Zydus Cadila exiting business in Japan

Gujarat-based drug maker Cadila Healthcare Ltd, which runs under the brand Zydus Cadila, has decided to exit all its businesses in Japan, the company announced in a stock exchange release yesterday.

It said the firm recently completed portfolio and strategy review of its business and has decided to exit from its business in Japan, which is currently handled through a wholly owned subsidiary.

Cadila has made this decision seven years after it decided to enter the Japanese market. In 2007, it acquired 100 per cent stake in Tokyo-headquartered Nippon Universal Pharmaceutical for an undisclosed sum. This was Zydus Cadila's second overseas acquisition after snapping Alpharma France in 2003.

Nippon reached out to more than 4,000 hospitals and clinics in Japan, which at that time was estimated to have a size of generic market size of $3 billion or just 5 per cent of the total pharma market in the country by value.

This was expected to provide a fillip to the group's operations in a market that is highly complex and dominated by local pharma companies.

"Going forward, I believe this acquisition will unlock value for us as generic market in Japan is just opening up and post 2010 we expect this market to be a major growth driver for our global business,” Pankaj Patel, Chairman and Managing Director, of the Gujarat-based pharma company said at that time.

In FY09, the first full year of operations after the Japanese acquisition the company generated sales of Rs 21 crore from the country. This more than doubled in the next four years and the firm’s sales in Japan rose to Rs 52.6 crore during FY13 but it remained a drain on its balance sheet clocking Rs 31 crore in loss last fiscal.

Cadila is among a string of Indian companies which have exited Japan’s pharmaceutical market. Last year, Hyderabad-based Dr Reddy’s Laboratories Ltd called off its joint venture plans with Japan’s Fujifilm Corporation citing latter’s realignment of strategy for pharma business. Last month, Orchid Chemicals & Pharmaceuticals Ltd closed down its Japanese subsidiary Orchid Pharma Japan KK.

Few years ago, Ranbaxy had also exited its Japanese JV. This happened after Daiichi Sankyo acquired majority stake in what was the country’s top drugmaker by revenues then and was seen as a natural corollary given conflict of interest in Daiichi’s home market.

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