Otsuka Holdings (4578 JP): Well-Diversified Portfolio to Augment Revenue Growth

Otsuka has a leadership position in atypical antipsychotic drugs. The company is successfully diversifying its revenue stream in order to mend the hole created by patent expiry of its erstwhile flagship drug Abilify (accounted for ~25% of total revenue). Four global products, including Abilify Maintena, Rexulti, Samsca, and Lonsurf currently contribute more than 30% of total revenue. Better-than-expected revenue from these four global products led to record high business profit in 2020. The performance continued in this year and the company reported 8% y/y revenue growth in H1, leading to 2021 guidance raise. This insight analyses the potential of Otsuka’s global products, which have leading market positioning amid large addressable patient population. Four global products are expected to achieve revenue of ¥480 billion (20% CAGR during 2018–2021) in 2021, two years ahead of schedule, driven by indication and geography expansion. These products should play a crucial role in achieving the medium-term management plan (2019–2023), which calls for average annual revenue growth of 10% or higher to reach revenue of ¥1,700 billion and ROE of 8% of higher in 2023. Otsuka has a rich pipeline of late-stage (phase II/III) programs to compensate for the upcoming patent cliff for its mainstay products.