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Message from the CEO

Using Innovation as a Driving Force to Benefit Patients Worldwide We will take on unprecedented challenges to achieve innovation for patients as we work toward our goal of becoming a “top pharmaceutical company.”

Steady Growth despite a Rapidly Changing Environment

Chugai’s goal is to become a “top pharmaceutical company” in the second half of this decade. Mid-term business plan ACCEL 15, which was implemented for the three years from 2013, was designed to accelerate our achievement of that goal. I am pleased to report that we met virtually all of our targets in ACCEL 15 and achieved steady growth.

However, the operating environment of the pharmaceutical industry has been changing significantly. Safety and quality regulations have been tightened while various countries have implemented measures to contain healthcare expenses. In research and development, declining success rates coupled with sharply rising costs have fueled fierce competition globally.

In Japan, expectations for healthcare-related fields are increasing, partly due to the inclusion of “innovation for the development of new drugs that will contribute to Japan’s national growth strategy” as an objective in the government’s Basic Policy on Economic and Fiscal Management Reform introduced in June 2015. On the other hand, that policy also included the new goal of increasing the market share of generic drugs to 80 percent. As for drug prices, in April 2016 an additional repricing rule was introduced for drugs with sales over ¥100 billion, and drug price revisions for three consecutive years are expected, instead of the typical schedule of every two years. These factors will make the operating environment extremely challenging for Chugai.

Strengths Established through Our Initiatives

In the strategic alliance with Roche in 2002, foreseeing to a certain extent such a series of changes in the healthcare market, Roche, Genentech and Chugai agreed to cooperate to create innovative drugs while dealing with the changes in the operating environment. As a result, the Roche Group as a whole now spends ¥1 trillion a year on research and development, one of the largest R&D investments in the global pharma industry, and the three major Roche Group companies are able to focus on activities that make the most of their respective strengths.

In this context, by concentrating investments on the areas where we have a competitive advantage, we have developed world-leading antibody engineering technologies and are among the top companies in the world in the number of patents for antibody optimization technologies. Chugai has also established powerful new discovery technologies for small molecules. In the last several years, these efforts have yielded a string of innovative new projects, with three compounds receiving breakthrough therapy designation from the U.S. Food and Drug Administration (FDA) from 2014 through 2015.

We have also established a new development model and created a structure for seamless production of investigational drugs to expedite development of multiple compounds amid intensifying global competition in development. As a result of such initiatives, we have also significantly increased the sophistication of our development and production systems. To achieve even faster global development, we amended our licensing agreement with Roche in 2014 to enable decisions at an earlier stage of the development process called early proof of concept (PoC).1 And in 2015, we established the Translational Clinical Research Division for the purpose of improving early development functions. With these initiatives, we have reformed and upgraded our global development system.

In marketing, our efforts to promote the expansion of personalized healthcare2 and contribute to coordinated regional healthcare are highly regarded and have further increased our domestic presence. Our area marketing innovations have been successful, and marketing productivity has increased about 22 percent since the start of ACCEL 15. In addition, overseas sales have increased about 11 percent, driven by growth in exports of Chugai products to Roche. We have also established a leading position in Japan in the areas of medical affairs and drug safety.

Taking on Unprecedented Challenges for the Benefit of Patients Worldwide

As I have explained, Chugai is now among the industry leaders in Japan in various functions. But we cannot be complacent if we want to continue to deliver new value to patients around the world. Advances such as innovations in information and communication technology and genome profiling technology, as well as understanding of pathological mechanisms, may well change the paradigm of research and development, so it is vital that we continue to pursue innovation through the evolution of our current strengths.

IBI 18, the mid-term business plan that started in 2016, is not simply an extension of our efforts up to now. It is aimed at bringing all of our functions to a world-class level of competitiveness. The plan contains an agenda with five priority objectives. For each of them, rather than following the lead of other companies, we will embark on a voyage into uncharted waters.

Chugai has a history of effecting unparalleled changes and carving its own path. Examples include initiating biopharmaceutical research ahead of other Japanese companies, making large investments in antibody discovery research and production, and the alliance with Roche. I am confident that we have the ability to turn unprecedented challenges into growth.

The source of this innovation and value creation is ultimately our people. We have accelerated our diversity promotion initiatives, established an organizational culture that encourages autonomous innovation, and formulated a new talent management strategy to speed up development of world-class talent.

Chugai’s idea of a “top pharmaceutical company” is being a very reliable company that provides a high level of satisfaction to its stakeholders and receives their active support. There are still many diseases in the world with no effective treatments, and people are suffering from them. Addressing unmet medical need3 by continuing to innovate for the benefit of patients is how we will realize our goal of becoming a top pharmaceutical company and raise our corporate value.

As expressed in our slogan, “Innovation Beyond Imagination,” and the name of our new mid-term business plan, we will use innovation as a driving force to benefit patients worldwide.

I would like to thank our shareholders for their continuing support and confidence in Chugai.

  1. Proof-of-concept (PoC) is a demonstration that the therapeutic effect conceived in the research stage is effective in humans. Early PoC means that in addition to safety, signs of efficacy or pharmacological effect have been confirmed in a limited number of cases.
  2. A treatment approach designed and implemented according to each patient’s unique molecular and genetic profile
  3. Medical need that is not adequately met due to a lack of effective treatments

Osamu Nagayama

Representative Director,
Chairman and CEO