Takeda: CHAPTER 3
Alliance activity
The following figure illustrates Takeda's alliance network. Takeda has used partnerships and licensing as a key growth strategy, with the creation of TAP, a joint venture with Abbott, in the US. The company also used joint ventures to establish a presence in several European markets. TAP was established to exploit the potential of Takeda's portfolio in the US, using Abbott's market expertise to maximize drug penetration. The partnership has focused on marketing two highly successful drugs: the proton pump inhibitor Prevacid (lansoprazole), which posted revenues of $3,157m for TAP in 2002, and the prostate cancer drug Lupron (leuprolidc acetate), with sales of $876m.Takeda and Abbott have been in talks for some time about the possible acquisition of the whole venture by either party. It is considered most likely that Takeda will buy out Abbott, although in June 2003 it was announced that talks had collapsed and that the joint venture would continue. The creation of TPNA and the co-promotion of Actos with Lilly highlight Takeda's intention to operate independently in the US and that the company is gaining the necessary marketing expertise. The next logical step for Takeda would be to acquire the remaining shares in TAP and to merge the business with TPNA. This would follow the strategy that the company has used in Europe, where it initially established a presence through joint ventures before buying out its partners. While TAP has been successful in the past, a number of factors limit the joint venture's future revenue potential:
- implications of the Lupron investigation by the US Department of Justice;
- Takeda's increasing direct penetration of the US market;
- rising competition to its lead products.
TAP, Takeda and Abbott all came under investigation in 2000 in connection with allegations of violations of state or federal law in connection with the pricing and marketing of Lupron. In October 2001, TAP was fined $875m. In addition, Chief US District Judge William Young placed TAP on probation for five years, putting the operation under pressure to monitor its operations carefully. It is unclear to what extent this will affect the future of the business but it is likely to be a negative factor in either Takeda or Abbott's decision to promote further products through the joint venture. At the time of establishing TAP, Takeda had virtually no presence in the US and TAP was its sole promotional vehicle. Takeda's position as an innovative player and the leading company in Japan meant that this was a lucrative opportunity for Abbott. However, now that it has gained a working understanding of the US market through TAP, Takeda has established its own US subsidiary and set up new partnerships, such as that with Lilly for Actos, to gain a greater share of revenues. Takeda is likely to continue this route for new products, so the direct supply of innovative drugs to TAP may diminish. A third factor that will be detrimental to the future of TAP is growing competition to its lead products. Prevacid faces a tough time following the launch of generic competition to its main rival, AstraZeneca's Losec (omeprazole). While TAP has striven to prove that its drug is superior to Losec and AstraZeneca's successor, Nexium (esomeprazole), the launch of generic omeprazole in late 2002 will have affected Prevacid's sales to some extent in 2003. In the meantime, Lupron faces competition from Abbott's own atrasentan in the prostate cancer market.
However, it is not only among established products that the competitive environment is heating up. The erectile dysfunction drug Uprima (apomorphine) has been a major hope for TAP but suffered delays in the hands of US regulators. The drug has lost any early-to-market advantage it may have had over other entrants, such as Lilly's Cialis (tadalafil) and Bayer/GlaxoSmithKline's Levitra (vardenafil). TAP may not have sufficient marketing capabilities to compete effectively against such strong rivals. Takeda is using licensing agreements to improve its pipeline. As the Japanese pharmaceutical company with the greatest international presence, it is an attractive development partner for smaller Japanese players and is able to in-license global rights excluding Japan. Agreements with Mitsubishi-Tokyo Pharmaceuticals in July 2001 and Dainippon in February 2001 illustrate this trend. However, although Takeda has considerably strengthened its early stage pipeline, it needs to in-license more late stage products if it is to maintain strong sales growth in the short-term. Although it has historically turned to smaller Japanese companies for such opportunities, these players are beginning to expand internationally themselves, so Takeda should widen its search to source products from smaller biotechnology companies.
Financial overview
Takeda is in a strong financial position, with adequate funds to implement a number of major strategic moves. The company has cash funds of $6,610m and short-term investments worth a further $2,704m. It also has relatively little debt, with total liabilities of $3,602m. In 2002, Takeda's net profit margin was 26%, providing the company with a strong source of further funds.Takeda's overall 4.1% growth in 2002 was driven by its pharmaceutical business, which comprises sales of ethical drugs, consumer healthcare and vitamins. The pharmaceutical business accounted for 88.7% of the company's total sales in 2002. Sales of the bulk vitamin and food business fell by 31.7% as a result of the transfer of the food business in April 2002 to the joint venture Takeda-?irin Foods. The chemical product group recorded a 2% decline in sales to $396m in 2002. Sales of the agricultural business declined by 57.7% from $298m in 2001 to $126m in 2002, in part as a result of its spin-off in November 2002 to another joint venture, Sumitomo Chemical Takeda Agro.
Takeda's operating profit rose by 10.5% from $2,246m in 2001 to $2,481m in 2002. Its operating profit margin increased by 6.1% to 29.7%. Net profit increased by 15.4% to $2,170m from $ 1,882m in 2001, while the net profit margin rose by 10.8% to 26%. Sales in Takeda's domestic market fell by 3.1% to $5,082m in 2002. European markets experienced the fastest growth at 33.5% year-on-year, although this was from the smallest base, while US sales grew by 13.1%.