Japan Pharmaceuticals and Healthcare Report Q3 2012

BMI View: The prospects for Japan’s pharmaceutical market over the medium term are very positive. The country has one of the largest pensionable populations, healthcare is readily accessible, the government appreciates investment in biomedical research and the regulatory regime balances the requirements of the major stakeholders. The key downside risk in the world’s second-largest pharmaceutical market is a negative macroeconomic adjustment, such as a domestic debt crisis, which would affect public and private spending on medical services.
Headline Expenditure Projections 􀂃 Pharmaceuticals: JPY10,157bn (US$127.4bn) in 2011 to JPY10,205bn (US$130.8bn) in 2012; +0.5% in local currency terms and +2.7% in US dollar terms. Our short-term forecast has been revised down slightly from Q212 due to greater awareness about the impact of the April 2012 medicine price cuts.
􀂃 Healthcare: JPY39,824bn (US$499bn) in 2011 to JPY40,096bn (US$514bn) in 2012; +0.7% in local currency terms and +2.9% in US dollar terms. Our forecast has been revised down from Q212 due to macroeconomic factors.
􀂃 Medical Devices: JPY2,220bn (US$27.8bn) in 2011 to JPY2,240bn (US$28.7n) in 2012; +0.9% in local currency terms and +3.2% in US dollar terms. Our forecast has been revised down from Q112 due to macroeconomic factors. Risk/Reward Rating: Japan’s Pharmaceutical Risk/Reward Ratings (RRRs) score for Q312, 75.5, is unchanged from Q212, underlining its status as the most attractive market in Asia Pacific. The country scores highly for every major category of the proprietary ratings system. It is only let down by two of the 15 sub-categories, namely market growth and population growth.
Key Trends And Developments 􀂃 In March 2012, Asahi Kasei said it will purchase the US medical equipment producer Zoll Medical for US$2.21bn to increase its focus on the global healthcare business and decrease its dependence on its chemicals and fibres operations. Asahi Kasei wants to extend its business footprint in the US.
􀂃 Also in March, Dainippon Sumitomo Pharma (DSP) signed a definitive agreement to acquire US biotechnology firm Boston Biomedical Inc (BBI). DSP will purchase BBI for up to US$2.63bn, which includes a payment of US$200mn upfront, up to US$540mn in developmentlinked milestone payments and up to US$1.89bn in sales-related milestones. BBI has a cuttingedge product pipeline targeting cancer stem cells, including BBI503, which is ready for phase III trials for treating colorectal cancer in the US and phase Ib trials and phase II trials for multiple solid tumours. BBI608 is in phase I trials in North America for advanced solid tumours.
BMI Economic View: Recently released figures have shown a slight improvement in economic activity in Japan, a trend we expect will not hold up for the rest of 2012 and into 2013. We continue to expect overall growth in private consumption and investment to remain subdued as the drivers of the recent spikes wane by mid-2012. With little upside for net exports as uncertainty surrounds economic conditions in the eurozone, China and the US, and public consumption and investment set to remain held down by budgetary pressure, we maintain our real GDP growth forecasts for 2012 and 2013 at 1.4%, versus consensus expectations of 1.5 in 2012% and 1.4% in 2013.
BMI Political View: Japan’s political scene will be more unpredictable now that the country has moved beyond sole government by the Liberal Democratic Party (LDP). However, it is far from clear whether Japan will develop a competitive two-party system, or whether one-party rule will re-emerge under either major party. Furthermore, it is questionable whether any political force can address Japan’s colossal economic woes, which have been exacerbated by the March 2011 Tōhoku earthquake and nuclear crisis.