Kazuo Nakamura, President and CEO, CMIC
B&I: International media, such as the Financial Times or the Economist have questioned the implementation of the third arrow of Abenomics, however we have seen several reforms take place in the defence, agriculture and tourism sector. In your sector, we have seen the introduction of the Japan revitalisation plan closely linked to the health sector to increase productivity and life span of the Japanese population.
Abenomics has also revised the Pharmaceutical Affairs law, how did this affect the pharmaceutical industry as a whole?
Japan has the longest life expectancy in the world at approximately 84 years old, which is expected to further extend to 90 years old by 2050. I believe that the government’s universal public insurance system has helped to increase life expectancy in Japan. Japanese people have been quite fortunate to have the healthcare system, which has enabled them to enjoy long lives with limited concerns regarding personal healthcare cost.
However, the system was designed in 1961, when life expectancy was 68 years old. Some parts of the system, such as nursing, health insurance, and pensions, need to be updated because the country’s medical cost has been and will continue to rapidly rise due to the country’s aging population.
To create a sustainable system, the Japanese government has been focusing on two things – 1) improve the value per cost and 2) support the healthcare industry’s globalization to earn more tax revenues and to benefit from the larger scale of economy. This approach is well aligned with the visions of the Japanese healthcare companies, who have been focusing on the international growth.
For example, in 2014, the government announced “Strategy of SAKIGAKE”, a system to put into practice innovative medical products globally. Under the new system, the government intends to improve and accelerate the potential seeds into the actual commercial products. The government now provides support at the various clinical approval stages, including the rapid drug authorization. This shall be a good opportunity for the international health care players to view Japan as a good business partner.
We, CMIC, are proud of ourselves that, as a pioneer of the Japanese contract research organization (“CRO”) business, we have been able to contribute the Japanese healthcare system for a quarter century (we just celebrated the 25th anniversary this year) and assist 80% of the new drugs approved in Japan last year
CMIC Holdings has continuously been evolving, adapting and helping major pharmaceutical companies to provide high quality drugs and pharmaceutical products. Furthermore, across its history CMIC has been capable to compete both domestically and internationally.
Could you tell us more about CMIC’s history and its major milestones?
We established CMIC as the first CRO in Japan in 1992. At that time, the Japanese government still viewed the pharmaceutical business as too complex to be outsourced and the domestic pharmaceutical companies were still committed to the idea that the entire manufacturing process should take place internally. However, by having witnessed the significant growth of the CRO industry as well as the values the CRO’s expertise brought into the drug developments in the U.S. during the previous two decades, we believed that we could generate a meaningful contribution to the Japanese healthcare system, especially through the pharmaceutical industry. We then seriously discussed and negotiated with the industry experts and the government to launch the CRO service in Japan, which eventually took us for 5 years. In the meantime, we expanded our services to the sight management organization (“SMO”) business in 1996 and the contract sales organization (“CSO”) business to further support our pharmaceutical clients. Finally, we expanded into the contract manufacturing organization (“CMO”) business in 2005, once the business was deregulated in Japan. At the same time, we also grew our footprint outside Japan and now have offices in 10 countries in Asia and two sights in the U.S. as well as a handful of strategic partners all over the world.
In addition, our view is that as life expectancy continues to expand significantly, prevention is becoming more and more important. Therefore, we have expanded to develop our own renal biomarker business, which is now in the marketplace.
We now provide the “one-stop” pharmaceutical support services, from research, production, distribution, and all the way to post marketing surveillance, with intentions to offer business solutions to our clients rather than simply to execute the outsourced functions (“Pharmaceutical Value Creator”). We believe that our business model is especially appealing to international pharmaceutical companies seeking to enter into the Japanese market, which is the second largest with consumers who are demanding more innovative and better products from overseas.
Your company has been contributing towards improving the health of people around the world through its services, earning therefore customers trust. Hence, which would you say that are your main competitive advantages compared to other players?
Thank you for the comments. First of all, we are very glad to see the tremendous growth of the CRO industry in Japan which we envisioned at the inception of CMIC 25 years ago. We also appreciate and are very thankful of our clients for their trusts on us throughout the period and letting CMIC remain to be the industry leader.
We believe that one of our core differentiating factors is our “Pharmaceutical Value Creator” concept mentioned above. For example, other CRO companies, even the global peers, are not able to provide manufacturing, while we provide the manufacturing service as a part of “one-stop” pharmaceutical service together. In addition, with our “Pharmaceutical Value Creator” concept, we are able to support pharmaceutical companies, even an international company that is entering Japan for the first time, from the start to the end of the pharmaceutical business process.
Recently, we have moved our business model one step forward, which we call “Innovative Pharma Model.” For example, we register ourselves as marketing approval holder (“MAH”) in Japan on behalf of our clients, as it is highly critical to have a right distribution channel for the success of any pharmaceutical product even if a company obtains a manufacturing and a marketing approval in Japan and this is tough for an international pharmaceutical company without prior knowledge about the Japanese market. Therefore, by registering ourselves as MAH, we would increase our client’s strategic options and flexibility, even more than a licensing transaction.
