Sankyo: Strategic position
Strategic position
StrengthsSankyo has outlined a clear commitment to increasing its focus on its pharmaceuticals business. The restructuring of the company's non-pharmaceutical businesses has already resulted in the establishment of the crop protection and special merchandise divisions as separate companies, and has led to the amalgamation of the remaining businesses.
Sankyo is in a vulnerable position but its positive strategic responses to challenges that it faces is a major strength. The company's main sales driver, Mevalotin (pravastatin), is already threatened by generic competition in Japan, with generics expected to reach the US in 2006. A number of products that were expected to replace Mevalotin have experienced regulatory delays, thereby reducing their sales potential. However, although many Japanese companies have set targets and produced five year growth plans, Sankyo actually appears to be making changes to achieve its goals. Recent in-licensing activity, through which it has acquired the Japanese rights to a number of promising products, is an indicator that the strategy is working.
Weaknesses
Sankyo's main weakness results from delays to regulatory approval of key products in Japan. With the threat of generic competition to Mevalotin from 2003, Sankyo has been attempting to find a replacement growth driver. In particular, pitavastatin (NK-104) and, to a lesser extent, Calblock (azclnidipine) were regarded as the products that could enable Sankyo to maintain its cardiovascular strength. A combination of safety concerns and associated delays in gaining regulatory approval have considerably diminished the potential of these drugs to replace lost Mevalotin sales, particularly over the short-term.Opportunities
Sankyo has a large R&D pipeline, with compounds in development from phase 1 through to phase III, but delays in bringing products to market have affected the company's sales growth. Sankyo must, therefore, focus on bringing products to market more rapidly and on providing extensive safety data in order to avoid the regulatory delays that have hampered recent product approvals.Threats
The greatest threat that Sankyo faces is if generic competition in Japan has a greater impact on Mevalotin sales than expected. Mevalotin accounted for 41.7% of Sankyo's sales in 2002 and generic competition entered the Japanese market in mid-2003. However, brand loyalty is far stronger among physicians in Japan than among their US counterparts, and generic drugs arc priced only around 20% below the branded version, so the impact of their launch is expected to be gradual. Even so, continuing government attempts to constrain costs and recent increases in co-payments for much of the population could result in a greater impact on Mevalotin sales.
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