Japanese drug merger shows competitive pressure

Main Category: Public Health
Article Date: 26 Feb 2004 - 0:00 PDT

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Yamanouchi Pharmaceutical Co. and Fujisawa Pharmaceutical Co.'s announcement Tuesday that in April 2005 they will merge to become Japan's second-largest drugmaker may indicate a sense of urgency amid Japanese pharmaceutical companies, which are facing an increasingly fierce battle for survival in the global market, observers said.

The decision also may accelerate the reorganization of the Japanese pharmaceutical industry.

A wave of mergers and acquisitions among major European and U.S. drugmakers has created several giant pharmaceutical companies, opening a gap with many Japanese companies in terms of financial clout available for research and development and other areas.

Speaking at a press conference Tuesday, Fujisawa President Hatsuo Aoki said, 'We hope to make the best of the exceptional research development capacity and business acumen of Yamanouchi and Fujisawa with the aim of becoming a global company.'

But the challenges facing the new company are considerable, analysts said. Expected drug sales pale in comparison to those of international drugmakers, with the new company set to rank 17th in the world in drug sales. Even Takeda Chemical Industries Ltd.--Japan's largest drugmaker--ranks only 14th in the world for drug sales.

After the amalgamation, Yamanouchi and Fujisawa's R&D investment will reach about 150 billion yen, making it the largest in the nation and allowing it to compete with major international pharmaceutical firms.

In addition, the new firm will employ about 2,400 medical representatives--the largest number of any Japanese drugmaker--in a bid to strengthen its business performance.

The new setup will enable the company to take on Takeda for the nation's top spot, analysts said.

The global race among companies to develop new drugs has spurred soaring levels of R&D investment and has led to the creation of behemoths such as Pfizer Inc., a U.S. company with annual sales exceeding 4 trillion yen. Mergers in England and France also have given rise to giant companies.

Consequently, it may be premature to draw any conclusions about whether the new Japanese company will be capable of challenging the overseas giants, which are endowed with immense resources and networks.

When questioned about the possibility of merging the new company with other companies, Aoki said, 'We'll consider any proposals for other mergers that may arise.'

The decision by two of Japan's most powerful pharmaceutical companies to link arms is expected to serve as a catalyst for further realignment among Japanese drugmakers.

Source:
http://www.yomiuri.co.jp/newse/20040226wo11.htm