have generated significant sales by this time. AS-013 has been in phase III trials for some time, reflecting the problems of developing treatments for peripheral arterial occlusive disease. Its long-term sales potential could be significant, although it will eventually face competition from gene therapy.

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Strategic position A summary of Mitsubishi’s strategic position is presented below. Figure 7.19: Mitsubishi’s strategic position

Strengths

Weaknesses

Large sales force

Weak late stage pipeline Mature marketed portfolio

Opportunities

Threats

Geographic expansion driven through overseas R&D operations

Safety concerns restrict Radicut sales Costs of Fibrinogen

Gaining approval for Albrec

Business Insights

Source: Author’s research and analysis

Strengths The merger of Mitsubishi-Tokyo Pharmaceuticals with Welfide in October 2001 to create Mitsubishi Pharma Corporation created a large sales force. The company is now believed to have 1,580 marketing representatives, more than any other Japanese pharmaceutical company (before the merger of Yamanouchi/Fujisawa). This will help it to maximize the penetration of its products from launch and may also increase its attractiveness to other companies seeking partners for co-marketing or out-licensing

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deals. However, while most notable Japanese pharmaceutical companies support between 800 and 1,500 sales reps, Pfizer’s Japanese subsidiary has 3,493 reps, more than double that of Mitsubishi. Many domestic companies have announced intensions to expand their sales forces over the next few years. Takeda, for example, plans to increase its number of sales reps to 1,700 by March 2006. The merger between Yamanouchi and Fujisawa is expected to create a sales force of 2,400.

Weaknesses Although Mitsubishi has eight late stage pipeline products (phase II and above), none is expected to attain significant sales. Only two are likely to be launched by 2008 and will achieve only limited sales in this period.

Mitsubishi has a mature marketed portfolio, with sales of many drugs declining in 2002. Safety concerns regarding one of the company’s main growth drivers, Radicut (edaravone), further undermines its marketed portfolio.

Opportunities International expansion is a key opportunity for Mitsubishi. The company has established R&D subsidiaries in the US and Europe, and in 2003 established a subsidiary in Germany to market its cardiovascular drug, argatroban. This should enable it to drive additional sales growth from both marketed and pipeline products.

Mitsubishi should also produce sufficient safety data to gain approval for Albrec (human serum albumin) in Japan. This would provide considerable additional sales, as at this stage the product appears unlikely to gain marketing approval.

Threats Safety concerns surround Mitsubishi’s highest selling product, Radicut. Treatment with Radicut has been associated with a number of deaths due to kidney dysfunction. If

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Mitsubishi is unable to convince physicians that its drug is safe and necessary, its sales could suffer considerably.

Mitsubishi is also involved in litigation regarding the blood plasma preparation Fibrinogen, which was marketed by the Green Cross Corporation, one of the company’s predecessors. If patients are successful in their legal efforts, Mitsubishi could face considerable additional costs, weakening its financial position.

Growth strategy Mitsubishi Pharma was formed by the merger of Mitsubishi-Tokyo and Welfide Corporation in 2001. Both companies were themselves formed through mergers: Green Cross merged with Yoshitomi to form Welfide in 1998 while Mitsubishi-Tokyo resulted from the 1999 merger between the pharmaceutical divisions of Tokyo Tanabe and Mitsubishi Chemical. Although Mitsubishi Pharma is not itself in a strong position to fund any major strategic moves, the announcement in late 2003 that Mitsubishi Chemical, its parent company, will increase its stake from 45% to nearly 60% to support potential alliances suggests that Mitsubishi Pharma is considering a number of significant growth options.

Foremost among these is Mitsubishi’s plan to become a global research-driven pharmaceutical company within 10 years. To this end, it has established research subsidiaries in the US and the UK (established in 2001 at the time of the merger), while in July 2003 it created Mitsubishi Pharma Deutschland as a first step towards setting up overseas sales and marketing operations. Mitsubishi Pharma Deutschland will market argatroban injection, which is in registration in Europe.

Mitsubishi already had a presence in the US through its plasma-fractionation operation, Alpha Therapeutic Corporation, although this business has been performing poorly and is in the process of being divested. In December 2002 it was agreed that part of Alpha

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Therapeutic would be sold to Baxter Healthcare, and in April 2003 it was announced that the remaining parts of the business would be transferred to the Grifols Group holding company, Probitas Pharma.

To increase its focus on the ethical pharmaceutical market, Mitsubishi announced plans to divest its OTC and bulk pharmaceuticals businesses during 2003. The OTC business will be transferred to Sato Pharmaceutical and the bulk drug business will be transferred to its consolidated subsidiary, API Corporation.

Mitsubishi’s pipeline contains eight novel products in phase II clinical trials or above and a large number of existing products in trials for new indications, all of which offer potential for organic growth. However, with only two of the new products expected to reach the market by 2008, this growth potential is not enough to offset the decline in sales of a number of the company’s older products. Thus, although Mitsubishi wishes to become an R&D focused pharmaceutical company, it will need to resort to in-licensing to supplement its organic growth over the next five years.

Alliance activity Mitsubishi has a broad alliance network, with agreements spanning a number of areas. In 2002 the company signed an agreement with GSK to co-promote Paxil (paroxetine) in Japan. This will provide additional income, although it is not believed that Mitsubishi will consolidate sales of the product. Further such licensing agreements are expected, as the company’s own portfolio is forecast to achieve limited sales growth over the next six years.

