Fujisawa Pharmaceutical Company, Ltd. History

Address:

4-7 Doshomachi 3-chome
Chuo-ku, Osaka 541
Japan

Telephone: (06) 6202-1141
Fax: (06) 6202-7926

Public Company
Incorporated: 1943
Employees: 7,700
Sales: ¥382 billion ($3.1 billion) (2003)
Stock Exchanges: Tokyo Nagoya Osaka
Ticker Symbol: 4511
NAIC: 325412 Pharmaceutical Preparation Manufacturing

Company Perspectives:

Fujisawa contributes to healthier, more prosperous lives for people around the world by exploring the frontiers of human health and disease. In pursuit of this goal, we are actively conducting business operations on a global scale in the field of health care, with particular focus on pharmaceuticals.

Key Dates:

1894:: Fujisawa Shoten opens in Osaka.
1943:: Fujisawa Pharmaceutical Co. Ltd. is incorporated.
1971:: Cefazolin, a bacteria-fighting antibiotic, is launched.
1977:: The firm establishes an American subsidiary.
1990:: Lyphomed Inc. is acquired and absorbed into Fujisawa's U.S. operations.
1993:: Immunosuppressant Prograf hits the market in Japan.
1998:: Fujisawa pleads guilty in an international price-fixing case.
2001:: Protopic, a drug used to treat eczema, becomes available in the United States.

Company History:

Fujisawa Pharmaceutical Company, Ltd. operates as one of the oldest and largest pharmaceutical concerns in Japan. The company's ethical pharmaceutical products--sold under such names as Prograf, Protopic, Funguard, Cefzon, Cefamezin, and Cefspan--are used in organ transplant, cardiovascular, respiratory, and antibiotic care. Fujisawa also manufactures over-the-counter (OTC) drugs, medical supplies, and chemicals.

Origins and Postwar Growth

In 1894, Tomokichi Fujisawa opened the Fujisawa Shoten in Osaka as a private dealership in medicinal herbs. The business expanded rapidly during the early decades of this century, its success based on the production of such widely used compounds as Camphor, a stimulant, and Santonin, a treatment for intestinal worms. Even though the company faced shortages of ingredients during World War II, it continued to prosper. It adopted its current name in 1943.

Along with the rest of the pharmaceutical industry, Fujisawa experienced unprecedented growth in postwar Japan, mainly as a producer of antibiotics. By 1961, antibiotics accounted for 10.3 percent of Japan's total drug production. Because Japan had no effective patent laws, and the results of highly expensive research and development could be easily pirated, Japanese pharmaceutical companies tended to import the technology to manufacture antibiotics and other medicines from abroad.

In its early history, Fujisawa showed an impressive ability to establish good working relations with foreign firms. In 1953, Fujisawa signed a contract with the Italian company Carlo Erba to sell a broad spectrum antibiotic, Kemicetine, in Japan. Other such licensing arrangements involved Irgapyrin, an anti-arthritic drug from Geigy of Switzerland, and a local anesthetic, Xylocaine, from the laboratories of Astra in Sweden. Fujisawa also began developing a number of successful drugs on its own--for example, Trichomycin, an antibiotic used in the treatment of candidiasis and trichomoniasis.

Besides the production and sale of antibiotics, Fujisawa was noted for its work with vitamin preparations. The pure synthesis of thioctic acid in company laboratories led to a highly successful product marketed as Tioctan. Neuvita, a longer-acting vitamin preparation, was added to the product line in 1961 after the firm developed a process to combine thioctic acid with vitamin B1. This new product, helpful in the treatment of liver disease, was well received by both physicians and the general public.

At the forefront of producing and marketing antibiotics and vitamins, Fujisawa reaped financial rewards. With antibiotics accounting for more than 10.3 percent and vitamins totaling more than 20 percent of the Japanese pharmaceutical industry's entire drug production in 1962, Fujisawa enjoyed an increase in profits that was 250 percent of its 1961 results.

