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The Japanese Life Science Market The Japanese Life Science Market

October 2010October 2010

Anil Vaidya-Sector Specialist Life science Team

UK Trade & Investment

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Healthcare delivery problems…

• Few doctors

• Lack of coordination between hospital services and welfare services

• Overused medical system

• Complex healthcare and registration systems

• So where are the healthcare opportunities & should you bother ?

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Healthcare Coverage

• Public healthcare system

• Majority of citizens covered

• Hospitals: 80% private

• Average hospital stay:

– Official 20-25 days

– Unofficial 11-15 days

• Currently mixed functions

• Chronic care bed reduction

• Increase in elderly healthcare facilities

Private clinics 97,000

General

UniversityHospitals

SpecialistHospitals

Hospitals

9000

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Major causes of death

Cardiovascular disease 137.2

Cerebrovascular diseases 101.7

Accidents

Suicide

Liver disease

Tuberculosis

Cancer 261.0

Source: MHWL 2006

Per 100,000

Pneumonia

Stomach

Liver

Esophageal

Lung

Renal Failure

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Geography & Demographics

• Population: 128 million people

• 4 major islands

• Tokyo metropolitan 24.2%

• Osaka metropolitan 13.1%

• Nagoya metropolitan 6.93%

• Fastest ageing society (65yrs)

• 2006 : 20.8%

• 2050 : 39.6%

Source: Asian Art Outlook, http://www.askasia.org Source: Ministry of Internal Affairs and Communications

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Medical Devices & Equipment

• Second largest market ¥ 1636 billion (GBP 7.2 billion)

• Imports ¥ 1012 billion (GBP 4.4 billion)

• US No 1 Exporter for 10 categories

• UK ranked 9th 2% imports of all importing countries

VC FundingRank Group Classification

1 Diagnostic Imaging System

2 Operating Equipment and Supplies

3 Artificial Internal Organ Apparatus & Assist Device

4 Measuring and Monitoring System for bio-phenomena

5 Medical Apparatus for Home Use

6 Related device and tool for diagnostic X-ray equipment

7 In vitro clinical test equipment

8 Dental Material

9 Ophthalmic goods and related product

10 Dental Equipment

11 Therapeutic and surgical equipment

12 Clinical equipment and supplies

13 Steel product for medical use

14 Surgical dressing and hygienic products

Top 14 medical equipment produced in Japan

Top 4 categories imports

• Artificial internal organ equipment & assist devices

•Operating equipment & supplies

•Ophthalmic goods & products

•Diagnostic imaging equipment

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Regulatory System

MAH

Separation of duties:

•Responsibility of manufacturing

•Production

•Responsibility of product release

• importing

• product certification

• storage

• safe release of products

Ministry of Health Labour & Welfare (MHLW)

Pharmaceuticals and Medical Devices Agency (PMDA)

April 2005

Pharmaceutical Affairs Law (PAL)

•GHTF

•ISO 13485:2003

•Market Authorisation Holder (MAH)

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Selling into Japan

• Appoint a Designated-MAH:

• distributor

• third party entity

• self designation

• Foreign manufacturer business license :

• animal origin device

• sterile device

• other general device

• labelling & packaging

Distributor

Pro: Reduce monthly expenses

Market access

Con: Access to confidential information

Difficulty in changing distributors

3rd Party Entity

Pro: Maintain confidential information

Easy to change distributors

Con: Monthly fees

No direct access to market

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Medical Device Classification

Approval Route

Class I: Do not require approval

Class II: Certain devices Registered Certification Bodies (not PMDA)

Class III: PMDA approval

Approval Times

Class I: immediate

Class II: Meeting product standards 6-12 months

Class III: 18 months if clinical trial required

Class IV: 5 to 7 years !

Category Risk Marketing Regulations

EU & USA Classification

Product Approval

General Medical Devices

Extremely low

Retailer’s notification is not required

Class I

Approval for marketing authorisation is not required

Controlled Medical Device

Low Distributor’s notification is required to Prefectural government

Class II

Implementation of third party certification system

Highly Controlled Medical Device

Middle Implementation of license system for retail. Notification to Prefectural government

Class III

High Minister’s approval for marketing

Class IV

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Pharma M&A in Japan

① Takeda

② Daiichi Sankyo

③ Astellas

④ Eisai

⑤ Otsuka

⑥ Mitsubishi Tanabe

⑦ Chugai

⑧ Taisho

⑨ Dainippon Sumitomo⑩ Shionogi

Sankyo

Daiichi

Yamanouchi

Fujisawa

Tanabe

Mitsubishi

Nippon Roche

Chugai

Dainippon

Sumitomo

(2005)

(2005)

(2007)

(2002)

(2005)

Source: Courtesy of Mitsubishi 2008

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Pharma M&A in Japan

Source: Courtesy of Mitsubishi Corporation 2008

• May, 2008–Daiichi Sankyo buys Ranbaxy for up to $4.6 billion (GENERICS / OTHERS)

• June, 2008–Daiichi Sankyo buys U3 Pharma for $234 million (PRECLINICAL / ONCOLOGY)

• April, 2008–Takeda buys Millenium for $8.8 billion (MARKETED / ONCOLOGY – MM)

• February, 2008–Eisai buys MGI Pharma for $3.9 billion (MARKETED / ONCOLOGY)

• November, 2007–Astellas buys Agensys for $387 million (PHASE 1 ･ PRECLINICAL / ONCOLOGY)