Mitsubishi has also formed an agreement with Takeda for the latter to market its cardiovascular pipeline drug, MCC-135, abroad. Although this will not directly benefit Mitsubishi’s sales, it should provide a boost to profits once the product reaches the market. As Mitsubishi has little or no presence in overseas markets, this agreement with

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the largest Japanese pharmaceutical company, which has a strong international presence, will enable the product to achieve higher sales.

The majority of Mitsubishi’s recent corporate agreements strengthen the company’s R&D capabilities, either in relation to specific products or projects or in acquiring new drug discovery and biotechnology techniques that enhance its research capabilities. Mitsubishi’s network of alliances is illustrated below. Figure 7.20: Mitsubishi’s alliance network

GlaxoSmithKline (Paxil) Janssen Pharmaceuticals (MKC -733)

/ SmithKline Beecham

NeoGenesis

Toray Industries

Takeda

(TRK-851)

(MCC-135)

Mitsubishi Eli Lilly

Pharmacopeia

Nikken Chemicals Sumitomo

(Myser, Romet)

Nissho MedGene Bioscience

(recombinent albumin)

R&D agreement

Product related agreement In-licensing licensing deals

Out -licensing licensing deals

Co-marketing/co -development agreements

Non - product related deals

Business Insights

Source: Author’s research and analysis

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Financial overview Mitsubishi recorded strong sales growth in 2002, up by 22.6% to $2,242m. However, the company’s net profits are low and it has cash/cash equivalents of only $222m. Thus, any major strategic moves were likely to be largely debt-funded; the company has a low debt to equity ratio of 11.6%. However, Mitsubishi’s financial strength and ability to undertake new alliances and M&A changed following Mitsubishi Chemical’s announcement in December 2003 that it would raise its stake in Mitsubishi Pharma to 58.94% from 45.08%. This move is believed to be preparing Mitsubishi Pharma’s business structure for a potential future alliance.

COGS accounted for 43% of sales in 2002, down from 46% in 2001, while S,G&A costs represented 29.3% of sales, down slightly from 30.3% in the previous year. Operating profit rose by 47.5% to $235m in 2002 and net profit declined by 8.2%, resulting in an operating profit margin of 10.5% and a net profit margin of 2.9%.

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Portfolio analysis Therapeutic focus Mitsubishi’s therapeutic focus is illustrated in the pie chart below. Figure 7.21: Mitsubishi’s therapeutic focus, FY2002 Other 13.1%

Hematology 10.1% Cardiovascular 44.6% Respiratory 12.9%

CNS 19.3% Business Insights

Source: Author’s research and analysis

Mitsubishi’s marketed portfolio is dominated by its cardiovascular franchise, which accounted for nearly half of all sales in 2002. Although sales of this franchise are forecast to remain static in the period to 2008, it will remain the largest. Sales of CNS products are set to grow most, albeit from a smaller base. Overall, the company’s sales growth prospects are weak, remaining virtually stagnant over the next five years.

Major marketed products The table below summarizes sales of Mitsubishi’s leading products. Radicut and Theodur (theophylline) are assessed in more detail in the following paragraphs.

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Table 7.13: Sales of Mitsubishi’s leading products, FY2001-02

Brand

Generic

Indication

Radicut Theodur Other

edaravone theophylline n/a

Stroke Asthma Various

Sales ($m) Growth FY2001 FY2002 FY2001-02 (%)

Total

165 185 1,288

259 160 1,603

57.0 (13.5) 24.5

1,638

2,022

23.4

n/a = not applicable Source: Company reports; author’s research and analysis

Business Insights

Radicut (edaravone) Radicut is a neuroprotective product indicated as for the treatment of acute stage cerebral infarction. The drug is usually used in emergency facilities. It was developed in-house by Mitsubishi and launched in June 2001, generating sales of $259m in 2002, up from $165m in its first year on the market.

The drug has clear advantages over its competitors. The main competing product is sodium ozagrel, which is marketed as Cataclot by Ono and as Xanbon by Kissei. Radicut is easier to use than sodium ozagrel and has superior clinical efficacy. This is reflected in the drug’s Japanese reimbursement price, which incorporates a premium for innovation.

Radicut can be used for both cerebral thrombosis and cerebral embolism, while sodium ozagrel is contraindicated for cerebral embolism. Since the clinical symptoms for cerebral embolism and cerebral thrombosis are similar, physicians must perform a differential diagnosis, including imaging of the blood vessels, to rule out cerebral thrombosis before administering sodium ozagrel. Sodium ozagrel can also not be used in patients with a predisposition to bleeding, since one of its side effects is hemorrhaging. In contrast, the only restrictions on the use of Radicut are that it must be administered within 24 hours of a cerebrovascular event and for a maximum of 14 days.

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These simpler usage guidelines are particularly convenient in emergency situations where time is crucial.

In July 2002, a kidney dysfunction side effect was reported in relation to Radicut, following two deaths. The fact that the product is used in patients with severe and possibly life-threatening illness means that its sales should not be significantly adversely affected over the long-term, although they are likely to have dipped in 2003. In addition, the package insert for sodium ozagrel already warns of this potential side effect.

The risk of generic competition to Radicut is as yet difficult to quantify. Mitsubishi does not hold a substance patent for Radicut, only an application patent, and it has not disclosed when this patent will expire. The threat from generic drug manufacturers may be limited because the manufacturing process for injected drugs is complex and because Mitsubishi has a strong presence in the cerebrovascular market.

Mitsubishi is believed to be carrying out trials for extended indications for Radicut, including subarachnoid hemorrhage and amyotrophic lateral sclerosis. These specialist indications are not expected to boost the product’s sales significantly. The drug is also in phase I trials in Europe but the lack of a substance patent may inhibit growth opportunities abroad. Consequently, sales of Radicut are forecast to fall to $192m in 2003, before increasing again to $263m in 2008.

