Lupin announced the US$150 million agreement in August 2016, under which its Japanese subsidiary Kyowa Pharmaceutical Industry Co Ltd (Kyowa) will purchase the generics from Shionogi.

Mumbai-based Lupin is the world’s seventh largest generics pharmaceutical company (by market capitalization) and develops a range of therapeutics, including diabetes, anti-infective and central nervous system (CNS) agents. Its Japanese subsidiary Kyowa is one of the country’s fastest growing pharmaceutical companies and a market leader in CNS therapeutics, covering 94% of Japan’s psychiatric hospitals. The company the generics are to be acquired from, Shionogi, is a research-driven Japanese pharmaceutical company, which focuses on infectious disease and CNS disorders.

The 21 generics to be bought by Kyowa include anti-infectives, treatments for heart disease, anticancer drugs and CNS agents, which had combined sales of US$90 million in 2015.

The new branded product portfolio will bolster Kyowa’s existing strength in CNS agents and extend its capabilities in other therapeutic areas. The purchase will be effective on 1 December 2016, after passing regulatory approvals and satisfying closing conditions, including the transfer of marketing authorization of the products to Kyowa.

Although Kyowa is already a market leader in CNS therapeutics in Japan (especially well renowned for its ‘AMEL’ generic), the move will further strengthen the Indian company’s position in the country. Kyowa is currently ranked ninth among Japan’s generics companies, but this acquisition will move it up to sixth position.

Other Indian generics manufacturers have struggled to enter the large Japanese pharmaceutical market, which is second only to the US. For Lupin, however, this will be its third buyout in Japan (following Tokyo-based injectables firm I’rom Pharmaceutical Co Ltd in 2011 and Kyowa, acquired back in 2007). The company made around 10% of its total revenues for the 2016 fiscal year from Japan (totalling US$210 million), making it the country’s largest Indian generic drug manufacturer.

For Shionogi, the agreement will help them to refocus on innovative drug discovery, while ensuring that their existing generics continue to be delivered to patients. The company – like many other Japanese drug manufacturers – is increasingly focusing on new drug discovery and divesting its off-patent products, having recently transferred several off-patent cancer drugs to Tokyo-based generics manufacturer Nichi-Iko Pharmaceutical Co Ltd.

The Japanese market has been tough for generics makers, as customers are notoriously brand-focused. Yet, this may be about to change, as the government has set a target of reaching 80% generics penetration by 2020 – driven by the combination of an ageing population and rising health costs.

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