Download An Interview with the President

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A N N U A L R E P O R T 2000
“We have worked to become a more profitable, efficient company and
to expand the sales of products that have been well received in the
marketplace. As a result, during the year under review we recorded
our highest level of operating income in the past 10 years.”
An Interview with the President
Focusing on Growth
Tanabe has faced a difficult operating environment in recent years, and the Company is aggressively implementing reforms
targeting strong growth in the 21st century. Based on the keywords of choice, decision, and focus, these reforms are aimed
at rapidly establishing a corporate organization and management structure suitable for the new age. Using these measures
to strengthen our market competitiveness and speed up our research and development of innovative new drugs is the
most important challenge that we face. During the past year, we continued to implement reforms, and they began to show
steady results.
Tanabe’s net sales declined slightly in the year under review, but improvement in
the composition of the Company’s sales led to a decline in the cost of sales. As a
result, operating income increased by a large margin, reaching the highest level in
the past 10 years, and net income also rose substantially.
Sales of key products were strong. These include fluvastatin (Lochol), an agent for the
treatment of hypercholesterolemia that was launched in 1998, as well as two products
that are the focus of intensive marketing efforts—imidapril (Tanatril), an ACE inhibitor,
and nicergoline (Sermion), a cerebral circulation and metabolism ameliorator.
To create a more profitable corporate structure, we have implemented aggressive
structural reforms, and those measures are showing steady results. Workforce
reductions have been achieved through a voluntary early retirement system, and the
number of employees, including those seconded to related companies, has been
reduced by about 500 over the past two years, to 4,439 at the end of March 2000.
In R&D, to further expedite the organizational reform measures previously implemented, we reorganized our Discovery Research Laboratory into seven departments, including Basic Technology and Biology and Pharmacology. As a result, we
have created the fundamental system needed to research and develop new drugs
more efficiently and quickly.
TANABE SEIYAKU
Tanabe’s Growth Strategies
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The Year’s Results
Build a more profitable company
by focusing resources on selected
fields and rationalizing management practices
Strengthen our core
business in ethical drugs
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Bolster our R&D system
and expand our new
drug pipeline
Reinforce our emphasis on results
and strengthen human resources
training programs
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By focusing on high-value-added operations and the promotion of
core products, centered on products developed in-house, we have
bolstered our Companywide management capabilities and made a
transition to a management constitution that can steadily generate
profits. In addition, we have reduced the number of employees by
about 500 over the past two years, and, at the end of March 2000, we
had realized our goal of 4,500 employees.
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Each of the products that have been selected for intensive marketing—imidapril (Tanatril), fluvastatin (Lochol), ecabet sodium (Gastrom), and nicergoline (Sermion)—achieved sales increases during the
year under review. The combined sales of these four products rose
16%, to ¥45.4 billion, and they were the driving force behind the
Company’s performance during the year.
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We have instituted a complete organizational reform of our Discovery
Research Laboratory, the center of our R&D activities. The result is a
flatter organization that can conduct R&D activities more rapidly. In
the new drug pipeline, we have an anti-inflammatory agent in phase I
clinical trials in Europe and are preparing to start clinical trials of ED
and diabetes agents in Europe and the United States.
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We believe that the added value created by individual employees is the
source of corporate growth. Accordingly, we have thoroughly implemented a performance-based personnel and compensation system. In
particular, in the R&D departments, we have made progress in motivating researchers by instituting an aggressive incentive system. In addition,
we have decided to introduce a stock option plan for executives.
Q.
How would you evaluate Tanabe’s
performance in the past year?
While we do not believe that an overly optimistic outlook is warranted, we are pleased
with the way in which our employees worked extremely hard during the past year and
achieved strong results in a number of key areas. The domestic ethical drug market remains sluggish under the influence of government measures to control spending on
pharmaceuticals, and in these conditions it is not possible to achieve significant improvements in performance without developing new drugs. In addition, competition between
companies is intensifying on a global scale, and pharmaceutical companies around the
world are faced with the need to research and develop new products through a process
that requires huge investments.
In this environment, we strove to make continued progress toward becoming a more
profitable, efficient company and worked to expand the sales of products that have been
well received in the marketplace. Although our consolidated net sales declined about
3%, to ¥185.1 billion, the products that we have selected for intensive marketing efforts,
such as imidapril (Tanatril), ecabet sodium (Gastrom), and nicergoline (Sermion), all
recorded favorable results. Also, sales of fluvastatin (Lochol) were set in the right direction in
its second year on the market. Our increased operational efficiency and the results of our
workforce reductions enabled us to achieve operating income of ¥20.4 billion, the highest
level in the past 10 years, as well as an increase in net income.
Q.
What is Tanabe’s strategy for
pharmaceuticals in light of the
sales trends and forecasts for the
Company’s principal products?
As I mentioned, despite the difficult operating environment, where the domestic market
for ethical drugs is contracting, we have a number of products that are steadily expanding
their sales each year. Our fundamental strategy for our ethical drugs operations calls for
increasing sales by intensively marketing these high-growth-potential products in their
target markets. Our antihypertensive agent imidapril (Tanatril) is recording steady sales
growth even though competition with new types of agents is increasing, and it now has
the second largest share of the ACE inhibitor market. Imidapril (Tanatril) is highly regarded
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A N N U A L R E P O R T 2000
“We have a number of products that are steadily expanding their sales
each year in a difficult operating environment. Our fundamental strategy for our ethical drugs operations calls for intensively promoting these
high-growth-potential products in their target markets.”
in overseas markets, and the number of countries where it is available is steadily expanding. With diltiazem (Herbesser), a calcium antagonist, and bisoprolol (Maintate), a selective
ß1 antagonist, we have three once-daily-administration antihypertensive agents with different mechanisms of action. This lineup provides us with an important competitive edge.