Theodur (theophylline) Theodur is indicated for the relief of bronchospasm in asthma and was launched in 1976. The drug is primarily used by patients who do not respond well to treatment with beta2 agonists. Its main advantage is that it is predominantly available as an oral formulation at lower doses, so it does not have any additional complications related to the delivery mechanism. It is also given intravenously at high doses in hospitals. Theophylline is absorbed rapidly from the gastrointestinal tract, remaining in the body

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for eight hours in adults and 12 hours in children. This means that oral sustainedrelease formulations may be used for the management of nocturnal asthma.

Theodur has a poor side effect profile. The drug can cause CNS and cardiovascular side effects, including vasoconstriction in cerebral blood vessels. It can cause seizures in children, even at concentrations at the lower level of the therapeutic range. One-third of all children undergoing theophylline treatment suffer from side effects.

A further source of concern is that Theodur is variably metabolized. This is compounded in children, where rapid absorption and metabolism mean that they experience high concentrations of the drug (potentially leading to side effects), followed by a rapid decrease in plasma concentration of the drug, which increases the danger of an exacerbation. This necessitates the need to infuse the drug slowly over long periods of time.

Theophylline also interacts with other compounds in the body, including oral contraceptives and gastrointestinal products like cimetidine. The effectiveness of the drug is also reduced in patients with liver damage or viral infections and in heavy smokers and drinkers. This limits its clinical application to severe asthmatics, who are often heavy smokers.

Sales of Theodur fell by 13.5% to $160m in 2002, due to increased generic competition and competition from leukotriene antagonists. Sales are likely to continue to decline to around $124m in 2008.

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R&D The table below presents an overview of Mitsubishi’s R&D pipeline. Table 7.14: Mitsubishi’s R&D pipeline, 2003 Brand/code

Indication

Stage

Albrec (human serum albumin) OC-108 AS-013

Hypoproteinemia Hemorrhoids Peripheral arterial occlusive disease Alzheimer's disease Heart failure Thrombosis Asthma Osteoarthritis Diabetes

Registration Registration Phase III

n/a 30 68

Phase II Phase II Phase II Phase II Phase II Phase II

n/l n/l n/l n/l n/l n/l

MKC-231 MCC-135 MCC-977 MCC-847 SFPP MCC-555

Forecast sales FY2008 ($m)

n/l = not launched Source: Company reports; author’s research and analysis

Business Insights

The company has nine new products in phase II clinical trials or above. However, only two of these, OC-108 and AS-013, are expected to be launched by 2008. Furthermore, although Albrec is listed as in registration in Japan, continuing safety concerns relating to allergic reactions are likely to prevent this product from gaining approval.

AS-013 is a lipid microsphere formulation of a prodrug version of alprostadil, a prostaglandin. Mitsubishi is developing the product for the treatment of peripheral arterial occlusive disease (POAD), with an initial indication of severe chronic arterial occlusion, a circulatory condition in diabetics that can lead to limb amputation. AS-013 has entered phase III trials in the US and is in phase II development in Japan. AS-013 is essentially an enhanced drug delivery system version of Liple that is currently marketed by Mitsubishi.

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Drugs for POAD are difficult to develop and AS-013 has been in phase III trials for some time. However, this is not to undermine its significant sales potential, although Mitsubishi will need to co-market the product overseas. Competition is intensifying in this area. Although still in early clinical trials, gene therapy has attracted significant attention as a treatment for chronic arterial occlusive disease because of its high level of efficacy.

OC-108 is an injectable drug in registration in Japan as an alternative to surgical removal for severe internal hemorrhoids. Phase III trials demonstrated a reduction in hospitalization and the length of the procedure, and a greatly reduced burden on patients (financial, physical, length of hospital stay). The main competitor to OC-108 will be Torii’s Paoscle (phenol), which was launched in 1976. However, this drug is indicated for moderate hemorrhoids that do not require surgical removal. The launch of OC-108 may stimulate the domestic market, which is believed to comprise around 300,000 patients.

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CHAPTER 8

Shionogi

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Chapter 8

Shionogi

Summary ‰

‰

‰

‰

‰

‰

‰

‰

Shionogi’s ethical sales declined by 31.3% in 2002 to $2,019m. This is partly due to the challenging domestic market, with an average 6.3% reduction in National Health Insurance drug prices implemented in April 2002. Shionogi’s ethical sales are forecast to record little growth over the period to 2008. A steady decline in sales of the company’s large but mature infectious disease franchise will negate growth elsewhere. The company’s core competency is its Japanese sales operations and it plans to concentrate its resources on the domestic marketing of new drugs. Shionogi’s aim, as part of a five year plan announced in 2000, is to have the largest sales force in Japan and to be the market leader in antibacterials. Although dependence on the Japanese market is expected to decrease as royalties from Crestor accrue and the joint venture established with GlaxoSmithKline bears fruit, Shionogi lags behind other major Japanese pharmaceutical companies in the development of its international operations. Shionogi has a healthy balance sheet, with relatively low long-term liabilities and a substantial cash reserve. However, it is less profitable than other Japanese companies. Profitability is expected to improve following the divestment of the loss-making wholesale business in 2002. In the face of increasing competition, sales of Shionogi’s lead product, Flomox, will display only limited growth, up from $274m to $295m from 2002-05. Shionogi is attempting to extend its reach beyond its current therapeutic markets, in-licensing compounds such as duloxetine from Lilly for the CNS market. However, Shionogi may struggle to penetrate this market, as it is inexperienced in this area and will face tough competition from Western companies. Crestor is the most promising of Shionogi’s pipeline products. Potential launch in Japan at the end of 2004 could drive sales to $250m in 2008.

