Takeda Announces Strategic Realignment of Key GI Product Lines in China

01 Confirm the merger of two product lines

On April 6, Takeda Pharmaceutical Company Limited China confirmed to Cphi that the product lines of Pantoprazole Sodium Enteric-Coated Tablets and Vonoprazan Fumarate Tablets will be merged.

Takeda China stated that this product line adjustment does not involve significant personnel changes. The reason for the adjustment is mainly to better respond to the market environment, and it hopes to have closer cooperation in this aspect moving forward.

Vonoprazan Fumarate Tablets belong to the new drugs in the oral formulation market for peptic ulcers and are also the first potassium-competitive acid blocker (P-CAB) to be launched in China. The indication is for reflux esophagitis. It was approved for marketing by the National Medical Products Administration at the end of 2019 and officially launched in China in May of the following year. Its compound patent in China will expire in 2026. Domestic companies that have already entered the market include Shandong New Times Pharmaceutical and Sichuan Haihui Pharmaceutical.

Pantoprazole Sodium Enteric-Coated Tablets are classified as a Class B drug under China's National Medical Insurance program. They are primarily used for the treatment of duodenal ulcers, gastric ulcers, and moderate to severe reflux esophagitis.

Pantoprazole Sodium Enteric-Coated Tablets were first developed by German company Byk Gulden. China successfully produced a generic version in 1998 and subsequently approved the market entry of various formulations, including Pantoprazole Sodium active pharmaceutical ingredient, enteric-coated tablets, enteric-coated capsules, and injections.

In the fourth round of national procurement in China, Pantoprazole Sodium Enteric-Coated Tablets (40mg) and Injectable Pantoprazole Sodium (40mg) were included, with implementation starting in 2021.

Data from Menet shows that among the top 10 proton pump inhibitor drugs in the first half of 2021, the sales of injectable pantoprazole sodium exceeded 1 billion yuan. Relevant production enterprises include Takeda, Liaoning Nuowei Pharmaceutical, Hunan Jiudian Pharmaceutical, Shandong Luoxin Pharmaceutical Group, etc. The sales of injectable pantoprazole sodium in 2019 had already exceeded 6 billion yuan.

In the entire digestive system medication market, drugs for treating gastrointestinal ulcers account for the highest proportion, currently nearing 60% of the market share. In 2019, the total market value of anti-peptic ulcer drugs in China reached 43.7 billion yuan, and it is projected to grow to 106.2 billion yuan by 2026, with a compound annual growth rate (CAGR) of 13.4%.

Digestion is a traditional area of strength for Takeda, with a complete R&D pipeline covering core disease areas such as inflammatory bowel disease, celiac disease and other intestinal cavity diseases, and gastrointestinal motility disorders.

It can be seen that this adjustment is Takeda's repositioning in its key gastrointestinal field.

An executive with experience in multiple multinational pharmaceutical companies told CPhI China that merging product lines is the most common way to cut costs. Generally, products in the same major disease category, as long as they target the same group of departments and require promotion to the same group of doctors, have room for merging. After merging product lines, a company’s promotional team may shift from promoting a single product to promoting multiple products, thereby spreading out the personnel costs borne by each individual product.

At the same time, pharmaceutical companies will also reevaluate the promotion capabilities of the merged teams and reallocate the promotion markets based on the different abilities of the promotion staff —— the pharmaceutical representatives with the strongest promotion capabilities are generally placed in the most important and promising markets.

Conversely, before the overall price decline of products, patented products, due to their ample price flexibility and sufficient profit to cover the cost of promotion teams, often choose to establish independent promotion teams to pursue rapid market expansion, with no need for product line consolidation.

An industry insider pointed out to CPhI China that, in terms of the general environment, an increasing number of imported drugs in China are beginning to face a patent cliff. Moreover, generic drugs can quickly capture the market through centralized procurement in the future. At the same time, for imported drugs whose patents have not yet expired, there are many domestically produced "Me too" drugs being launched. Under the combined influence of these two factors, the overall market share of imported drugs is shrinking, and with the market becoming smaller, product line consolidation becomes inevitable.