The market competitiveness of nicergoline (Sermion) was significantly boosted in
1998, when Japan’s Ministry of Health and Welfare completed a reevaluation of the
effectiveness of five drugs of this type, and out of the five drugs reevaluated only nicergoline (Sermion) had its effectiveness reconfirmed. Conditions in the market for cerebral
circulation and metabolism ameliorators are sluggish in general, but we expect steadily
expanding demand for nicergoline (Sermion), which acts on both cerebral circulation and
cerebral metabolism.
Q.
What are your plans for diltiazem
(Herbesser), which has been the
engine of Tanabe’s performance
for many years, and your expectations for the sales of new drugs?
Diltiazem (Herbesser), with sales of ¥23.7 billion in the year under review, continues to
make a strong contribution to our performance as our top-selling product. The year
under review was the 26th since we began sales of diltiazem (Herbesser). Even today, in
markets around the world, it is the most highly regarded drug of Japanese origin for
treating angina and hypertension. Recently, bulk exports have declined significantly due
to the sale of generics in the United States, but this decline is expected to taper off in the
next couple of years. Domestically, diltiazem (Herbesser) is influenced by National Health
Insurance drug price reductions, but we are confident that it will remain a widely used
product in the 21st century.
We will also be launching new drugs. Taltireline (Ceredist) and bepotastine (Talion)
were approved in July 2000, and we are planning to begin sales in fall 2000. Taltireline
(Ceredist), which we developed in-house, is the first oral drug for the treatment of
spinocerebellar degeneration, which has been designated as an intractable disease.
Taltireline (Ceredist) is expected to make a significant contribution to improving patients’
quality of life. Bepotastine (Talion), an agent for treating allergic rhinitis introduced from
Ube Industries, is especially effective at improving nasal obstruction. We will work to
expand sales of bepotastine (Talion) by moving quickly to get an additional indication
approved for dermatologic conditions, such as urticaria.
Q.
Would you discuss your fundamental R&D stance and the condition of your new drug pipeline?
Our fundamental stance in R&D is to strictly select promising new compounds and then
to concentrate our R&D resources in those areas. We also work to increase efficiency and
speed in new drug development by aggressively pursuing tie-ups with research institutions and companies in Japan and overseas. Progress in science and technology is moving
at a dramatic pace, and to do everything in-house from the basic research stage would
require a very large investment and considerable time. In today’s markets, we need to
clarify our development policies and our strengths, cooperate with research institutions
and companies in Japan and overseas, and thereby accelerate the research and development of new drugs. In the future, while considering strategic tie-ups with drug makers in
Japan and overseas, we will continue to focus on strengthening our R&D capabilities.
In our new drug pipeline, we currently have filed NDAs for three drugs, and we have
five compounds in clinical trials (phase II or later). Remicade (TA-650), introduced from
TANABE SEIYAKU
“We strictly select promising new compounds and then concentrate our
R&D resources in those areas. We also work to increase efficiency and
speed in new drug development by aggressively pursuing tie-ups with
research institutions and companies in Japan and overseas.”
Centocor, of the United States, is a promising drug and we have filed an NDA for
Crohn’s disease. In the United States, Centocor has received approval of an additional
indication for rheumatoid arthritis, and in Japan we are in bridging trials using the
clinical data from the United States. Its launch in Japan as an agent for treating rheumatoid arthritis is expected to improve the treatment of that disease, as current
treatment options are limited. In addition, for development candidates that we have
formulated in-house, we will increase efficiency and speed in R&D by first conducting
clinical trials in the United States and Europe. Currently, we have three drugs that have
just started or are in preparation for phase I clinical trials in the U.S. and Europe.
Q.
Finally, would you discuss the results of the structural reforms that
Tanabe has implemented over the
past several years and the Company’s performance projections?
Over the past several years, Tanabe has implemented thorough reforms targeting the
creation of a corporate constitution suitable for an operating environment that is increasingly challenging. Working to focus our resources on the achievement of higher profitability, these measures have included Companywide organizational reforms as well as
reforms to personnel systems, IT improvements, workforce reductions, and the integration of production facilities. Although the end results of these reforms have not yet been
fully reflected in the numbers, the significant progress that has been made in changing
the attitudes of our employees is worth noting. Our improved performance in the year
under review was due not only to the effect of our workforce reductions but also to the
energetic approach of our employees, which resulted in more efficient administration. In
the future, we will maintain an aggressive approach to reforms as we continue working
to improve our performance and increase corporate value.
In the current year, we expect a small increase in sales. Although there was a revision in
National Health Insurance drug prices in April 2000, our domestic ethical drug sales should
be strong due to higher sales of fluvastatin (Lochol) and imidapril (Tanatril) and to sales of
the soon-to-be launched bepotastine (Talion), an anti-allergy agent, and taltireline
(Ceredist), an agent for treating spinocerebellar degeneration. The scale of the increase will
be limited, however, by continued decline in bulk exports of dilitiazem (Herbesser).
We are also projecting a slight rise in operating income, due principally to an improved
cost of sales. We are, however, projecting a small net loss as a result of a one-time ¥34.7
billion expense to eliminate our unfunded pension liability. Although this step will affect
the bottom line in the current year, we will have significantly strengthened our management foundation and laid the groundwork for improved performance in the years ahead.
July 2000
Toshio Tanaka
President and Chief Executive Officer,
Representative Director
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