Global Warming

The Japanese Pharma League has spent almost $50 billion in a whirlwind year of foreign deals. But as the case of Astellas illustrates, becoming a global player in a game of catch-up will cost more than just money
Oct 01, 2008

Yoshihiko Hatanaka is a slight, smiling man in late middle age and a dark blue business suit. When we meet, he shakes my hand only after bowing, presenting his business card, and telling me his title: president and CEO of Astellas Pharma US. There is a touching humanity about this little ritual; Mr. Hatanaka's silky formality, a touchstone of the Japanese professional class, contrasts dramatically with US executive style, which, however polished, tends to reveal the stresses and strains of the personality inside the suit.

Astellas in Brief
In a 45-minute interview, Mr. Hatanaka shows no sign of stress or strain—a noteworthy fact, because some analysts believe that Astellas (formed in 2005 by the merger of Yamanouchi and Fujisawa) may be heading for a fall. Although his English is halting, Hatanaka effortlessly fields questions about Astellas' recent big moves, including a pricey biotech acquisition, some big-ticket platform licenses, the move of the firm's global development headquarters to the US—and the announcement last year that Astellas would close five plants and trim its workforce by 10 percent. (See "Astellas in Brief".)

Despite his elegant manners, Hatanaka, who worked his way up the hierarchy at Astellas and Fujisawa over 26 years, is a plain talker when addressing the stark challenges driving Astellas' new direction. "For the last 10 years the Japanese market has stagnated because of price cuts," he says. "In the past, Japanese companies were satisfied with just the Japanese market and licensing out their assets in other markets. But now it is required that we go out to United States, Europe, and even emerging markets."

The Japanese Are Coming

The Japanese Pharma League
Today, this "going out" is one of the drug industry's biggest stories. Just look at the deals involving the top four Japanese Pharma League: Takeda, Astellas, Daiichi Sanyko (another 2005 merger), and Eisai. (See "The Japanese Pharma League".) In the first eight months of 2008, Japanese pharma acquisitions added up to $42 billion—nearly twice last year's total, according to Thomson Reuters. This flurry of activity shows Japan's cash-rich drugmakers reading from the same playbook as Western Big Pharma: stocking up on biologics, especially in cancer, and setting up shop in nations with a fast-growing middle class. Necessity is the mother of imitation.

The Top 10 Deals
In April, Takeda, the league's 800-pound gorilla, paid $8.8 billion for Millennium, the Boston-based maker of the cancer drug Velcade. Eisai has also been ramping up its cancer portfolio; its $3.9 billion purchase of Minnesota-based MGI last December was its third major oncology acquisition in two years. Meanwhile, Daiichi Sanyko bought a majority stake in Ranbaxy, India's generics juggernaut. For an estimated $3.4 billion to $4.6 billion, the Japanese company will make a big footprint in India, and gain a toehold just about everywhere else. (See "The Top 10 Deals.)

lorem ipsum