In the late 1950s and throughout the 1960s, Fujisawa continued to expand its product line by moving into non-pharmaceutical items such as antioxidative food additives. The company's continued expansion in the 1960s--like that of many other Japanese pharmaceutical concerns--could also be attributed to the regulations of the National Health Insurance System established by the government in the early part of the decade. With the implementation of this program, the burden of public health costs fell upon the government, and people began to visit their doctors more frequently. With more patients, doctors prescribed more drugs. Because doctors operated their own drug dispensaries, the Ministry of Health and Welfare set official prices at which they would be reimbursed. These official prices were often higher than the purchase price: the profit involved obviously did not discourage doctors from generously prescribing drugs.

Research and Development Pays Off

Even as Fujisawa experienced record growth and profits, it continued, as did other Japanese pharmaceutical firms, to depend on foreign research and production technology. The result was a huge trade deficit between imported and exported drugs. The government, recognizing the potential of an active domestic pharmaceutical industry, implemented a number of measures to encourage export and to ensure that Japanese companies could withstand foreign competition. These measures included the tightening of patent laws and a restructuring of official drug pricing, which put innovative drugs at a premium.

Fujisawa's expenditure for research and development thereafter increased dramatically as it attempted to develop products that could be patented. Two new drugs to emerge from company laboratories at this time were Pyroace, an antibiotic, and Padrin, an antiseptic. By 1966, company profits were nine times what they had been a decade before, with newly developed products accounting for between 40 to 50 percent of total sales.

Fujisawa now looked to foreign markets as a means of recouping its huge investments in new products. A technical co-operation agreement with Delagrange in France led to Fujisawa's licensing the manufacture and sale of the drug Primperan. In the non-pharmaceutical division, the company began to export a leavening agent for baked goods. Both of these products were well received in foreign markets.

As technology began flowing from east to west, foreign companies became particularly interested in a new class of potent antibiotics developed by the Japanese. Known as third-generation cephalosporins, these antibiotics were particularly important for their ability to combat the highly-resistant strains of bacteria found in hospitals. In 1970, Fujisawa became the third company in the world to develop the cephalosporin Cefamezin. This new drug, branded Cefazolin, was introduced in 1971. A joint venture between Fujisawa and SmithKline Beckman in 1977 led to the introduction of Cefazolin and other Fujisawa antibiotics on the American market. This agreement also entitled Fujisawa to sell innovative SmithKline drugs in the Japanese market--including Tagamet, SmithKline's well-known anti-ulcer drug, and Auranofin, its popular anti-arthritic medication.

Fujisawa opened an American subsidiary in 1977 and established a London office in 1979. It was during this time that Mutsuya Ajisaka, Fujisawa's director of planning and co-ordination, outlined a new company strategy. Although much of the firm's overseas success had so far been achieved through licensing arrangements, henceforth Fujisawa would participate in more direct marketing of its products. Ajisaka also felt that antibiotics, including cephalosporins, though continuing to achieve huge sales, had saturated the market and that the company should concentrate its research in other areas. Within a few years, calcium blockers, a new class of potent drugs, emerged from Fujisawa's laboratories. These pharmaceuticals, which prevented blood vessels from constricting, were used to treat angina pectoris and hypertension.

Overcoming Hardships: 1980s and Beyond

By 1982, the per capita drug bill in Japan had reached the equivalent of nearly $100. In an effort to counter excessive profiteering and to alleviate national expenditures on medicine, the government began reducing the price of drugs. By 1987, prices had dropped 50 percent, and patients were now required to pay 10 percent of examination costs. This structural change in the National Health Insurance System almost immediately affected Fujisawa. Profits declined because demand declined. In 1985 alone the drug price decrease led to an average 5 percent reduction in demand for Fujisawa's products. Against this background, Fujisawa also found itself competing in a more crowded marketplace and suffering, with other pharmaceutical companies, increased costs for research and development.

Despite these difficulties, Fujisawa remained a strong and innovative competitor within the international pharmaceutical industry. The company introduced six new drugs in 1986, and it was strongly committed to developing a new class of drugs appropriate for Japan's growing geriatric population. One such drug, Gramalil, was used to treat psychotic disturbances in the elderly. Fujisawa was also developing an anti-tumor substance from soil bacteria, a drug that had been shown to be effective in treating leukemia and melanoma in laboratory animals.