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Strategic position Shionogi’s strategic position is presented below. Figure 8.22: Shionogi’s strategic position

Strengths

Weaknesses

Joint venture with GlaxoSmithKline

High proportion of long-listed drugs in domestic portfolio

Decreasing dependence on domestic market following overseas launch of Crestor

Reliance on domestic market

Royalty income from Crestor should boost profitability

Opportunities

Threats

In-license products to prevent decline in domestic sales

Further drug price cuts in Japan

Acquisition of overseas sales and marketing

Regulatory delays to launch of key pipeline products Incursion of Western pharma companies into Japanese market

Business Insights

Source: Author’s research and analysis

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Strengths Shionogi’s main strengths are its: ‰

joint venture with GSK;

‰

decreasing dependence on domestic market following the overseas launch of Crestor (rosuvastatin);

‰

royalty income from Crestor.

A joint venture with GSK, finalized in October 2001, will give Shionogi the ability to market its own drugs overseas (since it contributed four of the initial five products being developed), rather than relying on out-licensing as it has with Crestor and capravirine.

The potential blockbuster dyslipidemia therapy, Crestor, should boost profitability. Shionogi developed Crestor in-house and out-licensed it to AstraZeneca. The drug is forecast to achieve sales of around $3bn globally by 2008. Even if Shionogi earns only 15% of this in royalty income, the company will still realize $450m in 2008. This would be a substantial boost to the company’s bottom line, enabling it to invest in marketing drugs it develops through its joint venture with GSK and in the development of further novel drugs. Shionogi has also out-licensed capravine, an HIV drug in phase III trials, to Pfizer, which if successfully launched will be another source of future royalty income.

Weaknesses Shionogi has a high proportion of long-listed drugs in its domestic portfolio. This means the products have been on the market for a significant length of time and in most cases are no longer patent protected. These are exactly the drugs that are targeted for enforced priced reductions by the Ministry of Health, Labor and Welfare. In 2002, products that had been available for more than 10 years comprised 80% of Shionogi’s

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ethical sales. As a result, sales of its existing marketed products are forecast to decline between to 2008, leaving the company dependent upon the productivity of its pipeline for growth.

Opportunities Shionogi’s recently established US subsidiary, although only focused on R&D, gives it the ideal opportunity to assess the technologies, business strategies and product ranges of major players in those markets. Although the company may not have the resources to establish an independent overseas presence, its cash position and anticipated increase in profitability would enable it to acquire a small foreign company. This would give Shionogi an immediate international presence and reduce its future dependence on outlicensing as a source of international revenue.

Threats Shionogi is forecast to record limited ethical sales growth over the next five years. Any growth will be entirely dependent upon the successful launch and commercialization of pipeline products. Delays in the development or approval of just one of its pipeline products would result in the company’s ethical sales declining over the period to 2008.

Growth strategy Shionogi experienced falling sales across all of its major businesses in 2002, with sales of prescription pharmaceuticals declining by 31.3%. This was primarily due to the maturity of its ethical portfolio, with products available for more than 10 years accounting for 80% of sales. This is problematic not because of the threat of generic competition, which is not as significant in Japan as it is in the US, but also because of Japanese government imposed price cuts that are targeted towards mature products. Although the contribution of mature products is forecast to decline to 60% of sales in 2008, this is primarily due to the launch of in-licensed products rather than those

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developed in-house. Shionogi’s ethical pharmaceuticals business is not expected to show any organic growth over the next five years.

Outside the prescription pharmaceuticals division, the loss of sales in 2001 was due to the spin-off of Shionogi’s non-pharmaceutical businesses, which resulted from a restructuring of operations to increase the company’s focus on prescription pharmaceuticals and boost profitability. Shionogi has now withdrawn from its nonpharmaceutical businesses (including animal health, agricultural chemicals and contract clinical testing) and sold Ohmori Yakuhin, its drug wholesale subsidiary.

The company’s core competency is its domestic sales operations and it plans to concentrate its resources on the domestic marketing of new drugs. Shionogi’s aim, as part of a five year plan announced in 2000, is to have the largest sales force in Japan and to be the market leader in antibacterials. The company also plans to develop its cardiovascular and oncology businesses in Japan.

Although Shionogi has an established reputation in the antibiotics market, its sales force may not be as effective in other therapy areas because it is smaller than those of competing companies in areas it plans to enter. For example, Yamanouchi/Pfizer has a much larger presence in the dyslipidemia market, in which Shionogi will be marketing Crestor.

As part of its international growth plans, Shionogi established a US subsidiary, Shionogi USA, in February 2001, which is currently solely an R&D operation. Although royalties from Crestor will increase Shionogi’s overseas revenues, the company lags behind the other major Japanese pharmaceutical companies in the development of international operations.

Japanese firms that have already established an overseas presence include Takeda, Eisai and Fujisawa, while those in the process of doing so include Sankyo and Yamanouchi. International expansion will be a major opportunity for Japanese companies as they

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come under increasing competition from Western companies in their domestic market. Shionogi should exploit its joint venture with GSK to build an independent position in the US, rather than relying on out-licensing its drugs for overseas marketing.

