Company in Waiting

Paramus Road in New Jersey is a construction zone, filled with cars edging their way past lots slated for shopping plazas, food joints, and industrial office parks. Along that thoroughfare-near small pharma companies like Faulding and Synaptic and just a few miles away from Roche-lies Yama-nouchi Pharma America (YPA). Like the environment unfolding around it, YPA is in the process of becoming.

Roger Graham, senior vice-president of sales and marketing; Akihiko Matsubara, president; and Robert Desjardins, MD, president of research and development, converse in the courtyard of their new Paramus, New Jersey facility.

The company now occupies several floors of a new building, a substantial expansion from one year ago. Weekly management meetings have given way to daily updates informing executives of the company's latest marketing and execution plans. Industry analysts from Merrill Lynch, Datamonitor, and Decision Resources, among others, have already published their predictions for competitive sales.

That is a snapshot of a pharma company in waiting. Having submitted their first new drug application (NDA) to FDA for the investigational compound YM905, also known as Vesicare (solifenacin), a product to treat overactive bladder, YPA executives are gearing up for the agency's decision.

"We're moving full speed ahead with prelaunch preparations," says Roger Graham, YPA senior vice-president of marketing and sales. "We're excited about the compound and energized by the opportunity. And we don't expect good things-we expect great things."

At a Glance

Vesicare may be at the crux of Yamanouchi's US expansion plans, but gaining FDA approval for the product is only the first step.

"The move to contain drug prices in Japan and the strengthening of US and European firms have made the Japanese pharmaceutical market increasingly competitive," says Akihiko Matsubara, YPA president. "In such a climate, Japanese companies need to capitalize on global opportunities." Matsubara points out that the course Yamanouchi took, like other Japanese pharma companies before it, was to establish an independent US marketing and sales organization that allowed for continued growth. By doing so, Yamanouchi can:

• gain US marketing experience so it can one day market its products without splitting profits with licensing partners

• increase returns on its R&D investments because it will have a US infrastructure from which to launch additional products

• reduce its reliance on the Japanese market

• be considered a global company.

"There is more out there than just marketing in Japan," says Michael Ferguson, a senior analyst specializing in Japanese pharmaceuticals and biotechnology for Wood Mackenzie. "Japanese companies must sell products in all markets. Global companies have special opportunities. They are likely to attract more successful products and partners and, by doing that, make more money and profit."

Yamanouchi is not the first Japanese company to set up shop in the United States, but the establishment of its US subsidiary exemplifies the wider reality of Japanese pharma companies' flight to globalization. However, it learned some lessons from the companies that came before it, like Fujisawa, Eisai, Sankyo, and Takeda.

Akihiko Matsubara

"It's interesting that Yamanouchi is going at it alone and not relying on partners," says Joanna Lawrence, a Datamonitor healthcare analyst. "By forming their own company, they can get the maximum sales profits from every product."

Yamanouchi is similar to other Japanese companies in that it will try to use globalization to carve its way out of the increasingly hostile Japanese market.

Threatened on Their Own Ground

It used to be easy to run a pharma company in Japan. Before 1983, the Japanese government prohibited foreign companies from filing new drug applications unless they had a Japanese partner.

Projected Growth rates, a comparison

"That meant Japanese pharma companies had a conveyor belt of innovative drugs coming in from Western companies to be co-marketed," says Ferguson. "They didn't need to sell anywhere else because they were doing nicely."

Groomed by government, the Japanese pharma industry thrived in a system that favored domestic producers, placed enormous emphasis on safety-sometimes at the expense of efficacy-and, because the government-run National Health Insurance (NHI) picks up the healthcare tab for the entire population, kept companies insulated from the demands of the market. "Those factors combined to create an uncompetitive industry," says Todd Clark, president of VOI Consulting and editor of the Pharma Handbook: A Guide to the International Pharmaceutical Industry.

But megamergers and generic competition spurred western pharma companies' drive for profitability, and they clamored for Japan, the second largest pharma market, to let them in. With an economic recession in full spate, the Japanese government agreed to repeal many of its protective restrictions on industry to bring investment into the country from outside, says Clark.

The Japanese Ministry of Health, Labour, and Welfare reduced the review time for new drug approvals to 12 months. In addition, it adopted the International Conference on Harmonization (ICH) guidelines in 1998. Under the old rules, companies had to fully repeat clinical trials with Japanese patients-a major barrier to entry that kept brands like Tylenol out of Japan until very recently. ICH allowed researchers to use some data from clinical trials conducted in other parts of the world in the Japanese approval process. Pharma companies needed only to complete a bridging study that showed that the product worked in the population.

