In this tough operating environment, Chugai has established unique strengths that have enabled it to achieve continuous innovation. The foundation supporting these strengths is the strategic alliance with Roche, a unique business model that enables us to maintain autonomy as a publicly traded company while also being a member of the Roche Group.
In terms of drug discovery, the Roche Group as a whole spends about ¥1 trillion a year on research and development, and has a framework that enables the three major Group companies – Roche, Genentech and Chugai – to focus on activities that make the most of their respective strengths. As a result, Chugai has established world-leading antibody engineering technologies, and in addition to acquiring infrastructure for small-molecule discovery, we have taken on the challenge of establishing next-generation technologies for creating middle-molecule drugs.
In development and production, we now have the ability to quickly move multiple compounds through development. We have built a global development system that allows us to concentrate our resources on earlier stages of the development process up to early proof of concept (PoC),＊3 with a view to late-stage global development in collaboration with Roche. In marketing, our efforts to promote personalized healthcare＊4 and the coordination of community care are well recognized and have further increased our presence in the Japanese market.
We have achieved solid growth over the 15 years of the alliance: Chugai's revenues, operating profit and market capitalization have roughly tripled. In 2002, there was some concern over this alliance, which was an unprecedented arrangement at the time, but today the success of the alliance is shared with stakeholders, and I am very pleased that they appreciate its value.
Now that we have built these unique strengths and the infrastructure for growth, our challenge is to generate further innovation. The environment surrounding the pharmaceutical industry is likely to become increasingly severe, and the emergence of disruptive technologies＊5 such as artificial intelligence and the Internet of Things, as well as the entry of companies from other industries, could dramatically change approaches to drug discovery.
In IBI 18, our mid-term business plan that began in 2016, we are working to bring all of our functions to a world-class level of competitiveness. At the outset of IBI 18, I shared with all employees my decision to “embark on a voyage into uncharted waters.” In the first year of the plan, we took on new challenges in many of our business activities.
We achieved significant results in 2016 despite an average 5.5 percent reduction of National Health Insurance (NHI) drug prices for our products. Development of future key growth drivers emicizumab (ACE910) and atezolizumab (RG7446) progressed smoothly, and we concluded agreements to out-license SA237 and CIM331, both of which Chugai had been developing globally.
To support future growth, we acquired land in Yokohama, the first step in establishing a core base for research and development. We also concluded an agreement for comprehensive collaboration with Osaka University Immunology Frontier Research Center (IFReC).