Takeda Chemical Industries, Ltd. History

Company Perspectives:

Takeda's corporate philosophy is to contribute to better health and quality of life for people throughout the world. This philosophy forms the basis of Takeda's identity, and it has not varied with the passage of time or changes in the business environment. All our activities must satisfy this criterion.

Key Dates:

1783:

Ohmiya Chobei establishes a small firm to sell Japanese and Chinese medicines.

1895:

The company establishes a factory.

1909:

Fine chemicals are added to the company's product line.

1925:

The firm begins expansion.

1937:

Vitamin C is synthesized.

1938:

The firm synthesizes vitamin B1 and markets the product under the name Metabolin-Strong; the company becomes the manufacturer of Japan's first synthetic vitamin preparation.

1952:

Takeda Food Industry is formed.

1961:

The Japanese National Health Insurance system is implemented.

1970:

By now, 10 percent of the total national production of pharmaceuticals are traceable to Takeda operations, and its business accounts for 25 percent of total pharmaceutical exports.

1974:

Due to changing Japanese laws, Takeda begins to invest heavily in research and development.

1983:

Takeda secures a licensing agreement for a cephalosporin antibiotic with Abbott Laboratories.

1985:

The firm forms a joint venture with Abbott Laboratories, forming TAP Pharmaceuticals Inc.

1988:

Tsukuba Research Laboratories is established.

1995:

Ulcer drug Prevacid is approved for sale by the FDA.

1998:

Takeda Pharmaceuticals America Inc. is established in the United States.

1999:

The firm and six other pharmaceutical concerns agree to pay $1.7 billion to settle a price-fixing class action suit.

2001:

BASF AG and Takeda form a joint venture to combine their bulk vitamin operations.

Company History:

Takeda Chemical Industries, Ltd. is Japan's largest pharmaceutical company as well as one of the largest drug firms worldwide. Until the late 1980s, Takeda's name was virtually unrecognized outside the borders of its own nation. However, with the increasing presence of Japanese companies on the U.S. market during the 1990s, Takeda's reputation gained wider recognition.

The company operates as a research-based pharmaceuticals firm with operations in over 90 countries. Its products include ethical drugs, over-the-counter (OTC) drugs, bulk vitamins, food additives, chemical products, plant protection products, animal health products, and life-environment products. During 2001, its pharmaceutical operations accounted for 75.5 percent of total sales. Some of its original products include the anti-prostatic cancer agent Lupron Depot, the anti-peptic ulcer agent Prevacid, and the blood pressure reduction product Blopress.

Takeda's corporate headquarters are located in the same city of its origins--Doshomachi, Osaka. In the mid-18th century this urban center was the focus of the nation's drug business. Ohmiya Chobei, the company founder, established a small firm in 1783 to sell Japanese and Chinese medicines. During the Meiji Era (1886-1912) the firm's products expanded to include imported medicines from the west. After the company's first factory was completed in 1895, production began on manufactured pharmaceuticals. Fine chemicals were added to the production line in 1909, and four years later a modern factory was constructed to facilitate growth.

Expansion Begins in the 1920s

From the start of the Showa Era in 1925, the company's operations expanded significantly and transformed it from a local business to a major pharmaceutical concern. An important innovation during this period of growth was the successful synthesis of vitamin C in 1937 and vitamin B1 in 1938. Takeda marketed the product of this innovative research under the name Metabolin-Strong and became the manufacturer of Japan's first synthetic vitamin preparation. During the postwar years Japanese citizens expressed a new health consciousness. A vigorous orientation toward health and hygiene found Takeda's products in great demand. By 1962, 30 percent of the nation's drug sales were generated from the sale of vitamin preparations; Takeda supplied nearly 50 percent of the total, earning the title of "Takeda of Vitamin Fame."

In the 1940s, the company changed its name to Takeda Chemical Industries, Ltd. and absorbed two other firms, Konishi Pharmaceutical and Radium Pharmacy, into its operations. The company's experience with vitamin production increased with the successful synthesis of a thiol derivative of thiamine, otherwise known as a long-acting vitamin B1 preparation. Alinamin, the brand name of this synthesized product, became one of Takeda's most popular items. In 1952, Takeda's food division was established under the name Takeda Food Industry. This division grew to include the manufacture of enriched foods, food additives and beverages. Six years later Takeda's research activity was strengthened by the completion of new laboratory facilities.

Besides the manufacture of synthetic vitamins, Takeda's pharmaceutical products included tranquilizers, treatments for nervous disorders, and antibiotics. In the food product division, manufactured items included Plussy, a soft drink enriched with vitamin C, and Ino-Ichiban, a popular condiment. Takeda's formidable expansion allowed the company to invest unprecedented amounts of money into new equipment and facilities. Even more significant was Takeda's role in the inception of the drug export trade; by exporting manufacturing techniques for Alinamin, Takeda led the Japanese pharmaceutical industry towards international expansion.