Robert Desjardins, MD

"In the early days of ICH, the attitude in the United States and Europe was very skeptical," says Robert Desjardins, MD, president of YPA's R&D. "We thought, 'There is no way they can implement this stuff. It's going to be hard enough to harmonize Europe and the United States. There's no way we can harmonize Japan.'

"But it turns out that we were dead wrong. Japan implemented ICH requirements and guidances faster than we implemented them in the West. There was a recognition-typical of the Japanese, perhaps-that in the long term, this would help the Japanese pharma industry by forcing it to globalize."

Primed Pipeline

Under ICH, it was feasible for western pharma companies to launch both new products and a backlog of therapies that had not been marketed in Japan before. That increased the competition, says Lawrence, and caused "Japanese companies to feel threatened on their own ground."

In the same way that Yamanouchi seeks to market its products in the United States, Big Pharma companies may forgo contracting with indigenous companies and sell their drugs directly in Japan. Considering the dearth of NDAs at FDA during the last few years, that means growth opportunities for western pharma companies, according to Datamonitor. It remains to be seen if their growth comes at the expense of revenue for Japanese pharma companies-but it was that threat that finally ushered Japanese companies onto the world stage.

YPA Launch

"Yamanouchi is a name that is unknown in the United States as a corporate entity," says Graham. "One of the biggest challenges is to establish it among US healthcare professionals so that when YPA launches a drug, it can focus on product education and selling."

It is true that the company's products have greater name recognition than the corporate brand. Consider Flomax (tamsulosin), a well-known treatment for the symptoms associated with benign prostatic hyperplasia, now marketed by Boehringer Ingelheim. Credit for that goes, in part, to Yamanouchi's business development division which was established in the United States in the early 1980s. Yamanouchi's first agreements from that office also resulted in the licensing of future megabrands such as Cardene (nicardipine) to Syntex (now Roche) and Pepcid (famotidine) to Merck.

Parent Company

Ten years later, Yamanouchi expanded that office to include clinical development capabilities and called it Yamanouchi USA. YUSA consisted of a dozen employees-almost all Japanese expatriates-who worked closely with a clinical research organization to oversee Flomax's development. Despite being new to the agency's guidelines, that group successfully pulled together an FDA submission.

"Unfortunately, we didn't anticipate the opportunity Flomax created early enough to build a [sales and marketing] business for the company," says Desjardins. "Even though it was successful, it had to be out-licensed for marketing. It was clear to me when I interviewed here that Yamanouchi had no intention of letting that happen again."

Although Yamanouchi was one of the first big Japanese companies to arrive in the United States, it was among the last to establish a fully integrated pharma company. But it took steps along that path by creating Yamanouchi Pharma Technologies, which develops drug-delivery systems, in Palo Alto, California, in 1997 and a manufacturing center in Norman, Oklahoma, the following year. In 2000, Yamanouchi Venture Capital opened its doors with the goal of strengthening the company's investments in early-stage biotechnology companies throughout the world.

Corporate Culture

Although Matsubara, who company executives affectionately refer to as "Mat," worked at Yamanouchi's Japanese headquarters from 1977 until he came to the United States in 1999, he runs YPA with a decidedly American spirit.

Roger Graham, Jr.

"I didn't find a cultural gap between myself and the American people after I relocated," says Matsubara. "Instead, I feel right at home."

Desjardins says, "Because it is a Japa-nese company, I was concerned that it might be tightly controlled from headquarters or excessively hierarchical. But the style of management is very open and communicative and enjoyable to work in."

Graham adds, "YPA offers the best of both worlds. You are working for an organization which is just getting started in the United States, but there are vast resources to support you."

YPA executives attribute the subsidiary's independence to Takenaka's vision. "In my earliest interview with Dr. Takanaka," says Desjardins, "he said he understood that if we met the standards of product development of the US FDA, we'll meet them anywhere in the world. Certainly, the company has embraced the concept of global product development. And because FDA drives those standards, that places us in a key position here in the United States."

Desjardins adds that, although YPA will increasingly play a leadership role, the company will continue to work cross-functionally with its colleagues in Japan and Europe. After all, Yamanouchi conducts all of its discovery research in Japan, but development takes place across the globe. He says, "The ability to file applications for a new chemical entity in many markets at once speaks well of the company's coordination of its development systems and is evidence of its ability to work globally-not a trivial undertaking."

Heavy Competition

"We were very close to submitting Vesicare in Europe at the same time as in the United States," says Matsubara. "Japan was somewhat later, but in the future we will make product submissions simultaneously."

It is through such thinking that the divisions between Yamanouchi and YPA begin to melt away. "Yamanouchi products and YPA products are really one and the same," says Graham. "Right now, we want to establish Yamanouchi and Vesicare as truly global."