The only way for Shionogi to survive in Japan in the face of increasing competition is to achieve its aim of having the leading sales force. This would enhance its attractiveness as a licensing partner since it would offer increased penetration of the market, even if a foreign partner had an independent presence in Japan. This would allow Shionogi to continue its favored strategy of in-licensing products for the domestic market. The acquisition of another Japanese company would help it to achieve this goal by boosting the size of its sales force. Shionogi’s sales force comprises around 1,350 reps at present, while Chugai, Mitsubishi and Pfizer Japan all supporting larger sales forces.

Now that Shionogi has separated itself from its profit-sapping non-pharmaceutical businesses, it has also become a more attractive acquisition target for other Japanese or foreign companies seeking to boost their sales and marketing presence.

In terms of overseas opportunities, the acquisition of sales and marketing capabilities in the US would provide a significant boost to Shionogi’s sales and profit potential. Although Shionogi does have the option to acquire the Shionogi-GSK joint venture, the agreement does not allow for this until from 10 years after the launch of the first product.

Alliance activity In the Japanese market, in an effort to replace declining sales of its domestic portfolio, Shionogi has in-licensed compounds from Western companies, including Lilly, Schering-Plough and BMS, for development in Japan. In contrast, it has out-licensed

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the overseas development of capravirine to Pfizer, doripenem to Peninsula, and Crestor to AstraZeneca. Shionogi’s alliance network is illustrated below.

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Figure 8.23: Shionogi’s alliance network

Peninsula Degussa

(S-4661)

GSK (Valtrex/ Zovirax)

Quark Biotech

ScheringPlough

Kyowa Medex

Shionogi

(SCH29851)

Oncotherapy

Nippon Roche (Tamiflu)

AstraZeneca (Crestor)

Boehringer Ingelheim

SRL

Product related agreement Out-licensing licensing deals

R&D agreement

Multiple agreements

Co-marketing/co-development marketing/co agreements

Business Insights

Source: Author’s research and analysis

The arrangement with AstraZeneca for Crestor is interesting as it combines outlicensing of Shionogi’s product for marketing overseas with an agreement to co-market the drug in Japan. Although the agreement will boost profitability and overseas revenues, it will do little to aid Shionogi’s globalization because this can only be achieved through local production and marketing.

The joint venture with GSK better serves this purpose. The venture, finalized in October 2001, operates in the US and major European markets and focuses on the

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development of five compounds, four of which have been contributed by Shionogi. GSK will have exclusive marketing rights in countries where the joint venture does not operate, excluding Japan and Taiwan, where Shionogi will retain exclusive marketing rights to all of its compounds. GSK will have co-promotion rights in those joint venture markets where its capabilities could enhance commercialization efforts. The joint venture has also enabled Shionogi to form a close alliance with an international pharmaceutical company, which led to the agreement signed with GSK in March 2003 to co-detail (but not to sell) Valtrex (valacyclovir) and Zovirax (acyclovir) in Japan.

In addition to its many marketing agreements, Shionogi has research partnership agreements in the field of genomic drug discovery with The Institute of Physical and Chemical Research, OncoTherapy Science and Quark Biotech. These partnerships have the potential to boost Shionogi’s drug discovery capabilities and extend its international reach.

Financial overview Shionogi has a healthy balance sheet, with relatively low long-term liabilities and a substantial cash reserve. However, in comparison to other Japanese companies it is less profitable, with an operating profit margin of 14.3%, lower than the 19% average of the top five companies. Profitability is, however, expected to improve following the divestment of the loss-making wholesale business in 2002, an increased focus on ethical pharmaceuticals, and the beginning of a royalty stream from AstraZeneca’s sales of Crestor.

Shionogi’s total revenues declined by 32.1% from $3,356m in 2001 to $2,278m in 2002. The company’s revenues are dominated by ethical pharmaceuticals, which accounted for 88.6% of total sales in 2002. This business showed the greatest absolute fall in sales, with a $920m decrease from $2,939m in 2001 to $2,019m in 2002. This is partly attributable to the challenging domestic market experienced in 2002, which saw

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an average 6.3% reduction in National Health Insurance drug prices implemented in April 2002.

Sales of the agrochemical, animal health and clinical testing services divisions also fell in 2002, as a result of the restructuring of Shionogi’s business, which saw each of these divisions transferred to joint venture companies. Reduced sales volume and increased competition in the capsule business resulted in a 2.1% decline in sales.

A reduction in the number of employees and an increased focus on pharmaceuticals in 2002 improved Shionogi’s ratio of COGS to sales from 65.1% in 2001 to 53.8% in 2002. R&D expenses increased to $250m in 2002, up 2.5% from 2001. As a proportion of sales, R&D expenditure rose from 7.3% in 2001 to 11.0% in 2002. Greater investment partly reflected the submission of five NDAs during the fiscal year.

Portfolio analysis Therapeutic focus Shionogi’s ethical sales declined by 31.3% in 2002 to $2,019m. This is partly attributable to the challenging domestic market faced by the company, with an average 6.3% reduction in National Health Insurance drug prices implemented in April 2002. All of Shionogi’s therapeutic franchises were affected by this, with sales declining in the company’s three main portfolios. However, infectious disease drugs continued to account for the bulk of the company’s ethical sales, at nearly 60%, as illustrated in the following pie chart.