02 Multiple Product Lines Adjusted

Takeda China mainly focuses on four major fields: gastroenterology, rare diseases, plasma-derived therapies, and oncology. Not only in the field of gastroenterology, but Takeda China has also made relatively frequent adjustments in other fields recently.

In March, Takeda China just announced the appointment of Wei Yan as the head of the oncology business. The anti-tumor field is one of Takeda's global strategic priorities, and in the Chinese market, it has multiple innovative oncology drug products such as Leuprolide, Ixazomib, and Brentuximab Vedotin. Notably, Takeda has been continuously expanding and penetrating in various business areas such as prostate cancer and breast cancer.

In the field of rare diseases, Takeda Pharmaceutical Company Limited entered as early as 2019, spending 46 billion pounds to acquire Shire, a giant in the rare disease pharmaceutical industry. Despite taking on over 30 billion US dollars in debt, it successfully became one of the top ten biopharmaceutical companies globally.

At the same time as the completion of Takeda Pharmaceutical's acquisition, a non-core asset divestiture plan worth up to 10 billion US dollars was announced, intending to sell 21 non-core assets including its old headquarters. Takeda Pharmaceutical stated to Saibailan that divesting non-core businesses or assets is an important part of Takeda Pharmaceutical’s efforts to optimize its business portfolio and operations in order to focus on these core business areas.

Takeda Pharmaceutical Company Limited's Q1 2021 financial report shows that its revenue reached 7.44 billion U.S. dollars, increasing by 3.8% year-on-year. The company plans to achieve a revenue of 47 billion U.S. dollars by 2030.

In response, Takeda Pharmaceutical Company Limited increased R&D investment and promoted the transformation of its production line.

In Takeda Pharmaceutical Company Limited's previous plans for China, the "Gather Future in China" strategy was already outlined, with expectations to launch over 15 innovative drugs in China by 2025.

Currently, Takeda has already received approval or launched several products with new indications in China, including myPKFiT®, Entyvio®, Takhzyro®, Firazyr®, Adcetris® for new indications, and Vyvgart®. Takeda Pharmaceutical Company Limited stated that by 2030, Takeda China is expected to become the company's second-largest market globally. Within five years, Takeda's compound annual growth rate in the Chinese market is projected to exceed 20%.

Dong Zecheng, Marketing Director of a pharmaceutical company in China, believes that the budget for each product line of foreign companies is more generous than that of domestic pharmaceutical companies, resulting in higher cost expenditures. As the profit margin shrinks due to centralized procurement, pharmaceutical companies often take merging product lines as the first step to maximize profits. If the overall profitability still does not improve after merging product lines, subsequent cuts or sales of product lines are also possible.

For different markets (hospital market by level, county market, third terminal, etc.), the advantage of merging product lines lies in cost reduction, while promoting products separately for niche markets is generally a standard practice during the phase when the product has strong profitability and the market needs to be expanded.

Obviously, an overly detailed promotion strategy may lead to multi-front operations and increased management costs.

According to incomplete statistics from Saibailu, in addition to Takeda, several multinational pharmaceutical companies such as Novartis, Pfizer, Sanofi, and GSK have also undergone structural adjustments recently.

Shi Wankui, Deputy Director of the Pharmaceutical and Healthcare Division of Hejun Consulting, believes that in the context of constantly changing pharmaceutical policies in China, pharmaceutical companies must adjust their strategies and operational approaches to adapt to external environments and competition. As a result, organizational restructuring and personnel adjustments have become essential.

In order to adapt to the changes in procurement and payment models represented by "soul price negotiations," "volume-based centralized procurement," and "medical institution payment models," multinational pharmaceutical companies must make adjustments in terms of costs, which has also led to changes in structure and personnel. The rise of digital healthcare and competitive models represented by the Internet and the Internet of Things (IoT) has destined that competitive advantages will develop in the direction of digitization. How multinational companies define their own advantageous territories in the future is a question that strategy and operations must consider.

From the current development of pharmaceutical companies such as AstraZeneca, the structural adjustments of multinational pharmaceutical enterprises are showing trends of low cost, digitalization, agile response, and reaching lower-tier markets, which is different from the previous pattern of high costs, big brands, and aggressive strategies.