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With the latest research and development capabilities at their disposal, Japanese pharmaceutical companies have grown steadily. The nation has emerged as the third-largest pharmaceutical market in the world, as per the International Trade Administration. According to Mordor Intelligence, Japan’s pharmaceutical market size is expected to grow from $87.23 bn in 2023 to $91.14 bn by 2028.
The spread of Covid-19 prompted Japan to focus on innovative pharmaceuticals and vaccine development. In 2022, the Japanese government pledged to invest $2 bn to set up a vaccine research hub. It did so to create vaccines within 100 days, ensuring the nation’s preparedness for future epidemics.
One of the primary reasons behind the expansion of Japan’s pharma sector is the growing geriatric (aged) population and the rise in chronic illness. According to the World Bank, about 30% of Japan’s population was aged 65 years and above in 2022. This is the demographic bracket that is prone to cardiovascular diseases, thus boosting demand for therapeutics in the country.
Meanwhile, Alzheimer’s disease, a neurological disorder, is on the rise in Japan. This is a big market for the nation’s pharmaceutical industry. Research revealed that Japan’s Alzheimer’s disease drugs market is estimated to expand at a CAGR of 8.92% between 2022 to 2030.
Moreover, the Japanese government’s efforts to boost the pharma sector have been consistent. Even the drug approval process is relatively simple, wherein Japan’s Pharmaceuticals and Medical Devices Agency (PMDA) offers consultations to drug manufacturers to guide them through the process.
However, the sector is not without its underlying issues. The drug pricing debate has been going on for some time now. In the fiscal year ended March 2022, Japan shifted from a biennial price revision process for all reimbursed medicines to an annual review format.
This adjustment was aimed at maintaining affordable drug costs and sustaining the public healthcare system. However, it has led to an increase in the unpredictability of drug prices, adding to the woes of pharma companies.
Top Japanese Pharmaceutical companies to consider
Despite the drug pricing debate, Japan’s pharmaceutical sector has held its position in the global market. This can be attributed to the government’s consistent backing of drug research and development. Additionally, domestic pharmaceutical companies are actively engaged in developing therapies for rare diseases.
Here are three pharmaceutical stocks that investors looking at long-term growth can consider.
Chugai Pharmaceutical
Chugai Pharmaceutical is a drug manufacturer headquartered in Tokyo. Founded in 1952, the company entered a strategic deal with Roche in October 2002 and became a member of the Roche Group. Chugai offers products for the treatment of several therapeutic areas, including renal diseases, cancer, bone, joint diseases, and immune disorders. The company exports its drugs across North America, Europe, and Asia.
In May 2022, Chugai Pharmaceutical’s Tecentriq received regulatory approval from the Ministry of Health, Labour, and Welfare as Japan’s first immunotherapy for the ancillary treatment of non-small cell lung cancer.
For the fiscal year ended December 2022, Chugai Pharmaceutical saw a year-on-year revenue increase of 16.8% to 1.168 tn yen ($7.8 bn). Additionally, the company’s operating income for the year climbed by 4.1% on an annual basis to 451.7 bn yen ($3.02 bn).
“In 2023, we will enter a new phase in our financial performance as we move away from the initial contribution of COVID-19-related drugs,” affirms Dr. Osamu Okuda, Chugai’s President and CEO.
“However, excluding the temporary impact of those products, we expect revenue growth this fiscal year as our core business in Japan and overseas is solid, with a robust portfolio of products and projects that will support our future growth,” he adds.
With a market capitalisation of 8.12 tn yen ($54bn), Chugai Pharmaceutical is listed on the Tokyo Stock Exchange (TYO: 4519). Its shares have surged 39.6% over the past year. Chugai Pharmaceutical stocks have a PE ratio of 24.15 and a price-to-book ratio of 5.18.
Daiichi Sankyo
This Japanese pharma giant was established in 2005 through a merger of Daiichi Pharmaceutical and Sankyo. Daiichi Sankyo conducts research, development, production, and marketing of drugs. Besides cancer, the company develops treatments for rare diseases and immune disorders. The company’s operations span across North America, South and Central America, Europe, and Asia.
The company witnessed a 22.4% year-on-year increase in its revenue, reaching 1.28 tn yen ($8.5 bn) in the fiscal year ended March 2023. During this same period, Daiichi Sankyo’s operating profit rose by 65.1% year-on-year to 120.6 bn ($0.81 bn).
The company, with a market capitalisation of 7.777 tn yen ($52 bn), has its shares traded on the Tokyo Stock Exchange (TYO: 4568). Over the past year, Daiichi Sankyo’s stock has seen a 16% decline. Its shares have a price-to-earnings ratio of 52.74 and a price-to-book ratio of 4.88.
Takeda Pharmaceutical Company
Takeda Pharmaceuticals is involved in discovering, developing, manufacturing, marketing, as well as importing and exporting drugs. The company develops treatments for cancer, inflammatory bowel disease, acid-related diseases, motility disorders as well as liver diseases. The pharma giant also has a presence in the Americas, Europe, and the rest of Asia.
Earlier this month, the U.S. Food and Drug Administration approved Takeda Pharmaceutical’s Adzynma drug to treat a rare genetic blood disorder in adults and children.
The company saw a 12% year-on-year increase in its revenue, reaching 4.03 tn bn yen ($27 bn) in the fiscal year ended March 2023. During this same timeframe, Takeda Pharmaceutical’s operating income increased by 6.4% year-on-year to 490.51 bn yen ($3.28 bn).
Takeda Pharmaceutical Company, with a market capitalisation of 6.57 tn yen ($44 bn), has its shares traded on the Tokyo Stock Exchange (TYO: 4502). The stock is also listed on the New York Stock Exchange (NYSE: TAK). The company’s stock climbed 4.36% over the past year on the Tokyo Stock Exchange. Takeda shares have a PE ratio of 34.44 and a price-to-book ratio of 0.90.
Editor’s note: All stock movement figures as of November 22, 2023.
