Mizuho 1038 pharma


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Mizuho 1038 pharma

  1. 1. Japan Industry Outlook / 38 2012 No.1 Table of Contents1, Comprehensive Industry - Japan 15, Broadcasting (Japanese only)2, Iron and Steel - Japan 16, Marine Shipping (Japanese only)3, Non-ferrous Metals - Japan 17, Logistics - Japan4, Paper and Pulp (Japanese only) 18, Electric Power - Japan5, Cement - Japan 19, City Gas (Japanese only)6, Chemicals - Japan 20, Retail - Japan7, Pharmaceuticals - Japan 21, Food and Beverage - Japan8, Petroleum - Japan 22, Food Service Industry - Japan9, Automobiles - Japan 23, Construction (Japanese only)10, Shipbuilding (Japanese only) 24, Real Estate and Housing - Japan11, General Machinery (Japanese only) 25, Travel and Tourism - Japan12, Electronics - Japan 26, Nonbank (Credit Cards & Credit) (Japanese13, IT Services - Japan only)14, Telecommunications - Japan 27, HR Service Industry (Japanese only) Contact: Industry Research Division Mizuho Corporate Bank, Ltd. mizuho.ird@mizuho-cb.co.jp
  2. 2. FY2012 Japan Industry Outlook (Pharmaceuticals) PHARMACEUTICALS Summary ■ The domestic market in 2011 saw a relatively high growth rate of around 5%, boosted by the expansion of the vaccine market on the back of public subsidies. In 2012, the domestic market is forecast to grow around 2.5% owing to drug price revisions that will lower the actual average price by 6.25% as well as a shift to generics. ■ Market growth is forecast to slow to a crawl in both the U.S. and European markets because of a shift to generics in the U.S. seen following patent expirations for blockbuster drugs and efforts to curtail drug costs in Europe due to the financial difficulties of governments in the region. ■ The earnings of Japan’s Big 9 pharmaceutical companies in FY2011 appear headed for a fall in profits on the back of patent expirations for their blockbuster drugs and the effects from yen appreciation. Despite the implementation of drug price revisions in Japan, in FY2012 Japan’s Big 9 pharmaceutical companies are forecast to record a slight increase in revenues and profits thanks to effects realized through previous company acquisitions and expanded sales for certain new drugs. ■ The pharmaceutical market will grow over the medium to long term, but the composition of the market will undergo significant changes, including a dichotomization between “specialty market” and “commodity market.” Centered on emerging countries, the “commodity market” should see sharp growth in terms of volume. However, the social mission of Japan’s new drug manufacturers will remain the “development of new drugs.” Today, Japan’s drug companies are facing question marks about how they will respond to these market changes in order to remain a company that can develop revolutionary new drugs in the year 2020.I. INDUSTRY TRENDS1. Domestic Market The market growth In 2011, the domestic pharmaceutical market saw a relatively high market rate for 2011 growth rate of about 5% (see Fig. 7-1). This growth was achieved because was around 5% structural factors, including an increase in drug demand from Japan’s aging population, helped boost the market for the specialty categories of cancer and central nervous system ailments, while the vaccine market also grew on the back of 108.5 billion yen in new public subsidies spent on vaccines for cervical 1 Mizuho Corporate Bank, Industry Research Division
  3. 3. FY2012 Japan Industry Outlook (Pharmaceuticals) cancer and other conditions.The domestic market Structural factors such as an increase in drug demand from Japan’s agingis forecast to grow by population will remain unchanged in 2012. However, drug price revisions,around 2.5% in 2012 which will lower the actual average price by 6.25% (including the impact of andue to the effects ofdrug price revisions additional price reduction of long-term listed drugs), will exert downward pressure on prices, while the government will step up measures to promote the greater use of generics and patents will expire for blockbuster drugs including Lipitor and Aricept. As a result, the market growth rate for the domestic market in 2012 is forecast to be around 2.5%. [Fig. 7-1] Domestic ethical drug market (in value of manufacturer shipments) Value of domest ic shipment s (JP Y 100million) Market growt h rat e 90,000 10% 80,000 8% 70,000 6% 60,000 50,000 4% 40,000 2% 30,000 0% 20,000 10,000 -2% 0 -4% 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 12 forecast 11 estimate (CY) Source: Compiled by MHCB Industry Research Division based on materials from the Ministry of Health, Labour and Welfare Note: Figures given for FY2011 and FY2012 are based on forecasts by MHCB Industry Research DivisionSummary and Drug price revisions have a major impact on the composition of theimpact of drug pharmaceutical market. The previous drug price revision in 2010 implementedprice revisions in a “premium to promote the development of new drugs and eliminate off-label2012 use” on a trial basis in which the price of new drugs still with a patent was essentially unchanged if certain conditions were met. This same premium will be continued on a trial basis in the 2012 drug price revisions, which should help jumpstart the new drug market. Yet, with restrictions on Japan’s fiscal resources, an additional across-the-board price reduction for long-term listed drugs (new drugs with an expired patent) of 0.9% will be implemented. Considering the Ministry of Finance was calling for an addition 10% price reduction during the debate, the actual price reduction is much lower than anticipated, but the trend of falling prices and market contraction for long-term listed drugs, which has continued since the previous drug price revision, is likely irreversible. 2 Mizuho Corporate Bank, Industry Research Division
  4. 4. FY2012 Japan Industry Outlook (Pharmaceuticals)The generics Although incentives for generic prescriptions will be extended to pharmaciesmarket will and medical institutions as indicated in Figure 7-2 below, the effect will likelyexpand, but it will be minimal compared to the previous drug price revision in 2010. Despite abe survival of thefittest boost gained from patent expirations for blockbuster drugs such as Lipitor and Aricept, the 2012 market share of generics in terms of volume will be kept to around 25%, indicating that the government will miss its target to increase the market share of generics to 30% by FY2012 by a wide margin (Fig. 7-3). In addition, it is worth noting that if the number of listed generic drug items exceeds 10, the price will be set as 0.6 times that of new drugs (normally this is 0.7 times), while existing drugs will see a 0.3% across-the-board price reduction. Although it has been reaping the rewards of strong corporate earnings on the back of market growth, going forward the generic drug industry will face a survival-of-the-fittest landscape as price competition heats up regardless of market growth. [Fig. 7-2] Main measures in drug price revisions to encourage the greater use of generics Benchmark Prior to 2010 revision 2010 revision 2012 revision Number of Quantity Quantity Premium for prescriptions Percentage of generic Pharmacies generic drug Over 20%: 6 points Over 22% drugs used dispensing Over 30%: 4 points Over 25%: 13 points Over 30% Over 30%: 17 points Over 35% Pharmaceutical Provision of information - - New management fee on generics in writing Percentage of generic Medical Institutions Premium for using drug items used New - Adds "Over 30%" generic drugs compared to total Over 20%: 30 points pharmaceuticals used Unit of change to Prescription form Prescription unit - Pharmaceutical unit generic drugs Source: Compiled by MHCB Industry Research Division based on materials from the Ministry of Health, Labour and Welfare [Fig. 7-3] Domestic market size and total share of generics Market size (JP Y100million) Share of volume 9,000 30% 8,000 7,000 26% 25% 6,000 23% 22% 22% 5,000 4,000 19% 18% 18% 3,000 16% 15% 2,000 14% 14% 1,000 0 10% 05 06 07 08 09 10 11 12 estimate forecast (CY) 3 Mizuho Corporate Bank, Industry Research Division
  5. 5. FY2012 Japan Industry Outlook (Pharmaceuticals)Source: Compiled by MHCB Industry Research Division based on materials from the Ministry of Health, Labourand WelfareNote: Figures given for FY2011 and FY2012 are based on forecasts by MHCB Industry Research Division2. Western Markets The U.S. The U.S. pharmaceutical market in 2011 saw a market growth rate of around market grew 3% in 3% owing to downward pressure felt from the shift to generics following the 2011 expiration of patents for blockbuster drugs, which offset market growth seen in the specialty categories of cancer and central nervous system ailments (see Fig. 7-4). [Fig. 7-4] Ethical drug markets in major Western countries (Unit: USD100million) 2006 2007 2008 2009 2010 Growth rate Growth rate Growth rate Growth rate Growth rate U.S. 2,701 9% 2,810 4% 2,853 2% 3,011 5% 3,112 3% Europe (five 