Japan May Prove to Be Strong Growth Driver for AstraZeneca in 2017



Japan market trends

In 2016, AstraZeneca’s (AZN) revenues from Japan fell year-over-year (or YoY) by around 3%, mainly as a result of the mandated price reductions that companies had to bear twice in 2016, one as suggested by Japan’s Central Social Insurance Medical Council and the other due to price cuts by the Japanese government every other year. In 2016, the company, however, witnessed 2% YoY growth in sales volumes in Japan due to solid demand for Crestor, Symbicort, and Nexium. While Crestor witnessed a slight reduction in inventories by a local marketing partner in Japan, the drug managed to maintain its dominant position in the Japanese statin market in 2016.

AstraZeneca has been competing fiercely with other pharmaceutical players such as Pfizer (PFE), Merck (MRK), and Eli Lilly (LLY) in the Japanese market.

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Growth drivers

In 2016, AstraZeneca witnessed higher growth as compared to the overall Japanese market, which has helped the company climb from its 12th position in the Japan market in terms of company rankings in 2012 to eighth place in 2015 and finally sixth place in 2016. This trend is a result of primary care products and the successful launch of third-line lung cancer therapy, Tagrisso, in Japan. Tagrisso entered the Japanese market in May 2016 and had already been used to treat 3,000 patients by the end of 2016.

AstraZeneca expects to further benefit from a change in treatment guidelines for non-small-cell lung cancer (or NSCLC) in Japan. Further, the approval of Tagrisso’s companion diagnostic test, which uses either blood or tissue to detect epidermal growth factor receptor (or EGFR) T790 mutation in NSCLC patients, is also expected to boost the drug’s sales in Japan.

If these growth trends materialize as projected in 2017, it could have a positive impact on the stock prices of AstraZeneca as well as those of the Vanguard FTSE All-World ex-US ETF (VEU). AstraZeneca makes up about 0.16% of VEU’s total portfolio holdings.

In the next article, we’ll discuss AstraZeneca’s new oncology portfolio in greater detail.


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