Japan's biggest biotech

KHK's scientist-CEO expanding beyond Japan with in-house tech, academic targets

Japanese pharmaceutical companies have historically been thought of as stodgy, insular and opaque, but that is changing fast. One year into the job, Kyowa Hakko Kirin Co. Ltd.'s CEO is building his company along lines that would sound familiar to any Western biopharma CEO: growing organically by combining the company's technology - much of which he helped discover - with targets out of academia.

Nobuo Hanai became president and CEO last March. To compete in today's environment, his senior management has concluded KHK must transform itself from a Japan-centric company into a global specialty pharmaceutical player.

To do so, the strategy has four basic components: creating new products based on KHK's core antibody-related technologies; strengthening its competitiveness in Japan in selected disease categories; expanding its business base in the U.S. and Europe; and building a biosimilars franchise.

KHK was created in 2008 through the merger of Kirin and Kyowa Hakko Kogyo Co. Ltd. The newco began its transformation in 2009 when it divested its food business under then-CEO Yuzuru Matsuda. In 2011, the company divested its chemicals business, leaving pharma and biochemicals.

As a result of both moves, total net sales have declined by 28% since FY08, and the company's market cap has hovered around $6 billion for the last four years (see "Kyowa's Sales by Segment").

In the same period, however, pharmaceutical sales have grown by 19% to ¥249.7 billion ($3.1 billion).

The company made its first move outside Japan with the 2011 acquisition of ProStrakan Group plc for £292 million ($474 million). The U.K. company provided an EU and U.S. sales force, as well as U.S. and EU rights to pain drug Abstral fentanyl citrate, a sublingual mucoadhesive formulation of the mu opioid receptor agonist from Orexo AB, which reacquired the U.S. rights last year (see BioCentury, Feb. 28, 2011).

Also in 2012, KHK entered the biosimilars business by forming a joint venture with Fujifilm Corp. called Fujifilm Kyowa Kirin Biologics Co. Ltd.

KHK released a new medium-term business plan at the end of January. By the end of 2015, the company hopes to launch five new pharma products in Japan and to grow global pharma sales by ¥10.2 billion (4%) to ¥260 billion.

Overall global sales are expected to grow by ¥24.9 billion (7.5%) to ¥358 billion. That includes KHK's biochemical business, which includes amino acids and nucleic acids for use in pharmaceuticals and their intermediates, health foods, dietary supplements and cosmetics.

As the plan comes on line, the company projects only modest growth this year: it forecasts net sales of ¥338 billion ($4 billion), an increase of 1.5%, and operating income of ¥55 billion ($647.1 million), up 4%.

The payoff is slated to come later, after 2015, when KHK hopes to launch its first three home-grown products outside of Japan: Poteligeo mogamulizumab, an anti-CCR4 antibody; istradefylline (KW-6002), an adenosine A2A receptor (ADORA2A) agonist for Parkinson's disease (PD); and KRN23, a human antibody against fibroblast growth factor

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