1,226 4% 1,418 6% 1,552 5% 1,504 4% 1,474 3% major nations) Germany 318 0% 365 5% 411 5% 408 4% 400 3% France 332 4% 385 6% 425 3% 405 1% 389 1% Italy 208 4% 240 3% 270 4% 268 4% 262 3% Spain 163 8% 194 9% 224 8% 225 6% 220 3% U.K. 205 4% 234 5% 222 3% 198 5% 203 4% Source: Compiled by MHCB Industry Research Division based on the IMS Health Knowledge Link; copyright 2012 IMS Health, unauthorized reproduction prohibited Note: Growth rate figures are adjusted to exclude the impact of the exchange rate The impact from Although continuing demand is expected in specialty categories in 2012, patent expirations Lipitor, which ranked second in terms of U.S. drug sales, saw its patent expire is set to peak in 2012 in November 2011 and the patent for top selling Plavix is set to expire in mid 2012, indicating that the shift to generics from blockbusters will peak. As a result, the U.S. pharmaceutical market is forecast to only grow by between 1% and 3% in 2012 (see Fig. 7-5). 4 Mizuho Corporate Bank, Industry Research Division
  6. 6. FY2012 Japan Industry Outlook (Pharmaceuticals) [Fig. 7-5] Drug patents that expired around 2010 Year of U.S. patent Name of drug in Date of U.S. patent U.S. net sales Company expiration U.S. expiration (Jan. - Dec. 2010) 2008 Astellas Pharma Prograf April-08 *1 97.2 billion yen 2009 Takeda Pharmaceutical Prevacid November-09 *1 1.7 billion dollars GlaxoSmithKline Advair September-10 4.0 billion dollars 2010 Eisai Aricept November-10 *1 2.1 billion dollars Eli Lilly Zyprexa October-11 2.5 billion dollars 2011 Pfizer Lipitor November-11 5.3 billion dollars Astra Zeneca Seroquel March-12 3.1 billion dollars Bristol-Myers Squibb Plavix May-12 6.2 billion dollars 2012 Takeda Pharmaceutical Actos August-12 *2 3.6 billion dollars Merck Singulair August-12 3.2 billion dollars 2013 Eli Lilly Cymbalta June-13 2.8 billion dollars Source: Compiled by MHCB Industry Research Division based on various publications *1: Net sales are for the year prior to the patent expiration *2: FY2011 net sales The European market Although drug demand is rising amid aging populations much like in the U.S. saw weak growth amid and Japan, the five major European countries (Germany, France, the U.K., Italy the region’s austerity and Spain) have continued to see weak market growth in the range of 3% to 4% measures in the wake of the European in recent years owing to efforts in each country to curtail medical expenses. sovereign debt crisis Following the Greek sovereign debt crisis, European countries have accelerated their efforts to cut medical expenses. For example, since 2011 Spain cut its drug spending by 2.4 billion Euros annually by means of drug price reductions as high as 25%, while France is currently considering legislation that will curtail drug expenditures by 900 million Euros annually through drug price reductions. Given this trend, the five major European countries experienced slow growth of around 1% in 2011, with some countries also expected to see negative growth. In 2012, overall pharmaceutical market growth in Europe is forecast to be stuck between 0% and 1% as countries are set to continue with their efforts to curtail drug spending.II. CORPORATE EARNINGS1. FY2011 earnings are expected to see a fall in both revenues and profits due to the impactfrom patent expirations of blockbuster drugs and appreciation of the yen 2011 Fall in both Corporate earnings for Japan’s Big 9 pharmaceutical companies in FY2011 are revenues and expected to see only slight gains (0.3% year-on-year) in terms of combined net profits expected sales (see Fig. 7-6), despite generally strong sales from the domestic market, amid patent expirations of which did not have a drug price revision in 2011, and the significant boost in blockbuster drugs revenue seen by Takeda Pharmaceutical Company from its acquisition of and yen Nycomed. The main factors for this sluggish growth include the major hit taken appreciation 5 Mizuho Corporate Bank, Industry Research Division