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Figure 8.24: Shionogi’s therapeutic focus, FY2002 Other 18.1%

Cardiovascular 8.6% Infectious diseases 59.1%

Oncology 14.2%

Business Insights

Source: Author’s research and analysis

Major marketed products The table below summarizes sales of Shionogi’s leading products, each of which are assessed in more detail in the following paragraphs. Table 8.15: Sales of Shionogi’s leading products, FY2001-02 Sales ($m) Growth FY2001 FY2002 FY2001-02 (%)

Brand

Generic

Indication

Flomox

cefcamate pivoxil flomoxef vancomycin n/a

Bacterial infections

268

274

2.2

Bacterial infections Bacterial infections Various

186 168 2,317

172 155 1,418

(7.5) (7.7) (38.8)

2,939

2,019

(31.3)

Flumarin Vancomycin Other Total

n/a = not applicable Source: Company reports; author’s research and analysis

Business Insights

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Flomox (cefcamate) Flomox is one of Shionogi’s oral cephalosporins, which act through the inhibition of bacterial cell wall membrane synthesis. Cephalosporins inhibit enzymes that create the cross-linkage of the peptidoglycan polymer, leading to interference with the cell wall structure. These enzymes, located beneath the cell wall, are known as penicillin-binding proteins (PBP). The effect of an antibiotic on a specific micro-organism depends on which PBP is bound and inactivated.

There are three formulations for this product: Flomox tablets 75mg and 100mg, and Flomox 100mg granules for children. Flomox differs from other cephalosporins in Shionogi’s portfolio in that the drug belongs to a newer generation of improved cephalosporins, which are less susceptible than earlier agents to inactivation by betalactamases.

Launched in June 1997, Flomox has become Shionogi’s best selling product, with sales of $274m in 2002, an increase of 2.2% over 2001. The drug has compensated for the fall in sales of Kefral (cefaclor), whose manufacturing process patent expired in 1994, and enabled the company to maintain its share of the antibiotic market in Japan.

Japan accounts for one-fifth of the global antibacterial market. Growth has been curbed by a steep fall in sales of Fujisawa’s Cefzon (cefdinir) and Daiichi’s Cravit (levofloxacin). The leading products in Japan are different from those elsewhere as they are produced by Japanese companies that have limited sales outside their home territory. Many of the dominant products are cephalosporins, which are particularly heavily used in Japan and account for almost 50% of total antibacterial sales. Products such as Flomox, which are only marketed in Japan, have limited long-term growth potential, due to a confined patient population and regular price cuts enforced by the Japanese government.

Flomox is considered to be a key component of Shionogi’s portfolio. The combination of an orally bioavailable cephalosporin with broad and well balanced antibacterial 153

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activity, supported by Shionogi’s strong relationship with influential opinion leaders in Japan, has provided the company with a steady revenue stream. However, although Flomox is a fourth-generation product, it will experience a significant fall in sales growth unless Shionogi out-licenses the drug for sale overseas as the Japanese market is nearing saturation. Flomox has the second highest sales in Japan, behind Daiichi’s Cravit, which generated $519m in 2002.

Sales of Flomox are not expected to increase significantly. The drug will also face competition from macrolide antibiotics, such as Taisho’s Clarith (clarithromycin), which are gaining a reputation as first-line antibiotics in Japan. Consequently, sales are forecast to increase to $295m in 2005 before declining to $274m in 2008.

Flumarin (flomoxef) Flumarin is the oldest and most well known of Shionogi’s cephalosporins. It is an injectable oxacephem antibiotic that gained popularity among clinicians due to its broad spectrum of activity and relatively favorable side effect profile. Launched in 1988, Flumarin was initially among the 10 leading cephalosporins in the Japanese market.

Flumarin sales were $172m in 2002, a decline of 7.5% over 2001. At its peak in 1992, the drug generated $264m. Sales are expected to continue falling following the loss of patent protection in November 2002. Although there is no significant generic drug market in Japan, patent expired drugs are subject to greater downward price revisions. Thus, sales of Flumarin are expected to continue to decline to around $118m in 2008.

Vancomycin (vancomycin) Vancomycin is a relatively small aminoglycoside antibiotic derived from Nocardia Orientalis (formerly known as Streptomyces Orientalis). It is active against most grampositive bacteria, including Streptococci, Corynebacteria, Clostridia, Listeria and Bacillus, and is bactericidal to most susceptible gram-positive bacteria at levels between 0.5mg/l and 3mg/l. Staphylococci, including beta lactamase producing and methicillin-resistant species are killed at levels of less than 10 mg/l. Vancomycin kills 154

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bacteria mainly by inhibiting bacterial cell wall synthesis. However, it also damages the bacterial cell membrane and interferes with bacterial RNA synthesis. No significant post-antibiotic effect has been observed for vancomycin or any of the susceptible organisms.

Since their introduction into clinical use 50 years ago and despite the advent of newer agents (carbapenems, monobactams and fluoroquinolones), aminoglycoside antibiotics have continued to play an important role in the treatment of severe infections, particularly those due to aerobic, gram-negative bacteria. Several factors account for their durability and continued clinical use: therapeutic efficacy, synergy with betalactam antibiotics, low rate of development of true resistance, and low drug cost. The main drawback of vancomycin has been the occurrence of (reversible) nephrotoxicity and ototoxicity in a significant number of patients.

Strains of micro-organisms that have multiple resistances to antibiotics are one of the most serious problems encountered by hospitals, and vancomycin is sometimes the only available antibiotic that is effective against such microbes. However, resistance to ampicillin and the aminoglycosides has been increasing over the past decades, with the first outbreak of vancomycin-resistant Enterococci being reported in the late 1980s.

Vancomycin sales rose continuously from $59m in 1991 to $216m in 2000. However, sales declined in 2001 and fell a further 7.7% to $155m in 2002. This reflects growing concerns about the spread of vancomycin resistance (particularly among Enterococcus), largely due to the drug’s previous overuse. This trend has resulted in vancomycin’s use as a therapy of last resort in the treatment of methicillin-resistant Staphylococcus aureus.

