March 2, 2012 / 12:48 AM / 5 years ago

UPDATE 2-Daiichi, Glaxo set up Japan venture in vaccine push

4 Min Read

* Daiichi-Glaxo venture likely top Japan vaccine player

* Japan vaccine market seen holding good growth prospects

* Shares of Daiichi jump to 4-month closing high

By Chris Gallagher

TOKYO, March 2 (Reuters) - Japanese drugmaker Daiichi Sankyo and British peer GlaxoSmithKline are to form a 50-50 joint venture to bring new vaccines to Japan, targeting an underdeveloped segment of the world's second-biggest prescription drug market.

News of the venture, which will likely create the top player in the Japanese vaccine market, sent shares of Japan's No.3 drugmaker to a four-month closing high on Friday.

Japan has traditionally been slow to approve vaccines due, in part, to a focus on treatment of illnesses over prevention, as well as worries about the safety of vaccines developed overseas.

But the government is now encouraging the development and stable supply of vaccines as a shift towards prevention would lower overall healthcare costs, presenting a commercial opportunity for drugmakers.

"I think it is a strategically positive move," Jefferies Japan analyst Naomi Kumagai said of the venture, noting that vaccines represent only 2 percent of the 7 trillion yen ($86 billion) Japanese prescription drug market.

Daiichi and Glaxo said the venture, to be called Japan Vaccine Co, would aim to improve access to vaccines in Japan and create more combination vaccines by bringing together Glaxo and Daiichi's products and technologies.

The venture, which will launch in July, plans to initially sell vaccines already marketed in Japan by Daiichi and Glaxo, and then expand the business as new vaccines in the development pipeline are approved.

The two companies will invest a combined minimum 100 million yen ($1.2 million) in start-up costs, they said, and will split any profits equally.

Analysts at British broker Shore Capital said Glaxo was a global leader in vaccines and Japanese vaccine sales had been performing well, boosted by its cervical cancer vaccine Cervarix.

"With a birth cohort of around 1.2 million, good pricing and a comparatively underdeveloped pediatric vaccination schedule, Japan remains an attractive under-exploited geography for vaccines, particularly considering Daiichi's established local reputation," they said in a note.

Glaxo has been selling Cervarix in Japan since 2009, and has been selling Rotarix, its vaccine against the diarrhea-causing rotavirus in infants, since November.

In the financial year ended March 2011, Daiichi's vaccine sales came to about 18 billion yen ($222 million), a fraction of the company's overall sales of 967.4 billion yen ($12 billion).

Glaxo had vaccine sales of 52 billion yen ($642 million) in Japan in calendar 2011, compared with its worldwide vaccine sales of 3.497 billion pounds ($5.58 billion), said Yoshiaki Komatsu, a Glaxo spokesman in Tokyo.

The total Japan vaccine market totals some 140 billion yen ($1.7 billion), giving Daiichi and Glaxo about half based on the most recently available data.

Shares of Daiichi Sankyo surged 2.9 percent to 1,544 yen, their highest close since late October, outperforming a 0.8 percent rise in the broader market. Glaxo's shares were down 0.6 percent at 1226 GMT in London.

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