Article | December 19, 2024

Spotlight on Japan: A supportive government but market share declines

By Andrew Warmington, Manufacturing Editor | Citeline

Ian Haydock, Editor-In-Chief, APAC | Insights

Lisa Takagi, Managing Editor, APAC | Insights

In a series exploring trends across the APAC region, Norstella’s subject matter experts from key biopharma hubs delve into this year’s standout developments and share their outlook for 2025. Andrew Warmington, Manufacturing Editor at Citeline, spoke to Ian Haydock, Editor-In-Chief, and Lisa Takagi, Managing Editor at Insights in the APAC region, about key developments this year in Japan and their outlook for 2025

How would you describe the current clinical trial landscape in Japan and what major trends have you noticed in the last year?

Ian Haydock: A new white paper from Citeline on clinical trials in APAC shows that the number of Phase I-IV trial starts in Japan fell by a 5% compound annual growth rate (CAGR) over the period 2019-2023.¹ While this was partly a reflection of global trends and a slowdown after COVID, it may also point to other factors, like a falling number of pipeline drugs and the attractiveness of the Japanese market to foreign firms. There might be fewer drugs under development in Japan by foreign companies. We had around 700 trial starts in Japan 2023, which accounts for about 11% of the total across APAC. Oncology led the way in total over the 2019-2023 period. There are no figures for 2024 yet, but I think oncology will have stayed top. While Japan remains a key location for clinical trials, China is emerging as a leader both in APAC and globally, and I think this is being helped by a vibrant R&D scene. A lot of new drugs are under development in China and there is a very supportive regulatory environment.

Lisa Takagi: On the positive side, Japan has been adopting more flexible regulatory requirements around the acceptance of foreign clinical data. And there has been a recent change, reducing the need for local Phase I trials, which was recognised as one of the challenges for foreign companies to enter the Japanese market. In addition, Japan has been planning or implementing several measures to ease the pathway of trials and submitting medical data. For example, the government has been trying to address the so-called ‘drug loss’, which has meant that some globally important products did not enter the Japanese market. It is trying to ease these pathways by connecting foreign ventures to trial sites and potential Japanese partners. The government has also now decided to lift some of the clinical direct data requirements, especially around rare disease drugs, because it is very hard for companies to get this data and for some of them the number of patients is very limited.

What were the most significant Japanese drug/device approvals or milestones reached in 2024?

Lisa Takagi: Significant approvals included two new drugs for Alzheimer’s disease, Biogen’s Leqembi in December 2023 and Lilly’s Kisunla in November 2024. The launch of Kisunla was another milestone for Japan, to tackle ever rising nursing costs in a rapidly ageing society. Another was global first approval of Kostaive, the self-amplifying mRNA vaccine for COVID-19. This was discovered and developed by Arcturus, a US bioventure, but it was first approved in Japan and launched here by Meiji Seika. Several domestic candidates for rare disease also had their global first approval, including Acenobel by Nobelpharma for distal myopathy with rimmed vacuoles and Eisai’s Rozebalamin for amyotrophic lateral sclerosis (ALS). ALS is a non-curable disease in Japan with a relatively large number of patients compared to other rare diseases, and local patient groups were demanding other therapeutics. Acenobel was developed at the request of a local patient group and a national psychiatric hospital.

What new or ongoing drug development challenges will Japanese pharma and biotech companies face in 2025?

Ian Haydock: I think biotech funding will continue to be a major challenge, as it has been for decades in Japan. Some major local investors, such as banks, remain relatively risk-averse to the biopharma sector, essentially because of the time and cost of developing new drugs, although some government funding support schemes are available, and the government has been increasing its support over the past few years for bioventures. We have seen multiple major Japanese pharma firms make substantial staff cuts this year, thousands in total, as they look to cut costs, reorganise pipelines, and anticipate major patent expiries. The yen has been very weak for quite some time now and it seems likely to continue. This is a double-edged sword in that Japanese companies like Takeda, with major overseas revenues, particularly in the US, are seeing their reported revenues in yen increase, but they are also seeing higher costs in yen terms.

Lisa Takagi: The weak yen is good news for Japanese firms selling their products mainly in the US, but it is also very bad at home because it is increasing the costs of developing products in Japan. Another issue is reimbursement pricing cuts by the National Health Insurance (NHI) system. In general, this covers 70% of the price of pharmaceutical products, sometimes more, but because Japan is cutting these prices year by year, it is putting at risk the profit models of many pharmaceutical companies and discouraging the launch of new and innovative products like Leqembi, Kisunla, stem cell therapies, and CAR-T cell therapies. These have already been recognized as a huge challenge for the NHI system and pricing cuts look inevitable in the near future. Although the government has expanded funding support for local ventures, it has rather shifted its focus overseas to introducing multiple measures to fund and support the development of new drugs in Japan.

What Japanese M&A deals is the industry most anticipating in the year ahead?

