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Date Posted: 18:00:46 08/04/06 Fri
Author: Kyowa Hakko Kogyo
Subject: Strengthen Kyowa Hakko Kogyo’s position as a global biopharmaceutical company
In reply to: Welcome to Kyowa Hakko U.S.A. 's message, "KH, an international health ingredients manufacturer, is positioning itself to be a bio-innovator" on 06:59:25 08/04/06 Fri

o strengthen Kyowa Hakko Kogyo’s position as a global biopharmaceutical company, managers are streamlining domes-

tic and overseas operations. Kyowa’s focus is being directed toward its core areas of drug

discovery and biotechnology. Strategies are focusing on developing antibody-based biopharmaceuticals and supporting stemcell research to develop treatments for cancer and allergies. Company managers are arranging strategic partnerships with companies to improve drug-development processes. Kyowa plans to transform itself by 2004 into a holding company structure w i t h p h a r m a c e u t i c a l s a s i t s

main business. Under a new plan, Kyowa managers will restructure the company to become the new Kyowa: a biotechnology leader.

To develop products, arrange alliances, maximize its pharmaceutical business, and increase its global market share, a new drug-

development technique was developed by Kyowa and initiated at the end of 2001. The company has been able to produce antibodies with antibody-dependent cellmediated cytotoxicity on a commercial scale. This new development serves as Kyowa’s core technology in creating new therapeutic antibodies independently.

“Kyowa Hakko will take advantage of the next phase in the

development of biotechnology to be at the forefront of developing unique and effective treatments for cancer and allergies,” says Tadashi Hirata, Ph.D., president and CEO of Kyowa (kyowa.co.jp).

Dr. Hirata says antibody-based biopharmaceuticals are effective against a number of diseases and play a key role in the company’s future corporate strategy. In clinical trials, antibodies with high antibody-dependent cell-mediated cytotoxicity were shown to be more than 100 times more effective in treating disease than ordinary antibodies. Since antibody-based biopharmaceuticals have fewer side effects than traditional pharma-

ceuticals, there is a lower risk a patient’s body will react negatively to the treatments.

T h e M a g a z i n e o f P h a r m a c e u t i c a l B u s i n e s s a n d M a r k e t i n g m e d a d n e w s . c o m

September 2002

Kyowahakkokogyo

drugs in development

2001 % Chg.

($/millions) fr. 2000

•Pharmaceuticals $1,170.5 0.6%

•Liquor and food 851.6 0.2

•Chemicals 496.9 (0.4)

•Biochemicals 456.5 5.3

•Other 491.7 3.7

•Eliminations (352.4) 6.6

Net sales 3,114.8 0.8

net sales breakdown

Kyowahakkokogyo

awaiting approval

Desmopressin central diabetic insipidus

Navelbine breast cancer

phase III clinical trials

KW-9100 Helicobacter pylori infection

MM-Q01 magnetic resonance imaging

Topimax epilepsy

phase II clinical trials

KW-2170 cancer

KW-2871 malignant melanoma

KW-6002 Parkinson disease

KW-7158 urinary incontinence

phase I clinical trials

KW-4490 asthma

KW-6002 depression

Kyowa emerging Faced with difficult operating conditions in all business segments, managers are determined to raise profitability, reform the operational structure, cut costs, and aggresively market products


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Kyowa’s net sales for fiscal 2002 were ¥378.67 billion ($3.11 billion), a 0.8% increase compared with the fiscal year ended in

March 2001. Net income for fiscal 2002 was ¥5.54 billion ($45.5 m i l l i o n ) , a 4 1 . 1 % d e c r e a s e .

Earnings per share were ¥12.75 (10 cents), down 41.4% compared with fiscal 2001. Financial analysts at Daiwa

I n s t i t u t e o f R e s e a r c h L t d .

(daiwa.co.jp) say Kyowa managers have high expectations for the antibody technology. “Indeed, the new technology developed by Kyowa Hakko is likely to become a core technology applicable to a wide range of therapeutic antibodies,” Daiwa analysts say. “However, it may be some time before commercial production is seen. The next step for the company will likely be technological tie-ups with major companies at home and abroad.”

Daiwa analysts say therapeutic antibodies have had limited use because of high prices and heavy bu r d e n f o r m a s s p r o d u c t i o n because the products are proteinbased. But Kyowa’s technology could allow for therapeutic antibodies to be highly effective in low dosages. “Hence, we expect the

technology will result in more affordable-priced drugs, enabling application to a wide range of diseases and substantially reduced production costs, which are high compared with those of conventional drugs,” analysts say.