Japan is known for creating one of the most stylish and innovative products worldwide evoking therefore, an image of reliability and quality. What potential do you see in the ‘’Made in Japan’’ concept and its services and how do you believe that the well-known Japanese Monozukuri spirit is contributing towards positioning Japanese products overseas?
First of all, as you know, Japanese consumers are highly sophisticated and demand perfection. The regulatory approvals themselves won’t meet the consumer expectations. The Japanese Monozukuri spirit has been trained and built its reputation thanks to these well-educated consumers. For example, the size of some tablets and pills sold in the U.S. are not ideal for Japanese consumers. Therefore, the pharmaceutical companies crush these drugs into smaller sizes only for the sale in Japan, even though they pass the regulatory requirements with the original sizes.
We feel that the Japanese Monozukuri sprit will also provide strong advantages for pharmaceutical products as it has done in the other manufacturing industries, including the automotive industry.
As mentioned previously, we have the CMO business since 2005 through three manufacturing sites in Japan and a new facility is under construction for injectables, which is expected to grow rapidly in the near future. In addition, we have had a manufacturing facility in New Jersey since 2007 where we have been successfully introducing our U.S. clients to our Monozukuri spirit. Our business in New Jersey has been growing nicely and we are currently considering expanding capacity.
We also believe that the detail oriented mindset represented by the Japanese Monozukuri spirit couldalso be applicable to analytical work. Japanese academia is globally quite competitive in the pharmaceutical space supported by the strong analytical skillset, as proven by the recent Nobel Prize awards to the Japanese professors. CMIC has recently established a bioanalysis lab in Chicago. As a result, we are now able to exchange data between the U.S. and Japan seamlessly.
Which legacy would you like to leave to your employees as well as to the Japanese society and where would you like to see your company in the next few years?
Thanks to our clients and employees, we have experienced a tremendous run since the inception of CMIC 25 years ago. However, in the process, we have realized the importance of sharing CMIC’s core values among our employees. Therefore, we created “CMIC’S CREED” – 1) we respect everybody’s individual life equally and support to maximize his/her personal health value within the healthcare services, and 2) to achieve this, we always challenge ourselves to find better solutions.
We would like to continue growing our business in this rapidly changing world and it is very important to swiftly accommodate ourselves according to the environmental changes. At the same time, we believe there is something we should not change, which is CMIC’S CREED.
It is more critical than ever to continuously carry over and improve our business foundations; technology, know-how, and scientific level (the artificial intelligence will play an important role shortly). However, we always need to remind ourselves that it is our people who lead CMIC and have been spending significant resources to penetrate CMIC’S CREED in our organization.
Now, the pharmaceutical industry globally has entered into the period where the pharmaceutical companies are required to evolve rapidly to adapt to new environmental changes. Our industry is facing a revolution from many business aspects. For example, pharmaceutical companies should increasingly focus on good corporate citizenship by producing drugs for those who are financially less fortunate and for those who suffer from rare diseases. If they do not, they risk being viewed as socially irresponsible, thus potentially impairing their corporate brand value.
The biggest challenge for the industry is how to revolutionize the conventional pharmaceutical commercial model into a socially-responsible pharmaceutical business model. For example, not all the pharmaceutical companies have established a viable business model, financially and/or technically, to provide off-patent drugs or to own internal R&D functions for orphan drugs, while these are quite important aspects for good corporate citizenship. With CMIC’S CREED on our mind, CMIC does have willingness and capacity to provide solutions to these pharmaceutical companies by offering comprehensive support throughout their whole value chain, including development, manufacturing, marketing and sales activities. CMIC, with our more flexible cost structure and our profitable ventures in the CMO and orphan drug spaces, could provide various solutions to these pharmaceutical companies.
For example, not all the pharmaceutical companies have established a viable business model, financially and/or technically, to provide off-patent drugs or to own internal R&D functions for orphan drugs, while these are quite important aspects for good corporate citizenship.
What final message would you like to send to our global audience?
As mentioned previously, at CMIC, we have created the “one-stop” pharmaceutical service platform in Japan through our 25year history and gradually expanded our presence primarily in Asia and the U.S. With the services offering, we are ready to support any international pharmaceutical clients entering into the Japanese pharmaceutical markets. We are also quite excited to expand our footprint further into the international markets for the next 25 years.
In the meantime, we feel that the global pharmaceutical industry is going through revolutionary changes, while the industry needs to go back to its original mission to provide healthcare services to those who are truly suffering regardless of their financial conditions. The same is true in Japan, while it will take some time for the industry to find the right balance between the corporate responsibility and the social responsibility.
We are quite excited about the current environments CMIC is in and would like contribute more to the healthcare industry than what we have done for the last 25 years, not only in Japan, but also internationally.