Japanese pharmaceutical consolidation
Sankyo, the #2 Japanese pharmaceutical company, announced it will merge with Japan's #6 drug company, Daiichi Pharmaceutical. The new company will apparently be called Daiichi Sankyo. This $7.8 billion deal brings it close in market value and revenues to Japan's #1 drug company, Takeda Pharmaceutical.
It also keeps the new company ahead of another newly expanded competitor named Astellas Pharma, which is the product of the acquisition of Fujisawa Pharmaceutical by #3 Japanese drugmaker Yamanouchi Pharmaceutical. Also in the offing is the acquisition of Dainippon Pharmaceutical by Sumitomo Chemical, which will form the #5 Japanese drug company.
The healthcare industry's merger mania has been slower to catch on in Japan, but it's starting to pick up speed. It's partly a reaction to the flurry of international consolidation that looms as a threat to the Japanese companies. In fact, two smaller Japanese drug firms, Banyu (acquired by Merck) and Shugai (acquired by Roche) have been snapped up by foreigners. Any small ones are in danger.
It also has to do, apparently, with the way in which the Japanese government, which buys most of the drugs, is starting to squeeze profit margins.
Japanese companies are doubtless looking for more sales abroad, especially the wide-open US market which is attracting drug companies like ants to a picnic. But they need a lot more size to compete with the Pfizers and Mercks of the world. Even with mergers, these companies are not among the top ten in the world, but it's a start.
In the end, most companies in most industries have to go multinational to keep growing, or even to survive. But the Japanese companies are still innovators. Sankyo, for example, did the basic research on cholesterol-lowering statins, and licensed its Prevachol drug in the US through Bristol-Myers-Squibb, a move that made the American company a lot of money.
Other big sellers, as reported in a Forbes magazine article ("Big in Japan", 2/25/05)
Actos, a top-selling diabetes drug, is made by Takeda, the largest Japanese drug firm, but co-promoted in the U.S. by Eli Lilly . Abilify, a schizophrenia drug sold by Bristol in the U.S., was invented by Japan's Otsuka. If Japanese firms sold all these drugs on the U.S. market, they would be far bigger. (Right now, Takeda ranks No. 11 in terms of global sales.)
In other words, if the Japanese companies can market their own drugs in the US and keep up the rate of innovation, they could take market share away from faltering US and European based drug giants. As the Forbes article puts it:
Until now, Japanese drugmakers have been trapped in their own small world. But if they develop international reach, they could help fuel a worldwide medical shakeup.
