Astellas Splits Sales Emerging Growth In Russia And China, But A Late Entry To India May Soon Be Rewarded

TOKYO - Japanese firm Astellas seems content pursuing emerging market growth on its own, perhaps eschewing partnering activity like its main Japanese competitors to expand in its newest markets in the BRIC countries - Brazil, Russia, India and China.

Astellas outlined its growth strategy in a meeting late last month, offering ways the company plans to overcome the sales loss of U.S. patents expiries for blockbusters Prograf (tacrolimus) and Harnal (tamsulosin).

According to UBS analyst Shigeru Mishima, Astellas is expected to return to a "profit growth trend" in fiscal year 2011, and the company will begin to see a rebound due largely to the oncology products provided by the 2010 acquisition of New York company OSI Pharmaceuticals (Also see "Astellas Completes OSI Acquisition; Shares Jump In Tokyo" - Scrip, 11 Jun, 2010.).

But Astellas is also prioritizing development in emerging markets, especially China, Russia, India and Brazil. The company told analysts Nov. 29 that it is considering an expansion of its in-house sales affiliates in new territories.

Astellas is also expanding beyond Russia's borders into neighboring markets. In September 2009 it opened sales offices in Belarus, Bulgaria, Romania, Ukraine and Kazakhstan; it has 450 full-time employees in the region, including 340 medical reps.

The company is currently the sales leader among Japanese pharma with operations in Russia, according to Astellas. In the major emerging markets, the BRIC countries, Russia - including former USSR nations - makes up nearly half of Astellas' sales, the company said in an interview.

But what Astellas' BRIC sales breakdown really shows is the small role India plays so far in its emerging markets growth. Of the roughly ¥30 billion generated in BRIC sales, nearly all of it comes from China and Russia, with limited contributions from Brazil.

However, the ratio may soon change, as the company launched its flagship product Prograf in India earlier this year. While the company is late to the market, Astellas India Managing Director Teruo Yasufuku told PharmAsia News that it began its interactions with India's transplant doctors in 2007, and with 13 sales staff has complete coverage of the Indian market, the world's fifth-largest transplant market (Also see "Indian Companies Are Becoming More Creative, Says Astellas India Managing Director Teruo Yasufuku: An Interview With PharmAsia News" - Scrip, 21 Jun, 2010.).

China, though, remains the company's highest priority in Asia; it has sales offices in Beijing and four other other cities, and has said it has immediate plans to strengthen its sales force. A Nikkei article in June stated that both Astellas and Eisai plan to double their sales forces in China, but Astellas is operating on a different scale. Astellas plans to double its sales reps to 600 by 2014, while Eisai plans to have 1,400 sales reps in China by 2013.

Still, Astellas' Chinese sale force is sizable enough to draw licensing deals from companies without a presence in China. Already partnered in Taiwan, Astellas recently expanded an in-licensing deal with Teijin Pharma to market the mid-sized Japanese pharma's febuxostat for gout and hyperuricemia in China (Also see "Astellas and Teijin Pharma Extend Febuxostat Partnership To China" - Scrip, 1 Apr, 2010.).

Innovative Over Expansive

Astellas told PharmAsia News that the company will focus on innovative products in the region, instead of supplementing its portfolio with generic brands like rival Daiichi Sankyo.

And unlike Daiichi Sankyo, Astellas states that it intends to grow organically in emerging markets rather than relying on a large-scale acquisition like Daiichi Sankyo's purchase of Ranbaxy. And rumors have circulated in recent months that Takeda has been in talks with Dr. Reddy's Labs for a deal focused on the Indian company's domestic formulations business (Also see "From Product Launches To Toll Manufacturing, Japanese Giant Takeda Unveils Plans For India" - Scrip, 1 Oct, 2010.).

Astellas CEO Masafumi Nogimori stressed in his late November presentation that the in-house sales network in emerging markets is one of the company's key strengths in the region.

While Astellas is expecting oncology products to help pick up the sales lag in the U.S., the company's sales network in emerging markets will still rely on in-house transplantation and urology products as its business core. Both Prograf and Harnal are expected to do well in emerging markets in the coming years, despite increased generic competition. Astellas does not disclose specific market sales, but Deutsche Bank analyst Kenji Masuzoe estimates Prograf will nearly double sales in emerging markets, rising from ¥11.2 billion in 2009 to ¥20.6 billion in 2015. Masuzoe expects Harnal sales will rise modestly from ¥8.1 billion in 2009 to ¥10.2 billion in 2015.

OSI Integration

While talking of expansion in Asia, Astellas has done some shuttering of facilities in the U.S.

To integrate the newly acquired OSI into the company, the company consolidated all oncology research functions to Farmingdale, NY, which will be Astellas' U.S. small molecule oncology research center. All clinical development programs will be moved to Astellas' U.S. headquarters in Deerfield, IL, which Nogimori said will not disrupt any of the trials. Nogimori added that the U.S. oncology sales and marketing groups will remain largely intact.

The company now has a sizable development pipeline of in-house oncology products, including IGF-1R inhibitor OSI-906 in Phase III and a number of Phase II projects: survivin suppressant YM155 for breast cancer, mTOR kinase inhibitor OSI-027, and antibodies - from its Agensys acquisition - AGS-1C4D4 and AGS-8M4 for pancreatic and ovarian cancers.

For its entire pipeline, few products appear to stick out as potential blockbusters, but Deutsche Bank analyst Kenji Masuzoe offered a verdict of the pipeline that is likely comforting to a company that has lost its largest products. "Given the lineup of late-stage pipeline products (10 in all, at Phase III trial or filing stage), we think the drugs, once launched, will potentially allow the company to build a product portfolio that is free of patent cliffs."

- Daniel Poppy ([email protected])