Product Focus

Vesicare is an ideal therapy for Yamanouchi's first US marketed product. Yamanouchi scientists discovered solifenacin in Japan, where the overactive bladder (OAB) market is not yet established. However, the company transferred development of the product to the United States, where analysts expect the market to grow as awareness of the condition increases and the stigma decreases. Graham says, "There are 17 million patients who suffer from OAB in the United States, but only 20 percent receive treatment. Part of growing that market is to get the other 80 percent of patients to seek treatment."

The Prostate Cancer Education Council reports that overactive bladder affects all ages and both sexes, although women are twice as likely as men to have the condition. The council estimates that 15–30 percent of people over the age of 60 who live at home are incontinent as well as at least half of the 1.5 million Americans who reside in nursing homes.

"It is possible that the size of the market may double over the next ten years," says Kat Neumeyer, a Decision Resources analyst specializing in the OAB market. "There is the baby boom factor. We know the marketers of drugs that target 'old age indications' are going to be very successful. A lot of that has to do with a change in attitudes about medical treatments for non-life-threatening conditions. That growth will be primarily driven by the US because it doesn't have the same issues as Europe does with pharma reimbursement cost control."

Vesicare is the first Yamanouchi therapy to have the same brand name in all markets. "There are synergisms associated with using a common trade name because most professional meetings are attended internationally," says Desjardins. "The American Urological Association (AUA) meeting in Chicago, for example, had a very heavy attendance from Europe and Japan."

Study abstracts, recently presented at the AUA and the American Geriatrics Society, found the efficacy and side effect profile favorable: once-daily administration of Vesicare reduced the major symptoms of OAB, including number of urinations, incontinence episodes, and the urge to urinate.

"There are no head-to-head studies in the United States comparing solifenacin with products already on the market, but according to Phase III data from Europe and the United States, the efficacy looks excellent," says Marc Gittleman, MD, medical director of South Florida Medical Research, who presented the drug's data at the AUA meeting in May.

Gittleman says that most OAB products' efficacies are generally in the same range and typically have the same side effects, such as dry mouth and constipation. But he notes that there is room in the OAB category because patients respond to certain drugs better than others. (See "Heavy Competition," page 46.)

Graham says the company plans to distinguish Vesicare from the other OAB products by playing to the product's strength. That is particularly true if Vesicare has a better side-effect profile than other therapies, says Dan Ollendorf, vice-president of analytic and consulting services for PharMetrics, a provider of longitudinal patient-level data. The results of a survey the company conducted of 250,000 OAB patients found that more than half the sample did not receive any pharmaceuticals. Says Ollendorf, "Physicians are reticent to prescribe prescription OAB therapies because a good many of them carry significant side effects."

Neumeyer says, even if HMOs don't cover the product, Vesicare still has the potential to make its sales mark. "Viagra is hardly reimbursed by anyone anywhere, but it is a blockbuster drug," she says. "There are certain lifestyle drugs that patients will pay for even if they are not reimbursed."

Given the stiff category competition and the fact that Vesicare will be the company's first product marketed in the United States, YPA is looking for a marketing partner to cover primary care physicians. "We will leverage our experience with the urology specialty group and pay for that out of our own coffers," says Graham. "At the same time, partnering with someone who has success in primary care helps manage the risk. It allows us to grow, rather than jump, into the marketplace."

At press time, the company had not yet announced who that partner would be. With approval expected in the first quarter of 2004, that doesn't leave much time to launch a coordinated sales effort. But Graham says YPA is spearheading all premarketing activities right now and will turn over the primary care market when they find the right partner. "We'll be fully prepared when FDA gives us the go-ahead."

The Road Ahead

Yamanouchi Pharma America has a lot riding on Vesicare. "If solifenacin is successful, they can afford to reinvest more in the United States, launch more products, and conduct more R&D, which perpetuates growth," says Ferguson. "On the other hand, if it is not successful, they won't have that revenue to reinvest. Vesicare is critical because it will give them an idea of what they can achieve. If it fails, it will set them back quite a long way."

YPA executives are confident about their ability to succeed-and lead the company into a new era. "In the next five years, I would like to establish the urology franchise and then enter into the next franchise to create an even broader and bigger phase of opportunity for Yamanouchi," says Matsubara.

That opportunity will depend on how the company harvests its products in development. (See "Primed Pipe-line," page 40.)

"From a probability of success perspective, Yamanouchi has a blend of low- and high-risk products in development ," says Desjardins. "Developing a drug like Vesicare is a tremendous challenge, but its efficacy is fairly predictable. On the other hand, we're pursuing other drugs such as the hyponatremia/heart failure vasopressin antagonist YM087.

"There are none like it on the market. There is good science behind them, but the ability to predict with certainty that those drugs will work in people is not high. Yet, philosophically, Yamanouchi has the courage, energy, and resources to go after those targets. That certainly makes our job on the science side more interesting."