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Daiichi reveals US expansion strategy

Daiichi Sankyo (D-S) has been expanding its US facilities and rapidly increasing its staffing since 2002 to support a growing pipeline of medications for cardiovascular disease, diabetes, oncology and infection.

Daiichi Sankyo (D-S) has been expanding its US facilities and rapidly increasing its staffing since 2002 to support a growing pipeline of medications for cardiovascular disease, diabetes, oncology and infection. While other pharmaceutical companies are downsizing, the Japan-based pharmaceutical firm is bucking the trend, having recently won FDA approval for its anti-hypertensive drug, Azor (amlodipine and olmesartan).

Unlike many major western pharmaceutical companies, D-S is growing toward a mid-size corporation. Japanese pharmaceutical companies are generally of this size and a number of high-profile mergers in Japan have occurred in order to achieve the critical mass required to compete on the world markets: Chugai and Roche; Dainippon and Sumitomo; Tanabe and Mitsubishi; and Yamanouchi and Fujisawa.

The flurry of mergers were helped by revisions in corporate law to provide for "triangular" merger, whereby foreign companies can use their stock to acquire or merge with Japanese companies, which arrived in May 2007. The new law is forcing change in a particularly change-averse market.

Avoiding Japanese strictures, Sankyo and Daiichi merged in the US in 2006 to form D-S and established its headquarters in the state of New Jersey. From 2002 to 2007, staff numbers at the headquarters in Parsippany have nearly doubled. The firm's global clinical development staff has also more than doubled, while its national sales force has also increased to over twice its original size.

D-S' focus on the US market is unsuprising, as conditions in Japanese pharmaceutical market are less rosy. The government said it would impose annual price revisions in FY07, but the measure has been temporarily halted, because many issues regarding practices of dispensing drugs must be resolved before price revisions can be instituted. The Japanese pharmaceutical industry anticipates that the government will implement unhelpful annual price revisions in FY09.

This is the problem with the Japanese domestic market. It is undynamic, over-regulated and internal company cultures make it difficult to do business. On the upside, the market generally suffers less aggressive generic price erosion than the the US and some EU countries. In May 2007, however, the government called for an increase in the market share of generics from 16.8 per cent  by volume in 2004 to at least 30 per cent in 2012.

D-S, which started its own commercial operations in the US nearly 10 years ago, has revealed plans for future growth and the impact it hopes to have in creating additional life science positions in New Jersey at a meeting with Congressman Rodney Frelinghuysen, who met personally with the management and employees to discuss healthcare
programmes and the future of healthcare and the industry in the state.

In a press statement, CEO of D-S' US arm, Joseph Pieroni, said: "Over the next three years, we expect to achieve a 60 per cent growth in sales."

Pieroni explained that he was proud of D-S' longstanding legacy of discovering leading cardiovascular and anti-infective products, but that, despite its presence in the US for 46 years, most US citizens still did not recognise the company by name.

"That's because in the past our Japanese parent companies traditionally licensed our products to larger companies to market. Sankyo discovered the statins, a lipid-lowering class of drugs which are now the mainstay of today's cholesterol reduction. Sankyo discovered the first statin, mevastatin, and co-discovered lovastatin with Merck, the first statin to be marketed. We also developed pravastatin, which we licensed to Bristol-Myers Squibb. Daiichi discovered levofloxacin, an antibiotic for bacterial infections, which is marketed in the US by Johnson & Johnson. Because these innovative and blockbuster products were out-licensed to large U.S. companies, Daiichi Sankyo is not exactly a household name in the US," added Pieroni.

In addition to the 26 September launch of Azor, the company expects to launch a type 2 diabetes indication for its lipid-lowering drug, WelChol (colesevalam). With FDA approval, WelChol will be the first LDL-lowering medication also indicated for improving glycaemic control. And within two years, D-S and its co-promotion partner Eli Lilly will bring the anti-platelet agent prasugrel to market for patients with acute coronary syndrome.

Globally, D-S currently ranks as one of the top twenty pharmaceutical companies, with FY06 sales exceeding USD 8bn. It is Japan's second-largest drug manufacturer, ahead of Astellas and Eisai, whose FY06 sales were USD 7.5bn and USD 4.6bn, respectively.

30th September 2008

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