In the early 1960s, the Japanese drug industry experienced an annual growth rate exceeding 20 percent, making it one of the fastest growing industries in the nation. In addition, sweeping changes in government regulation would soon make the industry one of the most profitable. Takeda was well-positioned to capitalize on these changes; no one single industry competitor came close to challenging Takeda's preeminence in sales and marketing.

Changes in Japanese Policy Lead to Explosive Growth: 1960s

The 1961 implementation of the Japanese National Health Insurance system marked an important date for the pharmaceutical industry. Under this system the patient's prescription costs were almost completely covered by the insurance program. In addition, the official drug pricing system allowed doctors full reimbursement for the cost of dispensing drugs. This structure, therefore, encouraged the generous prescription of drugs because doctors profited from the difference between the price at which they purchased drugs and the higher official price, set by the Ministry of Health and Welfare, at which they were reimbursed. For this reason the pharmaceutical industry experienced unprecedented financial success.

Takeda's growth matched the expansion of the industry and the health insurance system. Under the leadership of Ohmiya Chobei Takeda VI, descendant of the company founder, Takeda operated as a holding company for numerous subsidiaries, including Yoshitomi Pharmaceutical, Teikoku Hormone, and Biofermin Pharmaceutical. As profits increased the company established subsidiaries in Taiwan, Hong Kong, Thailand, the Philippines, Indonesia, West Germany, the United States, and Mexico. By 1970, 10 percent of the total national production of pharmaceuticals was traceable to Takeda operations. Moreover, while Japan's industry share of drug exports remained only 2.9 percent of total sales, export figures increased 34.7 percent between 1968 and 1970 with Takeda's business accounting not only for 25 percent of total pharmaceutical exports but also for 25 percent of food additives and industrial chemicals exports.

Despite movement toward export expansion, the trade deficit in pharmaceuticals remained sizeable; as late as 1982, 80 percent of the drugs sold in Japan continued to be manufactured overseas or with technology developed abroad. It was precisely this trade deficit that compelled the government to implement changes. One cause for this imbalance was traceable to Japan's lack of strict patent laws in the industry which, in turn, made research and innovation unprofitable. To encourage the industry to be less reliant on foreign technology the government passed stronger patent protection laws and altered the drug pricing system. By establishing high prices for innovative products, the development of new drugs suddenly became a highly lucrative business. Pharmaceutical companies immediately invested money in research and development and for the first time technology began moving from Japan to foreign markets. By 1977, Japan had received 1,700 drug and related product patents in the United States alone, ranking it second among all foreign recipients of U.S. drug patents.

Focus on R&D, Licensing Agreements: 1970s-80s

Takeda participated actively in this new orientation toward innovation. Between 1970 and 1974, research expenditures increased and a new plant in Kashima was built to strengthen these efforts. The number of patents received locally and abroad for products developed in Takeda laboratories surpassed 3,000. As leadership passed from Chobei Takeda to Shinbei Konishi, the new company president made the development of pharmaceuticals a priority along with the continued expansion into foreign markets. In addition, a new food company was established with the intent of raising the company's food industry market share to 12 percent. Konishi's strategy proved successful. While the sales of vitamins increased nearly four times between 1960 and 1964, the 1970s found Takeda instrumental in developing innovative antibiotics. A majority of Takeda's $1.8 billion in sales was generated from the sale of vitamins and antibiotics in the early 1980s. By 1982, cephalosporins--a powerful third-generation antibiotic--accounted for 24 percent of Japan's domestic drug sales.

The Japanese pharmaceutical industry's increasing emphasis on research served not only to strengthen the domestic market but also to facilitate growth overseas. On the one hand, because large expenditures were now needed to support the industry-wide effort, drug companies initiated a concerted expansion into foreign markets as a means of recouping the millions of dollars necessary to develop one drug. On the other hand, Japan's innovation in antibiotics compelled foreign companies to solicit their expertise. Thus began the popular trend of securing foreign licensing agreements between Japanese drug companies and their foreign counterparts. Between 1970 and 1980, drug-licensing increased nearly four times. The enactment of the Pharmaceutical Affairs Act, effectively extending the time a Japanese company can market a drug under exclusive license, encouraged further agreements. Takeda, representing the largest of the Japanese pharmaceutical concerns, contributed largely to this increase. By 1983, the company was involved in agreements with over 20 companies, including the licensing of a cephalosporin antibiotic with Abbott Laboratories.

