Takeda: CHAPTER 2
Weaknesses
Takeda suffers from a lack of potential in its late stage pipeline and a mature marketed portfolio. The company only has one product in phase III trials: TAK-375, a treatment for insomnia. This is forecast to achieve sales of $224m in 2008, representing only 3.5% of the company's sales in that year. Such a paucity of potential in its late stage pipeline is significant because a large proportion of Takeda's products have been on the market for some time. In fact, 59.1% of the company's sales in 2002 were derived from products that have been on the market for more than 10 years, and several such products are already losing sales to newer products and generics. Some 55.5% of Takeda's sales were at risk of generic competition in 2002. Patents protecting Actos (pioglitazone), Prevacid (lansoprazole) and Leuplin (leuprolide acetate) will all expire within the next five years, increasing the risk that they will lose sales to generic competition. Combined with the lack of a strong late stage pipeline, Takeda faces the prospect of declining sales.
Opportunities
Takeda must seek greater independent penetration of the US market and expand into new therapeutic markets. With the creation of Takeda Pharmaceuticals North America (TPNA), the company has already signaled its intention to operate independently in the US rather than through its joint venture with Abbott (TAP). The launch of Actos, the diabetes therapy that is being co-promoted with Eli Lilly in the US by TPNA, has been a success. This strategy should ensure that Takeda secures a greater proportion of sales and profits. Ultimately, once increased marketing experience has been gained, Takeda should be in a position to promote some products without a partner. However, as the company is unlikely to achieve the same degree of promotional strength as major US companies, it may continue to use co-promotion agreements to exploit the full potential of its products.
Takeda and Abbott have been in talks to alter the terms of the TAP joint venture, with Takeda keen to acquire Abbott's share. However, in June 2003 Abbott announced that discussions had been abandoned. Consequently, the future of TAP is uncertain. Since Takeda has significant cash resources, acquiring Abbott's share in TAP and merging it with TPNA could be a shrewd move.
Threats
Takeda is at threat from the increasing international expansion of smaller Japanese companies, which reduces in-licensing opportunities. The company currently benefits from its position as an attractive global partner for smaller Japanese firms, allowing it to in-license products with attractive commercial potential to boost overseas sales. However, as increasing numbers of Japanese companies seek to increase revenue growth through overseas expansion, they will not only out-license these products to other Japanese companies but will also attempt to launch the products themselves.
Growth strategy
Takeda has experienced rapid expansion in recent years through organic growth, in particular by launching a number of products with strong global potential. Leuplin, Prevacid and Actos have all driven growth through sales in the US. TAP markets Leuplin and Prevacid, while Actos is co-promoted by TPNA and Lilly. However, future organic growth prospects are weak as these products will lose momentum and there is little in Takeda's late stage pipeline that promises to replace sales on this scale. It is possible that the early stage pipeline will yield future blockbusters but this still leaves a revenue gap in the short- to medium-term.
Takeda has undertaken a considerable amount of restructuring in its non-pharmaceutical business. In 2002, it formed joint ventures with Kirin Brewery for its food business and with Sumitomo for its agricultural business. Takeda also divested its rubber latex business to Nippon A&L. As a result, Takeda has sharpened its focus on the pharmaceutical sector and is now well placed to undertake a merger or acquisition to bolster its international presence. With a strong cash position and healthy debt/equity ratios, Takeda is likely to be a player in further industry consolidation.
Takeda has focused on international expansion, first achieving a strong presence in the US and more recently in Europe. The company has followed an initial strategy of penetrating new markets through joint ventures, before buying out its partners or establishing separate, wholly owned operations. In Europe it has already gained full control of most of its subsidiaries, while in the US Takeda is keen to buy out its partner (Abbott) in TAP and has also established TPNA, a wholly owned subsidiary. In January 2004, the Takeda Global Research and Development Center (TGRD) commenced operations in Illinois, US. The TGRD Center is a wholly owned subsidiary of TPNA. TPNA's existing R&D division has been transferred to TGRD, while another of Takeda's wholly owned development companies, UK-based Takeda Europe Research & Development Center, now reports directly to TGRD. TGRD will integrate Takeda's clinical development activity in both the US and Europe.
As the pharmaceutical market in Japan shows no signs of improved growth prospects in the short-term, Takeda will continue to focus on driving its overall growth through international expansion. Going it alone will provide the company with greater returns on its investment but, to realize the maximum sales potential of its drugs, Takeda should continue to exploit co-promotion agreements.