Indian generic manufacturers aim to enter the Japanese market

Indian generic drugmakers are exploring all options to enter Japan's lucrative but difficult-to-crack drug industry.

Sun Pharmaceutical Industries, for example, is planning to acquire the Japanese drug portfolio of Swiss firm Novartis to make its entry into the region.

Sun Pharma, India's largest drugmaker by sales and market value, which acquired Ranbaxy for US$4bn in 2014, also plans to raise money through convertible debentures or a qualified institutional placement (QIP) for expansion and acquisitions.

Other Indian companies, including Lupin, Dr Reddy's Laboratories, Glenmark, Shasun Pharma, Sami Labs and Aurobindo Pharma are also making efforts to increase their business with Japan.

Drug sales in Japan were estimated at $115bn in 2013, and Japan accounts for nearly 10% of the global pharma market, compared with 38.4% for the US and 20.7% for Western Europe, according to a 2014 Deloitte report.

The penetration of generic drugs in Japan is a little more than 30% compared with more 80% in the US market. The Japanese government now wants to raise this share to 60% by 2017 as it looks to make healthcare affordable for its citizens.

In 2010, Japan opened its market allowing 5% of generic imports. Though valuations were high, and competition intense, Indian companies that have built competencies across drug development businesses have been looking to acquire Japanese firms.

Lupin and Zydus have already acquired companies, while Lupin went for two buyouts: Kyowa in 2007 and I’rom in 2011. Zydus bought Tokyo-headquartered Nippon Universal Pharmaceutical in 2007 to spearhead its entry into the generic markets. Dr Reddy’s Labs, Aurobindo Pharma, and Dishman too have fortified their presence in the region by setting up offices there.

Dr Reddy's is focusing on Japan after its joint venture with Fuji Film ended in 2013.

Of the $15bn worth of drugs that India exported in 2013–14, shipment to Japan totalled about $120m.