Japan Pharmaceuticals and Healthcare Report Q2 2012

BMI View: Japan’s pharmaceutical market is highly attractive to both foreign and local drugmakers. All three sub-sectors – patented, generic and over-the-counter (OTC) medicines – are large and forecast to growth over the medium term. Regulations are well-developed, transparent and improving. The key risk to this outlook is economic fragility and political uncertainty.
Headline Expenditure Projections ?? Pharmaceuticals: JPY10,157bn (US$127.4bn) in 2011 to JPY10,227bn (US$131.1bn) in 2012; +0.7% in local currency terms and +2.9% in US dollar terms. Our forecast has been revised down from Q112 due to macroeconomic factors, new historic data and additional analyst intervention.
?? Healthcare: JPY40,036bn (US$502bn) in 2011 to JPY40,435bn (US$518bn) in 2012; +1.0% in local currency terms and +3.2% in US dollar terms. Our forecast has been revised down from Q112 due to macroeconomic factors.
?? Medical Devices: JPY2,220bn (US$27.8bn) in 2011 to JPY2,245bn (US$28.7bn) in 2012; +1.1% in local currency terms and +3.4% in US dollar terms. Our forecast has been revised down from Q112 due to the receipt of new historic data. Risk/Reward Rating: Japan’s Pharmaceutical RRR score has increased from 72.4 out of 100 in Q112 to 75.5 in Q212, underlining its status as the most attractive market in Asia Pacific. The upgrade was primarily due to an upwards revision in the Industry Risks component (77 out of 100 in Q112 to 80 in Q212), which was caused by positive re-appraisal in the pharmaceutical regulatory regime.
Key Trends And Developments ?? In January 2012, Takeda said it will cut its workforce by 9% by March 31 2016. The company will make most of the 2,800 redundancies in Europe and the US as it attempts to save US$1.7bn through the integration of US$12bn Swiss acquisition Nycomed. The acquisition of Nycomed in September 2011 extended Takeda's operations into 42 more countries and reduced its reliance on the Japanese and US markets. Takeda expects the costs associated with the company restructuring will reduce its overall net income by approximately US$455mn during the current financial year.
?? In December 2011, Indian pharmaceutical company Elder Pharmaceutical announced plans to enter the Japanese pharmaceutical market during FY12, having gained Japanese Ministry of Health accreditation for its facility in Patalganga, India. The company's Joint managing Director, Alok Saxena, said: 'we have filed for new patents in these markets. So hopefully we should get these during the current financial year, which would open up another US$500mn market for us.’
?? In November 2011, Asahi Kasei Pharma said it will establish a new research complex in its Pharmaceuticals Research Centre in Shizuoka. The company will install advanced experimental apparatus and facilities at the new complex, which it said will ensure higher functionality and efficiency to carry out research with more competitive superiority. Asahi Kasei Pharma plans to start construction of the 6,500m2 facility by September 2012. It will invest JPY3bn in the complex, which is scheduled to be operational by October 2013.
BMI Economic View: While unlikely, a full-blown Japanese sovereign debt crisis cannot be ruled out in 2012, and such an event would have major global repercussions. Foreign ownership of Japanese Government Bonds (JGBs) is relatively minor, but Japan could be forced into large-scale selling of its overseas assets to prevent sovereign default, a scenario which would seriously wound economic activity across Asia, and potentially trigger an international bond market rout.
BMI Political View: Japan's political scene will be more unpredictable now that the country has moved beyond sole rule by the Liberal Democratic Party. However, it is far from clear whether Japan will develop a competitive two-party system, or whether one-party rule will re-emerge under either major party. Furthermore, it is questionable whether any political force can address Japan's colossal economic woes, which have been exacerbated by the March 2011 T?hoku earthquake and nuclear disaster.