PharmaVitae Analytics

Japan Pharma Outlook 2027

Strategizing Growth in an Evolving Industry Landscape

June 2018

| 2PharmaVitae Analytics

Edward Thomason

Company Analyst

Pharma Intelligence

Informa

Zara Fulton

Company Analyst

Pharma Intelligence Informa

Ian Haydock

Editor-in-Chief (Asia Pacific)

Pharma Insights

Informa

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PharmaVitae’s Japan Pharma Peerset

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Japan Pharma will add $6.5bn out to 2027 [JPN], generating $69.5bn in 2027 [JPN]

Low CAGR of 1.0% is indicative of the domestic pressures facing Japan Pharma

Healthy launch portfolio will offset heavy core and expiry portfolio

Launch portfolio will add $11.4bn over 2017-27 [JPN]

Core and expiry portfolio will lose $4.8bn over 2017-27 [JPN]

Japan Pharma: Global Revenue Growth Outlook, 2017-27 [JPN]

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Japan Pharma Challenges: Aging and Declining Japanese Population

Source: United Nations, 2017; World Health Organization, 2017

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Japan Pharma Opportunities: Government Incentives – The Stick Approach

Government Policies to Control Healthcare Spending

Regular Government Pricing Revisions

May occur annually from 2020 [JPN]

Set to increase the dichotomy between established and more innovative companies

Government Facilitated Generics Growth

Generic volume domestic market share: • Rose from 26% to 66% over 2012-16 [JPN]• Goal of 80% by 2020 [JPN]

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Japan Pharma Opportunities: Government Incentives – The Carrot Approach

Government Policies to

Pricing Premiums* Reform

Cost Effectiveness Assessment

Company Rankings

Government Policies to Encourage Japan-Based Innovation

*Based on Health Technology Assessment (HTA) criteria

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Challenges and Opportunities: Impact of Government Mechanisms

Will these mechanisms designed to encourage innovation while saving healthcare costs lead to higher R&D productivity and revenue growth?

More Regular Pricing Revisions

Stricter HTA Requirements

Higher Innovation Standards

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Strategies for Global Growth: Navigating Domestic Headwinds and Measures

Cost-saving measures, including job cuts

Divestitures of non-core or longer-listed products

Rationalization

Collaborations

Sharpened focus on:

• Oncology and central nervous system

• US and emerging markets

• R&D position in regenerative medicine

Greater economies of scale

Sustain profitability

Boost R&D productivity

Consolidation Reinvention

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Strategies for Global Growth: More Big M&A for Japan Pharma?

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Strategies for Global Growth: Takeda/Shire, 2017

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Strategies for Global Growth: Takeda/Shire

Regional Overview, 2027

US

5EU

Japan

RoW

$14,836m

$8,180m

$4,728m

$5,537m

Regional Overview, 2027

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Strategies for Global Growth: Astellas/Daiichi Sankyo, 2017

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Strategies for Global Growth: Astellas/Daiichi Sankyo

Regional Overview, 2027

US

5EU

Japan

RoW

$4,919m

$3,131m

$7,298m

$2,657m

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Strategies for Global Growth: Otsuka/Eisai, 2017

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Strategies for Global Growth: Otsuka/Eisai

Regional Overview, 2027

US

5EU

Japan

RoW

$4,989m

$1,206m

$6,809m

$3,398m

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Japan Pharma: Global Revenue Growth Outlook, 2017-22 [JPN] ($m)

Source: Datamonitor Healthcare; PharmaVitae Analytics

Japan Pharma will add $5.5bn out to 2022 [JPN]

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Japan Pharma: Global Revenue Growth Outlook, 2022-27 [JPN] ($m)

Japan Pharma will add $1bn out to 2027 [JPN]

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Japan Pharma: Therapy Area Dynamics

↑ Central Nervous System

↑ Oncology

↓ Cardiovascular

Global Growth

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Growth will be fueled by oncology and central nervous system (CNS) indications

Oncology market will grow by $5.4bn to reach $17.0bn in 2027 [JPN] at a 3.9% CAGR

CNS market will grow by $3.6bn to reach $14.1bn in 2027 [JPN] at a 3.0% CAGR

Cardiovascular will show the most decline, losing $1.9bn at a CAGR of -2.7%

Japan Pharma: Therapy Area Dynamics, 2017-27 [JPN] ($m)

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Japan Pharma: Regional Dynamics, 2017-27 [JPN]

Regional contributions to Japan Pharma revenue are set to converge

Shrinking Japanese market

China and South Korea markets hold significant potential through tripartite cooperation agreement

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Japan Pharma: Lifecycle Analysis

Core – Patented products that neither launch nor expire between 2017-27 [JPN]

Expiry – Patented products expiring between 2017-27 [JPN]

Launch – Patented products launching between 2017-27 [JPN]

Launch products set to add $11.4bn over the forecast period

Core products set to lose $2bn in value

Expiry products revenues will erode by $2.8bn between 2017-27 [JPN]

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Japan Pharma: Opportunities in China

China’s FDA ReformsNew SMAR and MISA

Rare Disease List & Allowance of Foreign Data

Stronger IP Protection More

trilateral cooperation (Japan/Korea/China)

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Japan Pharma: Any Aces Up Japan Pharma’s Sleeve?

Regenerative medicine

Early stage clinical development not fully reflected in current forecasts

Nobel prize for Physiology or Medicine awarded to Professor

Shinya Yamanaka who discovered iPS cells

Streamlined regulatory pathway facilitated by the MHLW offers potential first to market global

advantage

| 25PharmaVitae Analytics

Edward Thomason

Company Analyst

Pharma Intelligence

Edward.Thomason@informa.com

Zara Fulton

Company Analyst

Pharma Intelligence

Zara.Fulton@informa.com

Ian Haydock

Editor-in-Chief (Asia Pacific)

Pharma Insights

Ian.Haydock@informa.com

Questions?