Asia Healthcare Analyst, Pathology Associates Limited

Dion Stéfan Büchner M.D., FCAP

Asia Healthcare Analyst

Pathology Associates Limited

Thematic (Sector/Industry)

Japan Pharmaceuticals, biotechnology and life sciences / Thematic (Sector/Industry)

<ul>
<li>The Japanese government recently announced its decision to initiate an ad-hoc price reduction of ~4.35%, to be levied in October 2019, this will be in addition to the scheduled biennial price revisions (<a href="https://pj.jiho.jp/article/239057" target="_blank">source</a>).</li>
<li>The October 2019 scheduled price cuts will have nominal overall impact; however, we highlight a few companies that are relatively more vulnerable to ongoing price reforms.</li>
<li>
Mitsubishi Tanabe, Taisho, Santen, Kaken, Kyorin and Kissei generate &gt;50% of revenue from the domestic market and are projected to continue to do so over next 3-5 years.</li>
<li>Furthermore, the contribution from long listed (LL) drugs is much higher for the above-mentioned companies, which makes them relatively vulnerable to ongoing price reforms (price cuts for LL drugs are much higher than the average).</li>
<li>On the other hand, Ono, KHK and Nippon Shinyaku, despite a high proportion of domestic revenue (as a % of total revenue), have only limited contribution from LL drugs.</li>
<li>Ono’s Opdivo, however, will continue to face market expansion led special price cuts going forward.</li>
</ul><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/073/794/original/Domestic%20sales%20as%20a%20%25%20of%20total%20sales.PNG?1545456784" class="editor-image img-responsive" data-smartkarma-image-id="73794"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/073/796/original/LL%20as%20a%20%25%20of%20Domestic.PNG?1545456892" class="editor-image img-responsive" data-smartkarma-image-id="73796"></figure><div class="content-caption">Source: Company data, Pathology Associates research</div><div style="text-align: left;" class="content-caption">* Companies with financial year ending December, Taisho domestic pharma includes OTC sales, N Kayaku domestic pharma sales includes Generics and Biosimilar sales</div>


The Japanese government recently announced its decision to initiate an ad-hoc price reduction of ~4.35%, to be levied in October 2019, this will be in addition to the scheduled biennial price revisions (source).
The October 2019 scheduled price cuts will have nominal overall impact; however, we highlight a few companies that are relatively more vulnerable to ongoing price reforms.

Mitsubishi Tanabe, Taisho, Santen, Kaken, Kyorin and Kissei generate &gt;50% of revenue from the domestic market and are projected to continue to do so over next 3-5 years.
Furthermore, the contribution from long listed (LL) drugs is much higher for the above-mentioned companies, which makes them relatively vulnerable to ongoing price reforms (price cuts for LL drugs are much higher than the average).
On the other hand, Ono, KHK and Nippon Shinyaku, despite a high proportion of domestic revenue (as a % of total revenue), have only limited contribution from LL drugs.
Ono’s Opdivo, however, will continue to face market expansion led special price cuts going forward.
Source: Company data, Pathology Associates research* Companies with financial year ending December, Taisho domestic pharma includes OTC sales, N Kayaku domestic pharma sales includes Generics and Biosimilar sales

Japan Pharma - Domestic Market and Long Listed Drug Exposure