• March, 2007–Eisai buys Morphotek for $325 million (PHASE 1/2 ・ PHASE 1 / ONCOLOGY)–Takeda buys Paradigm Therapeutics (LEAD OPTIMIZATION)

• June, 2007- Takeda signs potential $ 1 billion RNAi deal with Archemix –$ 6 million upfront –Financial terms for R&D and commercial milestones / royalties not disclosed

• March, 2007–Astellas signs potential $ 100 + million VelocImmune technology for Monoclonal Antibody discovery deal with Regeneron- $ 20 million upfront / potential $ 20 million x 5 additional payments - A mid-single digit royalty on product sales

• January, 2007- AnGes MG signs orphan drug (NAGLAZYME) deal with BioMarin-Financial terms for upfront and milestones not disclosed -Exclusive rights to market and distribute in Japan

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Rank Company Ethical Drug Sales

R&D Costs % of R&D Costs

Overseas Sales

% of Overseas

Sales1 Takeda 514,944 193,301 37.54% 643,503 49.30%

2 Astellas 461,600 167,945 36.38% 450,062 48.89%

3 Daiichi-Sankyo 420,380 170,662 40.60% 356,700 38.38%

4 Pfizer 393,365 ー ー ー ー

5 Tanabe Mitsubishi

324,285 75,758 23.36% 33,571 8.29%

6 Chugai 297,700 54,609 18.34% 28,367 8.70%

7 Novartis 248,100 ー ー ー ー

8 Otsuka 240,118 105,255 43.83% 307,500 36.01%

9 GSK 225,750 ー ー ー ー

10 Eisai 217,000 108,296 49.91% 410,765 60.93%

Million Yen

Japanese Pharma Company Ranking

Source: Anastasia Liapi, ranking 2007

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Japanese Pharmaceutical Market I•Regulated by PDMA

Recognised drug lag:

- 12 months ?

- Submission of foreign data ?

•Reimbursement restrictive

- Higher value for innovation and minimal price cuts

•Generics market not developed

- Substitution check box

- Teva (Kowa Pharma ?)

- Ranbaxy (Daiichi Sankyo purchase)

- Dr Reddy’s

- Kyowa Pharma (Lupin purchase)

Source: BMI Japan, Q4, 2010, Nikkei

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Japanese Pharmaceutical Market II

• OTC growth ?

- Liberalisation on supermarkets sellings

- Qualified person/pharmacists

• 2nd Tier companies

-Zeria Pharmaceuticals (purchase Biofac Esbjerg, Denmark)

- Mochida Pharmaceuticals (tie up Taisho Pharmaceuticals)

- Aska Pharmaceuticals (JV Actavis Group, Iceland)

Source: BMI Japan, Q4, 2010, Nikkei

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Medtech OpportunitiesDrivers

• Ageing society

• Price reduction – cost containment

• Informed consumers

• Choice of practice

• Co-payment costs

• Technologically advanced

• Limited hi-tech medtec companies

• Patient responsibility

Design

Product & interior design

Infection Control

Sterilisation, medical waste, validation systems

Cancer Treatment

High tech equipment

Surgery

Minimally invasive surgery

Orthopaedics

Implants

Pain Control

Drugs, medical devices

Preventative Healthcare

Screening products

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Pharma Opportunities

Source: Datamonitor PharmaVitae tool

Which companies are interested in your products ?

• What is the company’s marketed products ?

• Are the sales growing in the therapeutic area of interest ?

• What are the pressures to fill the pipeline ?

• Is there a strong R&D pipeline in the therapeutic area of interest?

• Are there synergies in the pipeline?

• What is the strategic intent?

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Which company has relevant regional capabilities?

Source: Datamonitor

•Which regions is the company present in?

•Global companies will be interested in global partnering but probably not out-licensing

•Domestic companies will be interested in in-licensing for the Japanese market and may consider out-licensing abroad

•How big is the franchise in each region?

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Entering the Market

Benefits

• Financially rewarding

• Loyal market

• Innovative medical products

• Improve global quality standards

Challenges

• Government pressure on pricing

• Length of time to get approval, ‘second hand market’

• Potentially expensive to enter

• Healthcare products not going away

• Highly regulated

• Need to get approval on reimbursement

Benefits

• Financially rewarding

• Loyal market

• Innovative medical products

• Improve global quality standards

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Conclusion

• Second largest healthcare market in the world

• Challenging regulatory environment

• Opportunity for selling innovative products

• Financially rewarding

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Healthcare Trade Mission to Japan

21st February 2011

Tokyo & Osaka Seminar and networking receptions in both Tokyo and Osaka (participation fees TBC)

Briefing on Japanese regulatory issues pre-publicity and mission brochure

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Contact Details

Anil VaidyaSector Specialist – Healthcare & BiotechnologyFar East & Asia Pacific MarketsUK Trade & InvestmentLifeScience Sector Group66-74 Victoria StLondon SW1E 6SW

Email: anil@anilvaidya.co.ukTel: +44(0)-7957-366-899

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Disclaimer

This presentation is based upon materials either compiled by us through independent research, or supplied to us by third parties. Property particulars are for information only, and to give a general idea of the property. UK Trade and Investment and its parent departments, the Foreign and Commonwealth Office and the Department of Trade and Industry, can give no assurance that the information supplied is accurate, or complete for your purposes, and no legal responsibility is accepted for any errors, omissions, or misleading statements in that information caused by negligence or otherwise.