Ian Haydock: As yet, we have not heard any big rumours or predictions, but there might always be a surprise. In general, outside the biopharma industry, we are seeing a lot more activity from overseas activist investors in major firms in Japan. The Japanese government is also promoting M&A activity in general, including foreign direct investment (FDI), through new guidelines that were issued in mid-2023. There is a combination of factors that may also apply to the biopharma industry. Theoretically, this might create a scenario where domestic firms could join forces themselves if they are facing, for example, a potential foreign acquisition. We are seeing a lot of activity in general across different industries from foreign private equity (PE) in Japan. They are becoming much more active and assertive, and they are making some quite large investments in some sectors, so we might also see some action in the biopharma industry. There may potentially be a scenario where a foreign PE firm takes a position in a pharma company and some of the mid-sized Japanese companies may be candidates for that kind of activity, but that is just pure speculation on my part.

How do you see the Japanese pharma market growing over the next year? What would you say is the top priority for this sector?

Lisa Takagi: One of the very important issues to be prioritized is the recovery of generic drug supplies, especially essential drugs such as antibiotics and cough suppressants. These have been in short supply for a couple of years. For instance, there is a shortage of Anapeine, a local anesthetic from Sandoz. It was caused by tech transfer to manufacture the product in Japan that took longer than expected. Surgery is obviously a vital part of the country’s medical services and is facing huge impacts. Assessing the realistic balance of demand, cost, and drug supply capabilities for Alzheimer’s disease might be another priority, because marketing has just started, and it is expected to grow further.

Ian Haydock: Looking ahead to the growth prospects for the Japanese pharma market, in general we see it as being mature and flat. The government will continue its long-established policies to control drug prices within rising total medical costs, which are going up as the population rapidly ages. Generic drug shortages have been a problem for a while, and they will probably continue, due to ongoing quality problems that have reduced supplies of certain drugs. The companies making some of those drugs are often producing a large number of small-scale products. This is often not very profitable, so they are facing a number of challenges on the generics front. Worldwide, the obesity sector is seeing explosive growth, but in Japan the growth is probably not going to be as huge. The definition of obesity is slightly different here and there is a lower incidence of it. Novo Nordisk’s Wegovy was approved in 2023 but sales through the NHI system are only expected to peak at around $210 million in 2027. Lilly’s Mounjaro is forecast to peak at around $238 million in around 2032. Those are relatively modest figures compared to the rest of the world. The other factor in the equation is that these are sales through official prescriber reimbursement channels but there is a grey market for those products as well, which is obviously very difficult to quantify.

Lisa Takagi: There is a big market for these obesity drugs in Japan because there is a huge desire, especially among girls, to lose weight. When GLP-1 agonists are used for diet purposes, it is not officially recorded, but they have been marketed a lot. In the last couple of years, there has been a shortage of GLP-1s for diabetic patients because the demand is so huge for out-of-pocket use for dieting.

How can partnering with Norstella help organizations gain a competitive edge in the Japanese market?

Ian Haydock: The Insights business and our publications, including Scrip and Pink Sheet, focus on providing subscribers with unique and original content, which is designed to enhance understanding of developments across the spectrum of the biopharma industry, covering discovery right through to R&D, clinical trials, commercialization, and post-marketing. Policy and regulatory coverage is another big part of what we do. It helps companies understand the regulatory environment they are operating in and how new regulations are going to be applied.

Lisa Takagi: We really try to go behind the headline to add perspective and context. We are building on the contacts and knowledge of the team, and also, where appropriate, we leverage other Citeline and Evaluate products for data and expert comment in the story. I think this helps our readers gain a deep understanding of the markets they operate in, including the background and context, enabling them to better compete in Japan, while the group presence helps us to gather valuable information.

How does Japan differentiate itself from other APAC countries in the clinical trial space?

Lisa Takagi: The integrity of trial data and the organised manner of decentralised and centralised trials, the high quality of domestically manufactured candidates, especially in the cell and gene therapy space, where the demand for high quality is especially high – these have all been recognised as outstanding assets in the domestic clinical trial space.

Ian Haydock: The high quality of clinical work and investigators in Japan has long been established and recognised, although costs can be relatively high compared to some other countries. As we have seen from the rapid emergence of China as a regional and global trials powerhouse, it does require a commitment to streamlining and speeding up regulatory pathways, along with a vibrant domestic R&D environment to create a full ecosystem that is attractive to developers. The quality of investigators and sites in Japan is very high but China is overtaking it and the total amount of clinical work that has been conducted in Japan over the past five years or so has declined.

Are there any other trends and issues that you would like to highlight?

Lisa Takagi: The regulatory shift could be mentioned. The Japanese market is behind a language wall, but recently the government has been trying harder to address this issue by, for example, opening the Washington, DC office of the Pharmaceuticals & Medical Devices Agency (PMDA) to operate in English or allow approval for filing documents in English without any need to translate it into Japanese. Japan is at least trying to lower the wall to entering the market and the clinical trial space from foreign countries.

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