Japan's Taisho Pharma bets future on prescription drugs
Tokyo, July 18, 2001
Japan's Taisho Pharmaceutical Co has been turning a profit thanks to its over-the-counter energy drinks and hair growth tonic, but its chief scientific officer said it planned to make prescription drugs a major profit driver.
Taisho, Japan's largest non-prescription drugmaker which ranks eighth among the country's pharmaceutical firms in terms of sales, is best known for its
"Lipovitan D" energy drink, and in 2000/01 generated more than 70 percent of total sales from non-prescription drugs.
But Chief Scientific Officer Kunihiro Kitamura told Reuters in an interview on Tuesday that the future lay in prescription drugs, and that Taisho planned to come up with a remedy for nervous disorders by the end of the decade.
"We want to generate half of our total earnings from prescription drugs in the future," Kitamura said.
"To do that, we want to increase our research staff in the prescription drugs division to 300 from the current 220 in several years and introduce an original drug for the nervous system by 2008-2009," he added.
He said Taisho would continue to invest 30 billion yen ($240.4 million) annually in the prescription drug area.
Taisho has been gearing up research and development in prescription remedies since the mid-1990s, hiring more researchers and spending 80 percent of total R&D costs in the area. It has been focusing on the four areas of asthma, allergy, diabetes and disorder in the nervous system and sensory organs.
However, investors have tended to cheer Taisho's successes in non-prescription drugs rather than its drive to strengthen the prescription business.
Shares in Taisho had gotten a boost in the late 1990s due to upbeat sales of its "RiUp" hair growth promoter. But since hitting a high in September 1999, they have lost half their value due to falling RiUp sales and rising R&D costs.
Last year, Taisho saw its group net profit plummet 38 percent to 31 billion yen due to a sharp increase in R&D. For this year, the company predicts a slight recovery to 40 billion yen.
Philip Hall, an analyst at Credit Suisse First Boston, said he was sceptical on the company's strategy of putting emphasis on prescription drugs.
"Taisho is spending lots of money on prescription drugs but no one knows when and whether it can cash in on them. Taisho may be better off focusing on non-prescriptions rather than prescriptions, which come with a higher risk," he said.
"We consider the bad news is now largely discounted in the share price of Taisho and valuations are tempting, but a clear buying incentive is still lacking," he added.
PLUGGING THE GAP
As part of its efforts to plug the gap before its drugs hit the market, Taisho formed alliances with 10 U.S. and European biotechnology ventures since 1999, including Millennium Pharmaceuticals Inc and IDEC Pharmaceuticals Corp
"We expect some drugs from the collaborations will go on sale some time in 2005-2006," Kitamura said.
Taisho also aims to boost sales of Lipovitan D to 83.5 billion yen this year from 79.7 billion yen through a recent tie-up with Asahi Soft Drinks, which will sell the drink through 40,000 vending machines nationwide.
The energy drink is the world's second-most popular over-the-counter product after Johnson & Johnson's Tylenol painkiller.
And like other Japanese drugmakers, Taisho has reinforced its genome research in a bid to catch up with western pharmaceutical giants in the search for materials for new blockbuster drugs.
Kitamura said Taisho, with 30 genome specialists, has found five target materials for new medicines, two of which are for potential remedy for baldness.
Shares in Taisho closed down 1.23 percent at 2,410 yen on Wednesday, while the key Nikkei average fell 1.95 percent.
($1-124.77 Yen)
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