As industry analysts were keen to observe, licensing agreements with foreign companies were often just the first step in establishing independent foreign operations. Since agreements generally paid the licensee an initial fee and between 2 and 7 percent in royalties, a more lucrative endeavor was often pursued as a next step in securing overseas markets. Therefore, in 1985, Takeda initiated a joint venture with Abbott Laboratories where profits were split 50-50. Calling the venture Takeda Abbott Products--the named was eventually changed to TAP Pharmaceutical Products Inc.--the two partners worked to develop and market four new products, including a treatment for diabetes. Takeda's efforts to gain access to the U.S. market were not always easy. The Food and Drug Administration's long approval process often frustrated company officials. Similarly, Takeda experienced difficulty securing a U.S. producer for Nicholin, a treatment for unconsciousness caused by brain damage.

For the most part, however, Takeda's foreign expansion was successful and the company received further impetus to pursue overseas partners when the National Health Insurance system was reformed in the 1980s. By 1982, the per capita drug bill for Japanese citizens reached $95, making the Japanese drug market the second largest in the world. In an effort to halt escalating healthcare costs, the government reduced official drug prices by a total of nearly 50 percent and required elderly and insured workers to carry some of the costs of treatment. To maintain their respective market shares, companies reduced prices while continuing to allot generous sums for research. Thus foreign markets as a means of alleviating deteriorated domestic profit margins offered even greater appeal. In 1985, for example, Takeda opened a North Carolina plant to produce vitamin B1 in the United States.

Even as Takeda continued pursuing foreign ventures, domestic sales were hurt drastically by the government reforms. Two of the best selling antibiotics, Pansporin and Bestcall, were given between a 12 and 13 percent price reduction and total sales of antibiotics dropped from 18.4 to 16 percent. Similarly, vitamins, once accounting for close to 40 percent of sales, represented a mere 9 percent of the total. To ameliorate this trend, company president Ikushiro Kurabayashi shifted Takeda's domestic market orientation toward the growing population of aged people.

According to a government sponsored research study, one of every four Japanese would be at least 65 in the year 2020. For this reason Takeda's research started to concentrate on drugs for geriatric diseases. One such drug, called Avan, treated senile dementia. Having entered the market in early 1987, Avan generated ¥1 billion a month. Following Avan, Takeda planned to release an anti-osteoporosis drug aimed at treating the 4.3 million sufferers of this disease.

Takeda's research and development expenditures for 1985 reached ¥31.5 billion. This represented the highest budget allotment among all Japanese pharmaceutical companies. In 1988, the company opened its second research base, Tsukuba Research Laboratories. Aside from the drugs for geriatric diseases, the company began developing an anti-diabetic agent and a high blood pressure treatment drug. Furthermore, Takeda's research made the company a world leader in biotechnology. Due to the fact that Takeda also excelled in fermentation technology, foreign companies began to pursue this expertise as a means of manufacturing products of biotechnology on a large scale. Although company profits suffered from the changes in the health insurance program, Takeda remained on the right track to securing its position as one of the world's most successful pharmaceutical manufacturers.

International Expansion: 1990s and Beyond

During the 1990s, Takeda continued to expand its research and development efforts, secure strategic partnerships, and expand its presence in the United States. During 1991, the company launched Lansoprazole, which was used to treat ulcers. Developed along with Abbott Laboratories, the drug was approved by the FDA in 1995. Selling under names Prevacid, Ogast, and Takepron, it quickly became the firm's best-selling product.

In 1995, the firm teamed up with SmithKline Beecham PLC to research, develop, and market pharmaceuticals in the genome field. The company then formed a joint venture with Human Genome Sciences (HGS) in which Takeda received sole rights to license certain HGS products in Japan. Takeda also joined with Novo Nordisk to research diabetes.

During the mid-1990s, Japan's Ministry of Health and Welfare continued to cut pharmaceutical prices. Takeda responded to the cutbacks and increased foreign competition by restructuring its business operations and focusing on its international operations. In 1997, the company established a marketing subsidiary, Takeda UK Ltd., along with establishing a manufacturing facility in Ireland. Takeda America Holdings Inc., a holding company for its U.S. business, was also created. The following year, it purchased 100 percent interest in its marketing subsidiary in Italy as well as in France. It also created a pharmaceutical marketing subsidiary in Switzerland and a development subsidiary in the U.K.

As part of its strategic push into the U.S. market, the company created Takeda Pharmaceuticals America Inc. in 1998 as a marketing subsidiary. The move was seen by many as the beginning of its separation from Abbott Laboratories. A 1999 Crain's Chicago Business article claimed that "the bonds began to loosen in 1997 when Takeda decided not to renew a contract giving North-Chicago-based Abbott a right of first refusal to distribute Takeda's new drugs." The TAP venture secured over $2 billion in 1998, however, and $3.5 billion in 2001. By that time, it was the one of the fastest-growing pharmaceutical firms in the world. Amid speculation, Takeda held strong to its 50 percent ownership.

