Japan's Takeda Pharmaceutical and Israel's Teva Pharmaceutical Industries ($TEVA) have decided to form a joint venture to take advantage of the Japanese government's generic push to cut government healthcare costs.Teva CEO Erez Vigodman
The companies announced on Monday a plan to have Teva take 51% of the venture with Takeda taking the remaining 49%. The company will be independent and begin operations in 2016, the companies said in a statement filed with the Tokyo Stock Exchange.
As part of the plan for the new company, Takeda will shift off-patent sales to the joint venture and will focus instead of new-drug development, the Nikkei Asian Review reported.
Japan's national government, like many others in Asia such as China, is trying to cut healthcare costs as its population ages. This entails a shift away from brand-name pharmaceuticals to an increasing reliance on cheaper generics.
Japan wants to have generics account for at least 80% of all prescription drugs sold by fiscal 2020, the Nikkei reported, adding that Takeda, like other drugmakers, is shifting from reliance on off-patent medicines. Takeda generated about $4.76 billion in prescription drug sales in 2011 but those figures have declined in the three years after, the Nikkei said.
"As one of the fastest growing generics markets in the world, Japan is expected to continue its high growth driven by social requirements such as increased patients' needs for stable supply of affordable, high quality medicines and the Japanese government's policy of reduction of healthcare expenditures," the companies said in a joint statement.
The union is subject to government approvals, however, and its size was likely to attract close scrutiny, possibly requiring some divestitures.
Takeda and Teva said they plan to take advantage of Takeda's already large presence in Japan, its well-established distribution system and its brand reputation to "lead the high growth in the generics market in Japan."
On the same day as the Takeda announcement, Teva also announced it was selling $6.75 billion in stock to help fund its purchase of Allergan's ($AGN) generics unit, increasing its leadership in the global market well beyond Japan's shores.