Japanese Drugmakers Look to Western Markets

According to Japanese drug sector sources, the current round of consolidation in the domestic industry is not simply a defensive measure, and for some firms the process is becoming a means to pursue overseas opportunities. As the US currently accounts for some 60% of domestic leader Takeda's annual consolidated income, few Japanese firms can now afford to complacently expect the local market to enable them match the growth levels of their foreign peers.

The US is at the forefront of Japanese firms' overseas expansion plans, with Europe — especially the UK and Germany — and China and India falling far behind. Above all, the increased confidence of Japanese drug firms in their R&D pipelines is driving expansion, although few companies are likely to invest significantly in manufacturing outside Japan. Drugmakers are increasingly divesting production units as stand-alone operations, and contract manufacturing is expanding notably.

Potentially at the expense of China and Latin America, markets with weak intellectual property rights and associated entry barriers are relatively far from Japanese firms' strategic thinking. Nevertheless, as the regulatory approvals process grinds to a virtual halt in Japan, many firms could seek to outsource R&D in attractive markets that offer adequate data protection.