Weighing the Trade-Offs of a Direct Presence in Japan's Rare And

Special Report Weighing the Trade-offs of a Direct Presence in Japan’s Rare and Orphan Drug Market January 2020 Contents Summary ................................................................2 Background on increasing interest in Japan among rare and orphan biopharma companies ....................3 Attractive market fundamentals at the heart of the opportunity ............................................................4 Retaining control helps avoid poor partnering outcomes and entanglements ..................................6 The market is not without its challenges ...................7 A direct presence will not make business sense for everyone ............................................................. 10 Checklist for prospective Japan entrants ................. 11 Endnotes/About the Authors ................................. 12 About L.E.K. Consulting L.E.K. Consulting is a global management consulting firm that uses deep industry expertise and rigorous analysis to help business leaders achieve practical results with real impact. We are uncompromising in our approach to helping clients consistently make better decisions and deliver improved performance. The firm advises and supports organizations that are leaders in their sectors, including the largest private and public sector organizations, private equity firms, and emerging entrepreneurial businesses. Founded in 1983, L.E.K. employs more than 1,600 professionals across the Americas, Asia-Pacific and Europe. For more information, go to www.lek.com. 1 Summary Japan has long sought to foster an attractive market for orphan you consider the benefits of avoiding entanglement with a drugs, with specific provisions made to encourage the development partner and the challenges of managing relationships with of therapies for rare and orphan diseases as early as 1972.1 The potential licensing partners. measures and incentives that followed made the orphan and rare • But setting up a direct presence in Japan is not for model economically viable in Japan, yet companies operating in everyone. Some disease areas and molecule types are going the space typically addressed the market through local partners to face unfavorable volume and/or pricing dynamics that will rather than establishing local operations themselves. In recent make the business case for direct entry untenable; companies years, however, there has been a marked uptick in the number of may lack the pipeline depth to warrant a direct presence; rare and orphan companies establishing direct presences in Japan some companies will simply struggle to find the bandwidth to to steward their pipelines through development and to the market, make Japan a priority relative to other geographies. with many more considering doing the same. • The market landscape is also in flux, which inevitably Why is this happening? And what does it mean for executives and entails risk in decision-making. Pricing and access are rare and orphan-focused biopharma companies considering their often the greatest concerns, although the downside for the international strategy? rare and orphan market appears much less than in other major markets. For novel molecules, especially for gene and • Japan in general has strong fundamentals that make it cell therapies, the regulatory landscape is still taking shape an attractive market for rare and orphan companies to and, as with other major markets, the reimbursement system set up a direct presence. These include sizable underlying does not yet seem well suited to pay for transformative, one- patient populations, relatively attractive pricing, favorable time cures. market access, a streamlined regulatory system, and generally strong awareness of rare and orphan diseases, as well as • As such, careful analysis and planning are necessary supporting infrastructure to aid diagnosis, treatment and to guide a thoughtful entry strategy and subsequent ongoing management of patients. operationalization. • As such, for many rare and orphan companies, a direct For further information on this Special Report and its findings, presence in Japan is a viable option, even at the point please contact [email protected]. of first launch, and a means to capture the significant value offered by the Japan market. It is all the more so when 2 Background on increasing interest in Japan among rare and orphan biopharma companies For all but the largest pharmaceutical companies, the typical are expected to become increasingly prominent in the coming Japan strategy had until recently been to license development years, especially in the arena of pricing and access (see Figure 2). and commercial rights to a Japanese counterpart and focus attention elsewhere. Some midsize companies — such as UCB and As explained below, success in the nearer and longer term is Lundbeck — have experimented with “Japan-lite” entry models contingent on developing a localized strategy and capability set, whereby they have gradually increased their commitment over well equipped to demonstrate and communicate the value rare and time, but in general, companies of an equivalent or smaller size orphan drugs bring to patients, their caregivers and broader society. have tended to keep away. Figure 1 Around 10 years or so ago, this trend began to shift, most Timeline of entry dates of select rare and orphan companies notably for companies focused on rare and orphan diseases. Larger companies, such as Biogen and Shire, which both had a Shire Insmed G.K. Japan K.K. long presence in other international markets, established Japan Established in Established 2019 subsidiaries in the early 2010s in support of their rare and orphan in 2013 Amicus Sarepta assets. Subsequently, smaller companies, starting with Alexion Aegerion Therapeutics Therapeutics and now including others such as Alnylam, Amicus, Insmed and K.K.* K.K. K.K. Recordati, have set up an on-the-ground presence with the intent Established Established in Established in in 2013 2016 2019 of developing and commercializing their portfolios in Japan by themselves. The rate of entry has been increasing as the strategy has become increasingly validated, with many rare and orphan companies prioritizing Japan second only to the U.S. (see Figure 1). Biogen Alexion PTC Recordati Rare Japan Ltd. Pharma Therapeutics Diseases Japan K.K. What is behind this trend? In part, it is the consequence of Established G.K. Japan K.K.* Established in 2018 regulatory harmonization with other major geographies and in 2000 Established Established in in 2008 2015 Alnylam Japan K.K. relatively attractive pricing. However, other compelling factors in Established in 2018 play explain Japan’s pull on rare and orphan drugmakers. All the *PTC Therapeutics and Aegerion have exited Japan same, the market is not without its challenges, and some of these Source: Company websites; L.E.K. research and analysis Figure 2 Japan rare/orphan market SWOT analysis Strengths Opportunities • Large underlying population • Continue to value innovation, drugs for orphan and rare conditions • Streamlined and harmonized clinical, regulatory pathway • Existing pricing mechanisms award attractive prices to gene therapies • Generally attractive pricing • Redenition of manufacturer’s role in supporting institutions with redesign of • Market access relatively simple processes related to delivery • Established rare/orphan “system” • Development of home health infrastructure will enable streamlined monitoring and follow-up • Key opinion leaders (KOLs) receptive to new, innovative therapies • Patients becoming more engaged in care decisions • Ecosystem of distributors supporting cell/gene therapies Weaknesses Threats • Language barrier, cultural differences • More stringent interpretation of existing pricing rules (e.g., health technology • Interpretation of some regulatory steps for new molecules ambiguous assessments) • No purpose-built pricing mechanism for gene therapies • Redesign of pricing system that makes gene therapies untenable • Diffuse treatment landscape • Interpretation of regulation becomes burdensome • Lack of home health infrastructure • Ability to effect required process change inside/outside of hospitals remains limited • Limited role of manufacturers in driving change in hospital • Home health infrastructure remains limited • KOLs, advocacy bodies can be challenging counterparts 3 Attractive market fundamentals at the heart of the opportunity At the heart of industry’s interest in Japan’s rare and orphan the cost and time required for Japanese development. In rare market are attractive market fundamentals: a government and and orphan disease treatment, this has enabled manufacturers society long committed to providing world-class care to patients to include very few Japanese subjects as part of global trials, with rare and orphan diseases, a generally attractive underlying increasing the practicality and efficiency of Japanese development. volume opportunity, low barriers to entry, preexisting infrastructure Orphan designation offers further benefits, including faster review to support rapid uptake, and favorable pricing. times, tax benefits tied to research and development expenditure and longer market exclusivity compared to non-orphan drugs. Specific factors to note are discussed below. Furthermore, two new regulatory pathways — the regenerative A relatively large underlying patient medicine path and the conditional approval path — offer opportunity alternatives for companies wishing to launch as quickly as possible in Japan, although neither

Load more