Kirin’s $870 Million Pharma Investment & ‘Fermentation Biotech’ Transformation

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Japanese firm Kirin, part of the Mitsubishi Group and best known for its brewing operations, has pledged to invest JPY 100 billion (USD 870 million) into its healthcare/pharma operations amid a slowdown in the Japanese beer market.

 

Beer Today, Gone Tomorrow

Japan’s rapidly ageing population and the effects of the COVID-19 pandemic have led to a significant drop in the country’s beer sales, with the market shrinking by one third from its peak in the mid-1990s. Against this backdrop, CEO Yoshinori Isozaki recently told the Financial Times that Kirin’s big new investment into healthcare/pharma represented a “second revolution” for the firm, having initially moved into the field with the Kyowa Kirin brand in the 1980s.

Isozaki acknowledged the challenges of bolstering a footprint in an industry outside of its core focus of brewing, noting that “If the beer segment would grow forever, it would’ve been better for us to focus on it, because making a challenge in a new business is very tough.”

However, he also pointed out that there are synergies between the two industries and trumpeted his aim to transform Kirin into “a fermentation biotechnology company,” applying some of the technologies from brewing in biopharma.

 

Profit Projections

Isozaki is bullish on what Kirin can achieve in the health sciences, targeting revenues of JPY 200 billion (USD 1.74 billion) from the sector by 2027 with a 15 percent operating margin. 2021’s figures were less than half that amount. However, sceptic investors have questioned whether such lofty goals can be achieved as Kirin shifts further away from its core business.

“As of now, the contribution to the profits from the health science part is very small,” noted Nomura Securities analyst Satoshi Fujiwara. “So, does everyone right now believe in the future potential of this business? I think the reality is that’s not quite the case.”

 

Kyowa Kirin: The View from the Ground

Although the long-term prospects of Kirin as it transitions even more towards healthcare/pharma are still unclear, the Kyowa Kirin country managers that PharmaBoardroom has spoken to in the past 18 months have spoken in glowing terms about how the company has transformed in recent years and of its strong growth fundamentals.

The firm has an overarching 2030 strategy to transition into a specialty pharma company which Claudia Coscia, southern cluster lead nephrology & country manager Italy, felt is progressing well. “The Kyowa Kirin I joined in October 2021 was very different to that which I had left in May 2020,” she reveals. “The firm’s focus was completely renewed with the creation of two main business units. The first, from which our future growth will predominantly derive, is rare diseases, mainly in onco-haematology and nephrology where two notable monoclonal antibodies based on Kyowa Kirin research are currently on the market. Very few companies of Kyowa Kirin’s size are today able to develop a molecule all the way from lab to market.”

Coscia continued, “The second franchise is Kyowa Kirin’s historical and established product portfolio, which is mainly focused on supportive care, particularly in oncology.”

“Unlike some of the larger companies in rare diseases which have a broader focus, we have dialled in our efforts on a few specific areas and aim to succeed not only in terms of competition, but also in meeting the needs of rare disease patients and of physicians working directly on these complex and challenging diseases.”

 

Culture & Purpose

Other regional leads flagged up unifying company culture and purpose as a key differentiating factor for the company. “At Kyowa Kirin, we focus on our purpose, to make people smile, and we are united by our core values of commitment to life, teamwork/Wa [a Japanese cultural concept implying a peaceful unity and conformity within a social group in which members prefer the continuation of a harmonious community over their personal interests], innovation, and integrity,” stated Myriam Hakim, general manager for the GCC countries.

Gary Zieziula, president & region head for the crucial North American market, added, “Previously, our teams and operations were very site-specific, but we have been working hard to unify and harmonize these different groups under the One Kyowa Kirin initiative. We are still in the midst of implementing the processes and systems to facilitate more collaboration across the region, but we are happy with the progress we have made.”

 

Growth Prospects

Coscia, Hakim, and Zieziula were all united in their optimism for Kyowa Kirin’s future, even before the recent investment announcement. Coscia spoke of her desire to “successfully realize the creation and delivery of value that changes lives and ultimately makes people smile” while Hakim wanted to “establish Kyowa Kirin as a reference company in the core therapeutic areas of rare disease and oncology for all involved stakeholders.”

Zieziula struck a more practical note, stating that “Overall, Kyowa Kirin is definitely punching above our weight class when it comes to our pipeline, and as our portfolio continues to grow, we are adding important commercial capabilities to be more successful in market.” He added, “I believe these efforts can help us become a multi-billion-dollar affiliate over the next three to five years.”


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