Japan sales a tonic for Western drug firms

By Edwina Gibbs and Ben Hirschler - Analysis

TOKYO/LONDON (Reuters) - Japan's $57 billion drugs market is sparking into life for international companies as a raft of commercially important new medicines, some long-established in the West, win approval.

GlaxoSmithKline Plc (GSK.L) and Roche Holding AG (ROG.VX) both got a green light for their blockbusters Advair and Avastin on Wednesday and the Health Ministry has cheered firms with plans to speed up the approval process in future.

The shift will give international companies above-average growth and a bigger slice of the action in the world's second largest drugs market.

Japanese pharmaceutical revenues were $56.7 billion last year, representing 9.3 percent of the global total, according to pharmaceutical information group IMS Health.

But government-mandated price cuts meant sales actually fell 0.7 percent from the 2005 level and IMS only expects modest 4-5 percent growth this year.

By pushing out new products, however, Western firms should be able to beat easily that lacklustre pace.

Indeed, Glaxo's sales in Japan rose 8 percent to 860 million pounds ($1.72 billion) in 2006 and the world's second biggest drugmaker sees them breaching 1 billion pounds this year, helped by revenues from asthma drug Advair.

Dresdner Kleinwort analyst Ben Yeoh reckons the importance of the Japan franchise is being under-appreciated by investors.

NOTORIOUSLY SLOW

Up until now winning approval for medicines in Japan has been notoriously slow, with products on average coming to market four years later than when they were first sold overseas.

As a result a quarter of the 100 top-selling drugs worldwide are still not available in Japan.

But things are starting to change. Pfizer Inc.'s (PFE.N) painkiller Celebrex, for example, finally won approval in January.

Patrick Keohane, head of research at AstraZeneca Plc's (AZN.L) Japanese unit, detects a strategic shift behind the fact more drugs are reaching pharmacy shelves after years in limbo.

"I think there was a change sometime last year, a deliberate change that came from the regulators to reduce this barrier," he said.

One tangible factor has been for regulators to accept some non-Japan Asian data for pivotal drug submissions. Previously, all the clinical trial data had to be from Japanese patients.