  7. 7. FY2012 Japan Industry Outlook (Pharmaceuticals) in revenues from the patent expiration of blockbuster drugs, including an anticipated greater than 90% year-on-year drop in North American sales of Eisai’s Aricept, as well as the downward pressure on sales felt by the appreciation of the yen. Combined Japan’s Big 9 pharmaceutical companies are expected to see a 8.9% drop in operating profits due to the effects from the patent expiration of blockbuster drugs in the U.S. and transient costs from the Nycomed acquisition.2. FY2012 earnings are forecast to record a slight gain in both revenues and profits Corporate The patent for Takeda Pharmaceutical Company’s Actos is set to expire in the earnings forecast U.S. in August 2012, which with other patent expirations will have a major to recover despite impact on the corporate earnings of Japan’s Big 9 pharmaceutical companies in drug price revisions FY2012. Although a significant drop in revenues is unavoidable with Actos’s U.S. patent expiring and it being replaced with generics within several months time, Nycomed’s full-year contribution to earnings will make up for a majority of this drop and sales of new drugs just brought to market, including Eisai’s Halaven and Dainippon Sumitomo Pharma’s Latdua, will expand. As a result, Japan’s Big 9 pharmaceutical companies are forecast to see a slight increase in combined revenues and profits year-on-year in FY2012. [Fig. 7-6] Consolidated results overview for Japan’s leading pharmaceutical companies [Actual] No. of companies FY10 FY11 FY12 (Unit) (Actual) (Estimate) (Forecast) Big 9 Net sales (JPY 100m.) 66,507 66,275 67,832 Big 9 Operating profit (JPY100m.) 10,597 9,454 9,748 [Rate of Increase and Decrease] (YOY) Brief FY10 FY11 FY12 (Unit) (Actual) (Estimate) (Forecast) Big 9 Net sales (%) + 5.9% - 0.3% + 2.3% Big 9 Operating profit (%) + 10.2% - 10.8% + 3.1% Source: Compiled by MHCB Industry Research Division based on corporate financial statements Notes: The Big 9 leading companies are Takeda Pharmaceutical Company, Astellas Pharma, Dainippon Sumitomo Pharma, Shionogi & Co., Mitsubishi Tanabe Pharma Corporation, Chugai Pharmaceutical, Eisai Inc., Daiichi Sankyo, and Otsuka Holdings Co., Ltd. (listed in order of Securities Identification Code) Figures given for FY2011 and FY2012 are based on forecasts by MHCB Industry Research Division 6 Mizuho Corporate Bank, Industry Research Division
  8. 8. FY2012 Japan Industry Outlook (Pharmaceuticals)III. TOPICS: Prominent Medium-term Business Areas –How will novel drug companies beprofitable in 2020?— The global The global pharmaceutical market should continue to see growth over the pharmaceutical medium to long term on the back of an increasing world population, aging market is undergoing societies, and economic growth in emerging countries. However, the structure a dichotomization between “specialty and composition of this market will undergo great change. That is, the market” and structural change of growth in China and other emerging countries and “commodity market.” significant drug price reductions in the chronic disease category owing to patent expirations and government efforts to curtail medical expenses in developed countries, which are faced with aging populations. As a result, there will be great market demand for the continuing development of new drugs in 2020, with the global pharmaceutical market likely to undergo a dichotomization between “specialty market,” which requires high value-added medicines, and a “commodity market,” which requires high quality drugs at inexpensive prices. Of these, the market with the greatest growth potential will be the “commodity market” because of growing demand in emerging countries and efforts to curtail medical expenses in developed countries. In order to capitalize on demand from this growth market, manufacturers of new drugs are currently competing intensely to grow their presence in emerging markets and expand their generics business. The “commodity However, it may be premature to think that emerging markets and generics market” will see markets will form the core business of manufacturers of new drugs in 2020. In high growth, but other words, the “commodity market” requires pharmaceutical companies that Japan’s new drug can make and sell quality drugs inexpensively, which contrasts completely with manufacturers will find it hard to the conventional business model of Japan’s new drug manufacturers. With respond competitive local drug and generics makers in India and other markets already having established a presence, Japan’s new drug manufacturers will face a difficult task in changing their conventional business model to respond to these unique market characteristics. In reality, the only choice that Japan’s new drug manufacturers have may be to acquire a competitor already with a competitive presence in the “commodity market” in much the same way as Daiichi Sankyo acquired Ranbaxy and Takeda Pharmaceutical Company acquired