The company's growth into international markets did not leave it unscathed. In 1999, the firm--along with six other pharmaceutical concerns--settled a $1.17 billion class-action suit brought against them by U.S. buyers. Together, the companies had banded together to raise the prices of certain vitamins by 7 to 15 percent. Takeda pled guilty to the suit and apologized for its role in the vitamin price-fixing scandal. It came under public fire once again during 2001, when it settled a lawsuit that was filed under the Racketeer Influenced and Corrupt Organizations (RICO) Act. The suit claimed that Takeda and its TAP subsidiary failed to act when finding out that certain physicians were billing and over-billing insurance companies for the drug Lupron, when they had received the drug for free or at highly discounted prices. Takeda agreed to pay out $875 million to settle the case.

Despite its legal problems, Takeda continued to develop new drugs including Actos, an insulin sensitizer. It was sold in the United States in collaboration with Eli Lilly and Company. The company also launched its blood pressure drug, Blopress. During 2000, the firm's animal health businesses were consolidating into a new joint venture subsidiary, Takeda Schering-Plough Animal Health K.K.

Takeda also formed a joint venture with BASF AG during 2001 in which the two companies merged their bulk vitamin business to form BASF Takeda Vitamins K.K. Takeda then transferred control of its vitamin operations outside of Japan to BASF. Together, the venture controlled nearly 30 percent of the global vitamin market. Takeda also partnered with Mitsui Chemicals Inc. to form Mitsui Takeda Chemicals Inc., a urethane chemicals and composite materials firm.

Takeda's ability to develop new drugs left it with substantial profit gains. During 2001, the company posted a record profit of $2.86 billion; this was a 32 percent increase over the previous year and marked the tenth straight year of pre-tax profit increases. The company continued to focus on its research and development efforts that year. It added a new genetic research facility at its Tsukuba Research Center in Ibaraki, Japan, and also created Takeda Research Investment Inc., a subsidiary that invested in bioventure firms. With its business strategy fixed on research and new product development, Takeda appeared to be well positioned for future growth.

Principal Subsidiaries: Wako Pure Chemical Industries Ltd. (68.93%); Nihon Pharmaceutical Co. Ltd. (84.49%); Takeda Healthcare Products Co. Ltd.; Wyeth Lederle Japan Ltd. (40%); Shimizu Pharmaceutical Co. Ltd. (32.5%); Amato Pharmaceutical Products Ltd. (30%); Takeda America Holdings Inc.; Takeda Pharmaceuticals North America Inc.; TAP Pharmaceutical Products Inc. (United States; 50%); Takeda Europe Holdings Ltd. (United Kingdom); Takeda Europe Research & Development Centre Ltd. (United Kingdom); Laboratoires Takeda (France); Takeda UK Ltd.; Takeda Italia Farmaceutici S.p.A. (76.92%); Takeda Pharma GmbH (Germany; 50%); Takeda Pharma Ges.m.b.H. (Austria; 50%); Takeda Pharma AG (Switzerland; 50%); Takeda Ireland Ltd.; Tianjin Takeda Pharmaceuticals Co. Ltd. (China; 75%); Takeda Chemical Industries Taiwan Ltd. (99.88%); Boie-Takeda Chemicals Inc. (Philippines; 50%); Takeda Thailand Ltd. (48%); P.T. Takeda Indonesia (70%); BASF Takeda Vitamins Ltd. (34%); Takeda Food Products Ltd.; Mitsui Takeda Chemicals Inc. (49%); Takeda Schering-Plough Animal Health K.K. (40%).

Principal Competitors: Eli Lilly and Company; Sankyo Co. Ltd.; Schering-Plough Corporation.

Further Reading:

• "British Authorities Approve BASF Deal," Feedstuffs, July 23, 2001, p. 18.
• "Japan's Takeda Chemical Sees Record Pretax Profit For 10th Year," AsiaPulse News, November 7, 2001.
• Klein, Sarah A., "Abott Joint Venture Faces More Lawsuits," Crain's Chicago Business, September 24, 2001, p. 62.
• Mertens, Brian, "Healthy Player in a Vulnerable Industry," Asian Business, July 1996, p. 8.
• Moore, Samuel K., "Vitamins Makers Settle U.S. Civil Suit for $1.17 Billion," Chemical Week, November 10, 1999, p. 15.
• "Pharma Japan: Takeda Creates New U.S. Subsidiary to Invest in Bioventures," Chemical Business Newsbase, November 27, 2001.
• Somasundaram, Meera, "Hey, Abbott! Your Ally Goes it Alone: Takeda's U.S. Drive Starts Here," Crain's Chicago Business, March 1, 1999, p. 1.
• "U.S. Scandal Cost Drug Giant Takeda 105 Bil. Yen," Mainichi Daily News, October 5, 2001.

  Source: International Directory of Company Histories, Vol. 46. St. James Press, 2002.

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