Pharmaceuticals have become the company’s main focus. The company is developing products for a wide variety of needs including hypertension, cancer, allergies, and neurological related disorders. Net sales of the company’s pharmaceutical business sector were ¥142.2 billion ($1.17 billion), a 0.6% increase in fiscal 2002 compared with the previous fiscal year. Increased research and development costs and other factors weighed down operating income from the pharmaceutical business, declining 3.1% to ¥18.9 billion ($155.5 million). By the end of March 2011, managers expect sales from Kyowa’s pharmaceutical business to have risen to ¥300 billion ($2.47 billion). The company plans to have pharmaceutical sales of ¥160 billion ($1.32 billion) by fiscal 2004.

Kyowa’s top-selling brand in fiscal 2002 was Coniel, which is indicated for treating hypertension and angina pectoris. The product’s

sales decreased less than 1% during fiscal 2002 to sales of ¥29.9 billion ($245.9 million).

Kyowa faced tougher competition in the prescription pharmaceutical sector in fiscal 2002. Several products in development are expected to eventually boost sales though, as research and development along with aggressive marketing remain the company’s top priorities.

“Looking ahead, we have a number of promising pharmaceutical compounds undergoing clinical trials in the

United States and Europe, including KW-6002, for the treatment of Parkinson disease, which we expect to drive growth in the future,” says Toshiaki Mizutani, manager of investor relations at Kyowa.

Kyowa managers say the company intends to improve its market position through the in-house development of cancer and allergy products. According to Daiwa analysts, most of the company’s drugs in development are in either Phase I or Phase II clinical trials, and new launches are not expected for at least five years. The company is projecting sales of ¥381 billion ($3.13 billion), net income of ¥5.50 billion ($45.2 million), and earnings per share of ¥12.7 (10 cents) for the fiscal year ending March 31, 2003. Daiwa analysts are predicting sales of ¥379 billion ($3.11 billion), net income of ¥5.50 billion ($45.2 million), and net income of ¥12.7 (10 cents) for the same period. In fiscal year ending in March 2003, other analysts project sales of ¥374 billion ($3.08 billion), net income of ¥10 billion ($82.3 million), and earnings per share of ¥23 (.19 cents).

Kyowa launched two products in fiscal 2002. In October 2001, Kyowa introduced Meditrans Tape, a transdermal cardiovascular drug. In March 2002, Kyowa launched Durotep Patch (fentanyl), a transdermal drug for cancer pain.

As part of its medium-term management plan, Kyowa intends to invest ¥100 billion ($82.3 million) in pharmaceutical research and development during the next three years.

Kyowa continues to build its pipeline. Two Phase IIa clinical trials were completed in February 2002 in the United States for KW-6002, for the treatment of Parkinson disease. KW-6002 is an

Med Ad News, September 2002 2

Kyowahakkokogyo

CONIEL for

hypertension

$246 million

best-selling brand


--------------------------------------------------------------------------------

A2A antagonist that provides a unique action in either monotherapy or combination therapy with levodopa or dopamine agonists to i m p r o v e t h e s y m p t o m s o f

Parkinson disease without increasing dopaminergic-related side effects or inducing or worsening dyskinesia. The compound is undergoing U.S. Phase IIb trials.

Dr. Hirata says patent applications have been submitted worldwide for use of this new class

of drugs to treat Parkinson disease. “KW-6002 has potential as a new type of Parkinson drug therapy that differs in mechanism from present dopamine related agents including levodopa, dopamine agonists and COMT (catechol-Omethyltransferase) inhibitors,” Dr. Hirata says.

KW-2871, for the treatment of malignant melanoma, has entered U.S. Phase I/early Phase II clinical studies. These studies of the chimeric monoclonal antibody are b e i n g m a n a g e d b y K y o w a

Pharmaceuticals Inc. (kyowakpi.com), a U.S. subsidiary of Kyowa. A new drug application for U.S. marketing approval of KW2871 is planned for 2007.

KW-2871 binds specifically to GD3, a cell surface antigen

expressed in 90% of melanoma cells, and exhibits anticancer effects mediated by its ability to activate the cells that can kill tumor cells and to disrupt the cell

membrane through complement protein. With selective targeting of cancer cells, monoclonal antibodies are expected to be safer and better tolerated than conventional anticancer agents available on the market.

A Phase II clinical study of KW2170, an anticancer agent, has been initiated in five countries, including the United States. The company

has plans to conduct additional P h a s e I I c l i n i c a l s t u d i e s i n

Australia, Singapore, Taiwan, and Costa Rica based on the data obtained from the Phase I clinical study in the United States. Target indications are being sought for five cancers, including nonsmall cell lung, prostate, colorectal, u t e r i n e , a n d b r e a s t . Ky ow a

Pharmaceutical Inc. is responsible for coordinating these clinical studies and a new drug application submission is scheduled for 2006.

In June 2001, KW-7158 entered Phase II clinical studies in the United States and Europe for the treatment of urinary incontinence. Estimated peak sales of KW-7158 are expected to top more than ¥60 billion ($493.5 million). To commercialize the compound as soon as possible, efforts are being made to speed development activities.