Nycomed. Manufacturers of The much higher margin realized by pharmaceutical companies compared to new drugs need to other industries can be viewed as compensation for the critical role that novel produce new drugs drug development plays in society, including the treatment of intractable diseases and improved patient quality of life, and is also compensation for their ceaseless innovation. In addition, even though the chronic disease category has been inundated with new drugs, there still remain more than 6,000 diseases for which there is no curative medicine. As such, there will continue to be strong demand for the development of novel drugs. Given this, the duty of Japan’s new drug makers in 2020 will be the development of new medicines that have a 7 Mizuho Corporate Bank, Industry Research Division
  9. 9. FY2012 Japan Industry Outlook (Pharmaceuticals) major impact on society and their emerging market as well as generics businesses will be seen as a complement to their existing business portfolio.How will In light of the fact that drug development requires more than 10 years from thepharmaceutical discovery of a new substance to launch, however, it remains extremely difficultcompanies respond to develop drugs that meet the ever-changing needs of society and embraceto the industry’s disruptive innovation that can occur at times. Looking back on history, theparadigm shift? pharmaceutical industry has experienced a number of paradigm shifts as illustrated in Figure 7-7. Yet, success in one time period does not translate into success in future periods after a new paradigm shift occurred. In actuality, many of Japan’s pharmaceutical companies have been unable to respond to recent paradigm shifts and have thus seen their position in the world decline. [Fig 7-7] Conceptual diagram of previous structural changes that have taken place in the novel drug market Period Up to 1985 1980 to 2010 2005 to Today 2020 Transmittable Cancer? Illness category Adult onset diseases Cancer Rare dis eases? diseases Difficult to treat Treatment concept Mass mark et Mass mark et Individualized medicine Individualized medicine? Nucleic acid medicine? Novel drug Cancer vaccines? Low molecular Low molecular Bio, anti-body drugs technology Regenerative medicine? Low-molecular restoration? ・ Merck ・ Pfizer ・ Roche ・ Pfizer ・ Merck Main players ・ Pfizer ? ・ Takeda Pharmaceutical ・ Novartis ・ S hionogi & Co. Company Source: Compiled by MHCB Industry Research Division.Learning from past An analysis of past failures by Japan’s pharmaceutical companies indicatesfailures is the key in there were mainly two factors behind these failures. First, they failed to focusresponding to change on society’s needs such as proportions of disease and treatment policies, which should have been predictable to a certain extent, and instead continued with seeds-oriented development. Second, as a result of focusing too much on their own proprietary drug discovery technologies and development, they were late in accessing disruptive innovation. Based on this, Japan’s pharmaceutical companies should be able to recognize and adapt to the next paradigm shift. That is, first they need to focus on drug development that addresses the true needs of society by shifting from a seeds-oriented to a needs-oriented vision, and second, they need to access a wide range of new innovation through extensive partnerships with academia and venture businesses. 8 Mizuho Corporate Bank, Industry Research Division
  10. 10. FY2012 Japan Industry Outlook (Pharmaceuticals)Japan’s pharmaceutical As symbolized by the term “drug lag,” Japan’s drug discovery environment hascompanies may very many areas that require improvement. However, Japan and its aging societywell become the keydriver for Japan’s represent a model case for social change that is expected to take placeentire economy in 2020 worldwide in the future, and the country’s academia is a literal treasure trove of highly advanced innovation. Given this, the environment surrounding Japan’s pharmaceutical companies is in fact not bad at all. As such, by the year 2020, it may be no stretch of the imagination to see Japan’s pharmaceutical companies establish a solid position in the world new drug market and become a key driver for Japan’s entire economy. Kenji Aoki / Takayuki Totsuka kenji.aoki@mizuho-cb.co.jp / takayuki.totsuka@mizuho-cb.co.jp Primary Materials Team Industry Research Division Mizuho Corporate Bank, Ltd. 9 Mizuho Corporate Bank, Industry Research Division