Compounding these problems are the standard issues associated with patent expiry and the introduction of new products competing directly for market share, such as Synercid (quinupristin/dalfopristin) and Zyvox (linezolid). Within its own class, vancomycin has been relatively successful in defending itself against the competing glycopeptide

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antibiotic

teicoplanin,

Aventis’

Targocid

(teicoplanin).

Ultimately,

sales

of

Vancomycin are predicted to decline to $147m in 2003 and further to $110m in 2008, primarily in response to fears of resistance.

R&D Shionogi’s R&D pipeline is tabulated below. Table 8.16: Shionogi’s R&D pipeline, 2003 Brand/code

Generic

OxyContin (S-8117) SR-47436 NS-75A S-7878

oxycodone Cancer pain sustained release irbesartan Hypertension cetrorelix Premature ovulation mesna Urinary disorders associated with ifosamide pirfenidone Idiopathic interstitial pneumonia vancomycin Sepsis

S-7701 Vancomycin injection Crestor LY-248686 S-4661 S-8116 S-1153 Claritin S-6820 S-8921 S-0139 S-3013 S-8510 S-5751 S-3304 S-1746 S-3578 S-3536 S-2367 S-5920 S-1360

Indication

Stage

rosuvastatin Dyslipidemia duloxetine Depression doripenem Bacterial infections (injection) oxycodone Cancer pain immediate release capravirine HIV loratadine Pediatric rhinitis teceleukin Cancer n/a Dyslipidemia n/a Stroke n/a Inflammation n/a Dementia n/a Rhinitis n/a Cancer n/a Stroke n/a Bacterial infections n/a Osteoarthritis n/a Obesity n/a Sepsis n/a HIV

Forecast sales Launch FY2008 ($m) year

Approved

25

2003

119 25 19

2004 2003 2003

Pre-registration

34

2005

Pre-registration

n/l

n/a

Phase III Phase III Phase III

250 47 76

2004 2007 2005

Phase III

11

2005

Phase III Phase III Phase II Phase II Phase II Phase II Phase II Phase II Phase I/II Phase I Phase I Phase I Phase I Discontinued Terminated

0 n/l n/l n/l n/l n/l n/l n/l n/l n/l n/l n/l n/l n/l n/l

2006 n/a n/a >2008 >2008 >2008 >2008 >2008 >2008 >2008 >2008 >2008 >2008 n/a n/a

Registration Registration Registration

n/a = not available n/l = not launched Source: Company reports; author’s research and analysis

Business Insights

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Despite the current dominance of anti-infectives in terms of ethical sales and size of portfolio, there appears to be little R&D focus on infectious diseases, with only two products in phase II development or above. Indeed, most of Shionogi’s R&D activity is in areas as diverse as infertility, inflammation, neurology, arthritis and HIV, with nine products in phase II and above. The company seems to be actively attempting to extend its reach beyond its current therapeutic markets and has specifically in-licensed compounds such as duloxetine from Lilly for the CNS market. Shionogi may struggle to penetrate this market, as it is inexperienced in this area and will face increasingly tough competition from Western companies.

SR-47436 (irbesartan) SR-47436 (marketed as Avapro in the US) is a potent and long-acting angiotensin receptor blocker (ARB) that was jointly developed by BMS and Sanofi-Synthélabo for the treatment of hypertension and heart failure. The drug was first launched in September 1997 in Europe and later in 1997 in the US for the treatment of hypertension. In 1995, Shionogi and BMS announced the co-development and comarketing of irbesartan in Japan under the developmental name SR-47436.

Irbesartan exhibits the desirable features common to all ARBs and has an additional advantage over the market leaders – Merck & Co.’s Cozaar (losartan, marketed as NuLotan in Japan) and Novartis’ Diovan (valsartan) – in that it has demonstrated linear dose-responsive anti-hypertensive effects across the dosage range from 50mg to 300mg. In 2001, Losartan recorded global sales of $1,905m and Japanese sales of $398m, while valsartan generated $1,114m globally and $132m in Japan.

Clinical trials have shown that irbesartan has greater anti-hypertensive efficacy than Cozaar and this has undoubtedly encouraged rapid uptake of the compound. The maximum dose of 300mg per day of irbesartan has been shown to reduce blood pressure by 5.1/3.0mmHg more than the maximum dose of Cozaar (100mg daily). In May 2002, results were published from An Ambulatory Blood Pressure Monitoring Study of the Comparative Anti-hypertensive Efficacy of Two Angiotensin II Receptor

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Antagonists, Irbesartan and Valsartan. The trial randomized 426 men and women with mild-to-moderate hypertension to either irbesartan 150mg daily or valsartan 80mg daily for eight weeks. The following results were reported: ‰

patients who received irbesartan experienced a greater reduction in 24 hour ambulatory diastolic blood pressure (6.73mmHg compared with 4.84mmHg, p=0.035);

‰

irbesartan patients achieved a greater reduction in ambulatory systolic blood pressure (11.62mmHg compared with 7.5mmHg, p2008 >2008

Erectile dysfunction Cancer

Phase I Phase I

n/l n/l

>2008 >2008

TA-1790 T-0128

Forecast sales Launch FY2008 ($m) year

n/a = not available n/l = not launched Source: Company reports; author’s research and analysis

Business Insights

In the cardiovascular area the only novel compound in development is TA-993, a treatment for arteriosclerosis. Tanabe is also seeking approval for an existing product, Maintate (bisoprolol), for the treatment of chronic heart failure. However, as the revenues of the franchise’s lead products, Herbesser and Tanatril, are continuing to fall, the portfolio is expected to decline in importance unless Tanabe in-licenses further products.

