By Yuhei Matsumoto / Yomiuri Shimbun Staff Writer
Pharmaceuticals have seen a worldwide shift from small-molecule drugs to biopharmaceuticals in recent years. The trend has jolted the Japanese drug industry, which excels in medications with a low molecular weight.
This article explores the future of the Japanese pharmaceutical industry by examining three companies: Shionogi & Co., Takeda Pharmaceutical Co. and Mitsubishi Tanabe Pharma Corp. The companies were once dubbed the "Big Three" of Doshomachi, a district in Chuo Ward, Osaka, known as the birthplace of many drug companies since the Edo period (1603-1867).
Shionogi enhances its strength
"We are confident in our ability to develop small-molecule drugs. There is a tendency in the United States and Europe to say that Japan's drug development has lost energy recently, but I want to counter that by launching new Japan-made drugs," said Isao Teshirogi, chairman and president of Shionogi, at a May press conference to announce the company's acquisition of the Japan Tobacco Inc.'s pharmaceutical business.
In addition to that acquisition, Shionogi has also made a tender offer for Torii Pharmaceutical Co., a subsidiary of Japan Tobacco. The total cost of the purchases will be about 160 billion yen.
Shionogi boasts world-class capabilities in researching and developing small-molecule drugs, which are made by chemically synthesizing compounds. Small-molecule drugs can be produced at a relatively low cost because their molecular weight is small and they have simple structures. They can pass through even the small pores in cell membranes, making them easy to reach inside cells. However, they also carry a higher risk of side effects because they may affect other parts of the body.
In contrast, large-molecule drugs, also known as biologics, are produced through cell culture and other procedures. They are expected to provide more reliable therapeutic effects because they have high selectivity, meaning they can target specific areas directly. However, the costs of developing and manufacturing them are relatively high. Nevertheless, development of the drugs has been accelerating since the 2000s.
Shionogi is known for developing Crestor, a drug that treats hyperlipemia. Worldwide sales of Crestor totaled several hundred billion yen annually at its peak.
Shionogi has licensed the development and sales rights of Crestor to AstraZeneca PLC. Supported by huge patent revenue coming in from the British pharmaceutical company, Shionogi has put its efforts into developing drugs to fight infectious diseases, and those efforts have paid off, with promising medications developed for the flu and COVID-19. The Japanese company has also secured royalties for HIV drugs through the mid-2030s, ensuring solid performance in the near term. It posted record-high sales and operating profit -- which represents earnings from core business activities -- in its consolidated financial results for the three straight fiscal years through March 2025.
However, there is a sense of crisis at the company over its business style. "It is not easy (to continue growing) while relying entirely on (products that treat) infectious diseases," Teshirogi said. Cultivating new pillars of business has become a key challenge for the company.
As a way to cope with this situation, Shionogi has set its sights on Japan Tobacco, which has strength in small-molecule drugs.
While Torii is known for its anti-allergy medications, Japan Tobacco excels in immunology, so Shionogi aims to take advantage of the acquisitions by developing new drugs in both fields. Torii has a sales base in dermatology and otolaryngology, so Shionogi believes the effects of synergizing with the company would be significant.
However, Shionogi's strategy of focusing on small-molecule drugs puts it in the minority. The world's top-class pharmaceutical companies, whose annual sales are near 10 trillion yen, are investing heavily in the race to develop antibody drugs and other biopharmaceuticals. Meanwhile, Shionogi's consolidated sales for the fiscal year ending March 2026 are expected to be 530 billion yen, even when accounting for sales from Japan Tobacco's pharmaceutical business.
Observers are paying attention to whether Shionogi can make its presence felt in the global pharmaceutical industry despite its size.
Takeda's selection and concentration
In January, Takeda announced that President Christophe Weber will step down next year. The company's nomination committee did not hesitate to praise Weber, the first foreign national to assume the top post of the company, which has a history of nearly 300 years.
"During Christophe's 12 years of leadership, Takeda has transformed into a competitive, global R&D-driven biopharmaceutical company," the committee said.
Weber has devoted the drugmaker's managerial resources to the development of biopharmaceuticals. In 2019, Takeda acquired Shire PLC, an Ireland-based company known for its high skills in developing biologics such as gene therapies, for over 6 trillion yen. On the other hand, Weber decided to sell a consumer subsidiary known for producing Alinamin, a line of vitamin supplements, to a U.S. investment fund for about 242 billion yen in 2020. The decision illustrates Weber's policy of promoting business selection and concentration.
However, a significant gap remains between Takeda and its rivals in the United States and Europe. The Japanese drugmaker spent 730 billion yen on research and development in fiscal 2023, but U.S.-based Merck & Co. invested 30 billion dollars (about 4.3 trillion yen), about six times more.
Tanabe taken over by U.S. investment fund
The global shift away from small-molecule drugs to biopharmaceuticals has severely hit Mitsubishi Tanabe, a prestigious drugmaker with a 350-year history.
In February, Mitsubishi Chemical Group Corp. announced the sale of Mitsubishi Tanabe to U.S. investment fund Bain Capital LP for about 510 billion yen. In 2020, Mitsubishi Chemical made Mitsubishi Tanabe a wholly owned subsidiary as part of its strategy to make pharmaceuticals and healthcare a pillar of growth. However, because of the clear trend toward biopharmaceuticals, which require increasingly complex and advanced development, the chemicals maker has decided to change course. "The synergistic effect from pharmaceuticals and chemicals has waned," said Mitsubishi Chemical President Manabu Chikumoto during a press conference in February.
Bain Capital has an abundant track record of investing in life science companies, including drugmakers, so hopes are high that its knowledge and skills will improve Mitsubishi Tanabe's performance. However, there is a possibility that the drugmaker will be forced to take such actions as trimming product development, withdrawing from unprofitable areas and reducing personnel, as investment funds tend to judge the cost-effectiveness of development expenses more strictly.
Akihiko Kawakami, a senior researcher at Mitsubishi Research Institute Inc., urged Japanese drugmakers to think hard about strategies to compete with foreign companies, which have a significant advantage in investing in research and development. "(Japanese companies) need to take measures such as deepening collaborations with startups in and outside Japan, as well as (domestic) universities, which have world-class capabilities in basic research," Kawakami said. "Another approach is to conduct tie-ups between pharmaceutical companies to utilize each other's strengths."
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This article is from The Yomiuri Shimbun. Neither Dow Jones Newswires, MarketWatch, Barron's nor The Wall Street Journal were involved in the creation of this content.
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June 17, 2025 03:51 ET (07:51 GMT)
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