Japanese sales a tonic for Western drug firms http://www.reuters.com/article/ousiv/idUSL1921820820070419
Thu Apr 19, 2007
By Edwina Gibbs and Ben Hirschler - Analysis
TOKYO/LONDON (Reuters) - Japan's $57 billion drugs market is sparking into life for international companies as a raft of commercially important new medicines, some long-established in the West, win approval.
GlaxoSmithKline Plc (GSK.L: Quote, Profile, Research) and Roche Holding AG (ROG.VX: Quote, Profile, Research) both got a green light for their blockbusters Advair and Avastin on Wednesday and the Health Ministry has cheered firms with plans to speed up the approval process in future. The shift will give international companies above-average growth and a bigger slice of the action in the world's second largest drugs market.
Japanese pharmaceutical revenues were $56.7 billion last year, representing 9.3 percent of the global total, according to pharmaceutical information group IMS Health.
But government-mandated price cuts meant sales actually fell 0.7 percent from the 2005 level and IMS only expects modest 4-5 percent growth this year.
By pushing out new products, however, Western firms should be able to beat easily that lacklustre pace.
Indeed, Glaxo's sales in Japan rose 8 percent to 860 million pounds ($1.72 billion) in 2006 and the world's second biggest drugmaker sees them breaching 1 billion pounds this year, helped by revenues from asthma drug Advair.
Dresdner Kleinwort analyst Ben Yeoh reckons the importance of the Japan franchise is being under-appreciated by investors.
NOTORIOUSLY SLOW
Up until now winning approval for medicines in Japan has been notoriously slow, with products on average coming to market four years later than when they were first sold overseas.
As a result a quarter of the 100 top-selling drugs worldwide are still not available in Japan.
But things are starting to change. Pfizer Inc.'s (PFE.N: Quote, Profile, Research) painkiller Celebrex, for example, finally won approval in January. Patrick Keohane, head of research at AstraZeneca Plc's (AZN.L: Quote, Profile, Research) Japanese unit, detects a strategic shift behind the fact more drugs are reaching pharmacy shelves after years in limbo.
"I think there was a change sometime last year, a deliberate change that came from the regulators to reduce this barrier," he said.
One tangible factor has been for regulators to accept some non-Japan Asian data for pivotal drug submissions. Previously, all the clinical trial data had to be from Japanese patients.
"It may not sound like much but that's quite a big change," Keohane said.
At the same time more pharmaceutical firms have begun to conduct simultaneous clinical trials for the United States, Europe and Japan, which is also speeding up the path to market.
GREYING POPULATION
As a result Japan -- sometimes seen in the past as a difficult-to-access backwater -- is starting to work well for international players with good local infrastructures, according to Reed Maurer, a Japanese drug industry veteran who now heads advisory firm International Alliances Ltd.
"It's a blessing, in a sense. They are beginning to sell drugs that have had three to four years (on the market) outside Japan and now suddenly they have this growth," he said.
"Western firms are starting to reap the benefits of a sustained commitment to the Japanese market."
With its greying population Japan offers particularly rich pickings for medicines linked to old age, notably cancer.
New legislation passed last year to boost detection and treatment of cancer has also improved prospects for major oncology players, none of which are Japanese.
Roche, the world's top maker of cancer drugs, is a clear winner, vindicating its decision to buy majority control of Chugai Pharmaceutical Co. Ltd. (4519.T: Quote, Profile, Research) five years ago. Other Western firms have also moved to take control of their Japanese assets, with Wyeth (WYE.N: Quote, Profile, Research) this month buying out Takeda Pharmaceutical Co. Ltd.'s (4502.T: Quote, Profile, Research) 20 percent interest.
Other companies have also expressed interest in acquisitions in Japan, including Sanofi-Aventis (SASY.PA: Quote, Profile, Research), whose top-selling blood thinner Plavix was launched in Japan in 2006.
© Reuters 2007. All rights reserved.