Kyowa has established relationships with several companies to advance its existing technology and to market and develop new pharmaceutical products on a global scale. The company has renewed its Phase Zero relationship with

Pharmagene Plc. (pharmagene .com). Phase Zero tools and capabilities help to validate the likely success of new drug candidates by testing them in human tissue prior to clinical trials. Kyowa has

obtained continued access to Phase Zero to test chemical and biochemical entities. “Phase Zero provides us with

more advanced information about the potential of our product in humans at an earlier stage, allowing us to make decisions about our portfolio with confidence and potentially reducing later stage attrition rates of products,” says Seiga Itoh, Ph.D., executive officer of Kyowa.

Geron Corp. (geron.com), a collaborating partner with Kyowa, is working closely to jointly develop a telomerase inhibitor compound, GRN163, for the treatment

of cancer. The partnership includes the development and marketing of telomerase inhibitors for the Asian market. Kyowa has marketing rights for certain Asian countries. Geron retains all rights in North America, Europe, and the rest of the world outside Asia.

GRN163 represents a novel mechanism for the treatment of cancer, with potentially broader utility and greater selectivity against cancer cells than other anticancer agents in clinical use. Trials are expected to be managed in the United States and Europe in a number of selected cancer types.

“Telomerase is a critical anticancer target,” says Fumio Susuki, Ph.D., executive director of discovery research at Kyowa. “An inhibitor that is effective against multiple cancers would be a very large product.”

Several products developed by Kyowa or through partnerships are ready to be marketed or are awaiting regulatory approval. Kyowa retains the right to market and sell the oral antifungal Itorizol, the

gastroprokinetic agent Nauzelin, and allergy drug Celtect. All these products were licensed by Janssen Pharmaceutica Inc. (us.janssen

.com), a subsidiary of Johnson & Johnson (jnj.com). Strategic partnerships have been formed with companies to help streamline work processes so the company can be more efficient. K y o w a h a s p a r t n e r e d w i t h

Intralinks Inc. (intralinks.com) to use digital workspaces to

simplify inter-enterprise collaboration for global drug development and licensing activities. The

workspaces enable companies to work with their external business partners to create, maintain,

and exchange documents in a secure environment. Existing sales bases in Europe and Asia are being bolstered and

September 2002, Med Ad News 3

Kyowahakkokogyo


--------------------------------------------------------------------------------

expanded, and a U.S. sales structure is planned. To improve the capabilities of creating pharmac e u t i c a l s , a p h a r m a c e u t i c a l research and planning division w a s s e t u p i n A p r i l 2 0 0 2 .

According to Mr. Mizutani, the reorganization of these operations

aims to increase their competitiveness and profitability in the long term. Through 2005, core technologies

that include antibody-based medicines, genomics, combinatorial chemistry, high-throughput screening, and molecular design will be

strengthened. Kyowa executives plan to make reforms in research and development management. In addition to its pharmaceuti-

cal business, Kyowa’s operations include chemicals, biochemicals, liquor and food. Chemical sales for fiscal 2002 totaled ¥60.41 billion ($496.9 million), 0.4% lower than the previous fiscal year due to weak demand in Japan and the slowdown in the information technology sector. Sales in the biochemicals division increased 5.3% to ¥55.4 billion ($456.5 million). Sales of the liquor and food business were up 0.2%, reaching a total of ¥103.5 billion ($851.6 million).

In November 2001, Kyowa launched a Website, Specialty Chemicals Online (sp-chem.com), t o p r o v i d e r e s e a r c h e r s a n d

corporate purchasing managers with detailed information and updates about the company’s biochemical and fine chemical products. Kyowa Hakko aims to use the site to help it market new products and tailor production to suit customer demand.

Wacker Biochem Corp. and Kyowa USA (kyowa-usa.com) have formed an alliance to market and sell Cysteine, an amino acid, in the United States, which is

marketed by Wacker (wackerbiochem.com). Kyowa Hakko USA will serve as an exclusive sales agent for Cysteine, which enhances Kyowa’s position in the amino acid market.

Kyowa has agreed to transfer its alcoholic beverage business to Asahi Breweries Ltd. (asahibeer .co.jp). This transaction will transfer low-alcohol beverages, wine, and other related products. The raw alcohol business is not included in the transfer.

Med Ad News, September 2002 4

Reprinted with permission from MED AD NEWS, September 2002. Copyright 2002 by Engel Publishing Partners. All rights reserved.

Kyowahakkokogyo

Tadashi Hirata, Ph.D., president and CEO: Kyowa Hakko’s business environment presented new difficulties. The pharmaceutical business experienced more intense competition in part due to the increased market presence of foreign companies.


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Website - http://www.kyowa-kpi.com/Kyowa%20reprint%20MAN%200902.pdf

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