As competition continued to heighten in the late 1980s and into the 1990s, Fujisawa made several key moves to secure its position in the industry. In 1987, it bought out SmithKline's stake in its U.S. joint venture. The company also began investing in U.S.-based Lyphomed Inc. in the 1980s. In 1990, Fujisawa acquired the drug maker in a $765 million deal. Lyphomed's operations were absorbed into the company's U.S. subsidiary, Fujisawa USA.

In 1991, the company began to focus on a promising new immunosuppressant drug used in organ transplants called Prograf. A German subsidiary was created to oversee the marketing and development of the drug, and in 1993 Prograf made its debut in Japan. It was introduced in the United States and the United Kingdom the following year and quickly became a leading drug used in liver and kidney transplants.

While the company worked to overcome the problems it faced due to deregulation in its domestic market, it dealt with bad press related to a series of scandals. In 1998, the company pleaded guilty in a price-fixing case filed by the U.S. Justice Department's antitrust division. The case claimed that Fujisawa and other leading chemical firms worked together to eliminate competition in the market for sodium gluconate--used to clean metal and glass. Fujisawa was forced to pay a $20 million fine and Akira Nakao, the executive involved, received a $200,000 criminal fine. To make matters worse, this was not the first time that Fujisawa had been involved in a public scandal. In 1983, company executives stole a rival company's data on a new drug, resulting in the arrest of several employees. Fujisawa was also forced to pay out over $100 million in damages in the early 1990s after its Lyphomed unit was found guilty of using false data to gain U.S. approval for drugs.

While these scandals tarnished the reputable image of Fujisawa, it quickly became apparent that the Japanese company had put the past behind it. In 1998, it reorganized its U.S. operations by creating Fujisawa Healthcare Inc., a unit responsible for the company's pharmaceutical business in the United States. New drugs also continued to filter out of its pipeline. Protopic, a drug used to treat atopic dermatitis, was launched in Japan in 1999, made its way to the United States in 2001, and debuted in Europe and Asia in 2002. Funguard, a drug used to treat fungal infections, was also introduced in Japan in 2002.

To better position itself to compete with international drug makers in the century, Fujisawa implemented a series of restructuring efforts that included the creation of a global management system. The company continued to respond to the changing market in Japan by focusing on research and development and global expansion. A May 2003 Business Week article summed up industry conditions surrounding Japan's drug sector, claiming that "Japanese regulators realized that the sector needed a stiff dose of competition, and in 1998, they eased rules for new-drug approval by accepting clinical data on drugs developed outside the country. This spring, they barred physicians from collecting a commission on the drugs they prescribed--a longstanding practice that led doctors to prescribe domestic drugs, which offered higher payments. The biggest shock of all will come in 2005, when Tokyo scraps the local-manufacturing regulation." (This regulation requires companies that sell drugs in Japan to also have production facilities there.)

While the next couple of years would no doubt be challenging for Japanese drug firms, Fujisawa appeared to be well positioned to succeed in Japan's changing business environment. Sales in fiscal 2003 increased by nearly 12 percent over the previous year, while net income continued its upward climb. With new drugs in its pipeline and a strategy of bolstering its ethical pharmaceuticals business, Fujisawa's future looked promising.

Principal Subsidiaries: Analytical Science Laboratories Inc.; Fujisawa Technical Services Co. Ltd.; Fujisawa Clinical Supply Co. Ltd.; FMS Co. Ltd.; Fujisawa Distribution Service Co. Ltd.; Hoshienu Pharmaceutical Co. Ltd.; Fujisawa Home Care Co. Ltd.; Fujisawa Healthcare Inc. (United States); Fujisawa GmbH (Germany); Fujisawa Taiwan Co. Ltd.

Principal Competitors: Merck & Co Inc.; Sankyo Co. Ltd.; Takeda Chemical Industries Ltd.

Fujisawa Pharmaceutical Company, Ltd. History

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Key Dates:

Company History:

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