The recent launch of Remicade and its expected approval as a maintenance therapy for Crohn’s and Behçet’s diseases will drive the short-term growth of the arthritis, immune and inflammatory disorders franchise. The success of this product should bolster the company’s reputation in this area, helping it to secure further in-licensing deals.

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Despite the expected approval of a new line extension for Gastrom to treat ulcerative colitis, the mature gastroenterology franchise will continue to suffer from decreasing sales.

T-1095 is an anti-diabetes agent in early phase II trials. It has a novel mechanism of action whereby the blood glucose level is lowered through the increase of glucose excretion into urine. It is not expected to reach market before 2008. TR-14035 inhibits cell adhesion of leukocytes at sites of inflammation and is expected to be effective against a wide range of inflammatory diseases, including asthma and RA. This is a phase I compound, as is TA-1790, a rapid-onset agent with few side effects that is being developed for the treatment of erectile dysfunction.

Several of Tanabe’s early clinical compounds have been out-licensed for simultaneous development in the US and Europe. By out-licensing at such an early stage, Tanabe avoids incurring large development expenses. Although this reduces the royalty income it can expect to receive, it is a sensible strategy since the company has limited funds to invest in R&D.

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Index Abbott, 13, 16, 25, 27, 28, 29, 30, 31,

Fujisawa, 15, 17, 18, 63, 64, 101, 102,

32, 36, 73, 82, 89

103, 104, 105, 106, 107, 108, 109,

Arthritis, immune and inflammatory

110, 111, 112, 113, 114, 129, 146,

disorders, 52, 109, 184

152

AstraZeneca, 18, 32, 37, 38, 39, 55, 60,

Gastrointestinal, 55, 72, 90, 98, 137,

69, 75, 95, 97, 102, 105, 106, 144,

138, 183, 184, 188

147, 148, 149, 158

GlaxoSmithKline, 17, 20, 32, 36, 49,

Aventis, 16, 49, 73, 82, 89, 123, 155,

69, 73, 78, 97, 102, 105, 106, 107,

171, 185

112, 132, 142, 144, 146, 147, 148,

Boehringer Ingelheim, 73, 157

178, 181, 182

Cardiovascular, 18, 19, 21, 35, 47, 48,

Hematology, 21, 162, 167

52, 53, 57, 58, 71, 74, 90, 91, 116,

Infectious diseases, 64, 72, 103, 109,

121, 124, 128, 130, 132, 135, 138,

156

146, 162, 167, 171, 183, 188, 189

Janssen Pharmaceuticals, 88, 95

Chugai, 21, 147, 161, 162, 163, 164,

Johnson & Johnson, 79, 84, 94, 95,

165, 166, 167, 168, 169, 170, 171,

111, 123, 178, 187

172

Merck, 39, 55, 56, 57, 58, 60, 69, 73,

CNS, 18, 21, 90, 91, 102, 105, 106,

75, 97, 114, 156, 159

109, 121, 135, 138, 142, 156, 187

Mitsubishi, 19, 20, 32, 127, 128, 129,

Daiichi, 18, 19, 115, 116, 117, 118,

130, 131, 132, 133, 134, 135, 136,

119, 120, 121, 122, 123, 124, 125,

137, 139, 140, 147

126, 152, 153

Novartis, 17, 39, 49, 54, 57, 60, 69, 75,

Diabetes, 13, 14, 22, 25, 27, 34, 35, 36,

76, 79, 93, 94, 102, 107, 111, 112,

45, 48, 113, 117, 176, 189, 190

156, 157, 164, 181, 182

Eisai, 16, 81, 82, 83, 84, 85, 86, 87, 88,

Oncology, 21, 67, 146, 162, 167, 171

89, 90, 91, 92, 93, 94, 95, 96, 97, 98,

Pfizer, 14, 19, 25, 39, 42, 54, 55, 60,

99, 146

64, 69, 73, 74, 75, 77, 78, 79, 84, 88,

Eli Lilly, 21, 27, 28, 31, 32, 34, 36, 142,

92, 93, 94, 97, 103, 114, 119, 128,

147, 156, 164, 165

130, 144, 146, 147, 159

Endocrinology, 13, 25, 34

Respiratory, 14, 45, 123

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40, 54, 57, 58, 94, 130, 132, 146,

Roche, 21, 69, 111, 162, 163, 164, 165,

157, 186

166, 167, 169, 171, 172, 173, 181

Tanabe, 12, 22, 54, 131, 175, 176, 177,

Sankyo, 14, 40, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 55, 56, 57, 58, 59, 60,

178, 179, 180, 181, 182, 183, 184,

75, 76, 78, 146, 157, 159, 160, 169

185, 186, 187, 188, 189, 190

Schering Plough, 56

Urology, 71

Shionogi, 20, 21, 39, 55, 76, 141, 142,

Yamanouchi, 15, 16, 17, 54, 62, 63, 64,

143, 144, 145, 146, 147, 148, 149,

66, 67, 68, 69, 70, 71, 72, 73, 74, 76,

150, 151, 152, 153, 155, 156, 157,

77, 78, 79, 98, 102, 103, 109, 129,

158, 160

146, 159

Suntory, 18, 116, 118, 119, 121 Takeda, 12, 13, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39,

193

TLFeBOOK