（The English version is based on the interview published in Japanese.）
By Igarashi Daisuke
This year Takeda Pharmaceutical, Japan’s biggest pharmaceutical company, announced a deal to buy major Irish drug maker Shire, the largest-ever merger and acquisition deal by a Japanese company. Takeda is expected to start the integration as soon as early next year if it obtains approval at a shareholders meeting in December.
We resume our interview series, which we started last year, with Takeda President & CEO Christophe Weber.
While Takeda is headquartered in Japan, a majority of the executive team are non-Japanese, and English is frequently used in the company. Four years after assuming his role, how will President & CEO Weber steer this Japanese company? We asked him about a wide range of topics, including employee training, appointments of more female executives, and how to achieve work-life balance.
In the first of the series, we asked him about the acquisition deal with Shire and current trends in the global pharmaceutical industry.
――How are things going with your acquisition plan with Shire?
I think things are going well. We have received approval from many countries including the European Union, which was the final hurdle. As we announced, we will soon have a shareholder meeting in order to get the approval of our shareholders. (Takeda plans to hold an extraordinary general meeting of shareholders on Dec. 5)
We are already preparing for our integration with Shire. What I'm pleased about is that even though we are busy toward the deal closing, we are still able to focus on our business and we are continuing to deliver good results.
――Why did you need the Shire deal?
We believe that the Shire acquisition can significantly accelerate our momentum and make us more competitive, because it will allow us to continue to invest strongly in research and development (R&D).
At Takeda we spend about 300 billion yen a year on R&D. Acquiring Shire provides us a larger access in the global market, especially in the US market. It's a huge acquisition and a complicated one, but we think it makes a lot of sense.
――What is important when you combine two different companies?
Let's talk specifically about Shire and Takeda. The first thing is to be very clear about the strategy. We need to have a clear strategy for specific businesses, R&D and so forth and we need to consider how the organization will be structured. Of course, we need to create a common culture.
What I don't want is to keep two organizations separate for a long time. I want to immediately create a single integrated organization as "One Takeda" so that everybody will be under one roof, with one shared-vision.
Our corporate values are very important and we don't want to compromise them in any way, because the pharmaceutical industry is a very sensitive business. Patients are not consumers; when they are sick, the patient doesn't choose the medicine, their doctor prescribes it.
It's not luxury brand such as Lois Vuitton bag or iPhone, where the industries can dictate the price. We have a responsibility to make medicine accessible to everyone, rich or poor.
We are making rapid progress on preparations for the integration with Shire; it could take place within a few months after the deal is closed.
――Could you tell me current situations in the global pharmaceutical industry?
The pharmaceutical industry is fundamentally global by nature, because diseases exist around the world, and when a new medicine is developed, it is used globally. The world's top 20 pharmaceutical companies are all global, meaning they have expanded their business to reach out to many countries around the world.
The US market in particular is very strong and about 40% of the global pharmaceutical market. There has also been huge growth in emerging countries, too, in China, Brazil and Asia Pacific. In order to reinvest in R&D, mature markets are important and, in that sense, the US market is very critical. Japanese is another one of our important markets.
Interestingly back in 1994, Japan represented about 20% of the global market. Today it's 7%. Why is that? It's due to the growth of the market in the US and emerging countries, as well as the increased pace of innovation worldwide. R&D is very expensive and the cost has increased exponentially in the last 15 years. However, the success rate of R&D leading to the launch of a new drug is exceedingly low.
One other trend is that healthcare systems globally are under enormous financial pressure. Healthcare costs in UK and the US are increasing, as they are in Japan with its aging population.
In many countries drug prices are controlled by the government, but under this pressure, governments are trying to curb payment to patients through drug pricing or insurance systems. This situation is something we need to address.
――Why are Japanese pharmaceutical companies left behind US counterparts?
When I joined the industry in the early '90s, the Japanese pharmaceutical industry was very competitive and was creating significant innovation in cardiovascular drugs, in antibiotics for example. But in the last 20 years, the innovation has been more in new fields such as biopharmaceuticals; in other words, fields that rely on the understanding of biology rather than conventional chemistry.
Much of this transition has happened in the US and, because it is a transition that many Japanese pharmaceutical companies didn't manage so well, the industry has become less competitive. But it's still a very strong industry and it's not too late to regain some momentum.
――We have seen many M&As in the global pharmaceutical industry. Why do you need M&As?
I think one of the characteristics of our industry is that the upfront investment, in other words the R&D expense, is huge. We typically invest 15% of our revenue in R&D and this investment is made about 20 years before the product comes to the market. It's a very long cycle that requires a lot of financial strength.
The second characteristic is that drug patent exclusivity expires and that presents the industry with a very big challenge. We always need to secure a few major products, but the patents on these products eventually expire, leading to a dramatic drop in sales, and it's not easy to time the introduction of a new product to coincide with this.
When that happens, we need to reduce our R&D investment costs, but doing so impacts on the future of the business. And so, by integrating companies we can secure new sources of revenue. That's the common factor driving the M&As we see in the industry.
(■In the next interview, we will ask how President & CEO Weber has reformed Takeda and communicated with employees since he took the helm four years ago)
Japanese version： シャイアー買収の武田薬品工業社長が語る 製薬業界になぜM&Aが必要なのか