Pharmaceutical business
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We issued the following press releases on May 7th, 2025; 1) Notice regarding the transfer of JT Group’s Pharmaceutical Business through a company simplified absorption-type split, and 2) Notice of Change in Consolidated Subsidiary (Transfer of Subsidiary Shares).
We entered the pharmaceutical business in 1987 and since then have pursued consistent research and development aimed at creating first-in-class small molecule drugs, while maintaining stable investments in R&D. In 1998, we acquired a majority stake in TORII PHARMACEUTICAL CO., LTD. (“Torii”), consolidating it as a group company. Over the years, together with Torii, we built an integrated value chain for the pharmaceutical business, in which it conducts R&D while Torii handles manufacturing, sales and promotion activities. By maximizing synergies, the pharmaceutical business has been providing trusted prescription drugs to numerous patients globally, and complementing JT Group’s sustainable profit growth over the medium to long-term.
Unfortunately, in recent years, the environment surrounding the pharmaceutical business has been changing. In particular, the hurdle for discovering revolutionary original drugs to meet Unmet Medical Needs i.e., the medical needs for diseases that currently lack treatment, has become higher. Additionally, international competition has intensified, driven by significant investments from large global pharmaceutical companies. Furthermore, joint R&D activities of the pharmaceutical business with external partners have been gradually limited due to constraints related to the presence of tobacco products at JT.
We firmly believes that the drug discovery capabilities and expertise that it has cultivated in the pharmaceutical business remain a significant opportunity to provide valuable benefits to patients and society in the future. However, under the current structure and considering the highlighted environmental changes, it appears we are not best placed to continue growing the pharmaceutical business medium- to long-term. As a result, to ensure capabilities and benefits for patients continue to be developed, we have determined that the best option for the pharmaceutical business employees, patients, healthcare professionals and society is to transfer it to a dedicated pharmaceutical company that values both the pharmaceutical business and Torii, with a focus on new drug discovery.
In light of this decision, we have agreed to transfer the pharmaceutical business and Torii Shares to Shionogi & Co., Ltd. (“Shionogi”). Through the Absorption-type Split and the transfer of Torii Shares to Shionogi, the high drug discovery capabilities that JT Group has cultivated over the years will be preserved, and patients will continue to access trusted prescription drugs. We have also entered into an agreement with Shionogi regarding a series of transactions related to the Tender Offer for Torii Shares.
If all transactions progress as planned, the pharmaceutical business, including Torii, is expected to be classified as a discontinued operation from the third quarter of fiscal year ending December 31, 2025.
Industry overview
The global pharmaceutical market has been experiencing an average growth rate of 5.8% over the past five years, reaching approximately USD 1,599.6 billion in 2023 (up 8.1% from the previous year). While demand for advanced medicine is increasing due to heightening health awareness, population growth, and improvements to public healthcare systems, governments in various countries are tightening controls on drug prices to curb healthcare costs, against the backdrop of aging populations and budget deficits.
In Japan, the government’s promotion of generic drugs to hold down medical costs has led to an expansion of their share in the medical pharmaceutical market. In addition, drug price reductions have been implemented every year since 2021.
In addition, as unmet medical needs continue to be filled and the hurdles to new drug discovery increase, the industry as a whole is investing heavily in new drug discovery processes, led by the use of AI.
As these trends are expected to continue going forward, drug-related companies must persist in developing therapeutic drugs that address unmet medical needs, while keeping a close eye on drug pricing systems and regulatory developments in each country.
Pharmaceutical R&D, manufacturing, sales and marketing are stringently regulated in Japan and major overseas markets. Additionally, regulatory authorities globally have been reviewing new drug applications (NDA) increasingly rigorously in recent years in response to a growing imperative to ensure drug safety. Given the need to demonstrate safety in larger sample sizes over sufficiently long timeframes, clinical trials are growing in both scale and duration. Meanwhile, with required NDA documentation being internationally standardized both qualitatively and quantitatively, drug companies now commonly use a single set of data available in multiple countries for drug development, a practice that increases development efficiency and reduces costs.
Global pharmaceutical market*(USD BN)
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Copyright © 2025 IQVIA.
Calculated based on IQVIA World Review (Data Period, Year 2019-2023) Reprinted with permission
Business overview
In Japan, JT is primarily responsible for R&D operations, while Torii is responsible for product manufacturing and marketing. In overseas markets, we out-license development and commercialization rights for our compounds and receive one-time compensation, milestone payments based on development progress, and royalty income based on net sales from our licensing partners.
To realize this, the pharmaceutical business is developing innovative drugs that address true unmet medical needs from the patient’s standpoint by getting to the root of the disease, with the goal of delivering original new drugs faster than ever before to patients around the world who are suffering from diseases.
In addition to in-house research and development centered on JT’s Central Pharmaceutical Research Institute, the pharmaceutical business is promoting collaboration and networking with external research institutions, and is engaged in overseas research and clinical development based on Akros Pharma Inc. in the United States. Among our innovative new drugs developed to date are elvitegravir, an HIV integrase inhibitor and one of the active ingredients in the anti-HIV drug Genvoya® , and trametinib, the active ingredient in Mekinist®, the world’s first MEK inhibitor for treatment of melanoma.
In light of factors such as the rising hurdles to new drug discovery, the pharmaceutical business is also working on drug discovery process innovation, including the use of AI. The pharmaceutical business is focusing its R&D on the areas of “cardiovascular, kidney and skeletal muscle,” “immunology,” and “neuroscience,” where it can effectively leverage its accumulated knowledge. It has been aiming to build unique pipelines by targeting diseases with particularly high unmet medical needs.
Performance over the past five years
Although overseas royalty income declined, revenue was supported by an increase in revenue from Torii, which is responsible for the domestic market. The increase in revenue at Torii was due to significant growth in the allergy and dermatological fields. The pharmaceutical business is steadily investing in R&D to discover innovative drugs and actively pursuing in-licensing activities in the domestic market. Adjusted operating profit has remained largely stable from fiscal year 2020 to 2024, despite fluctuations in one-time compensation and milestone payments.
Revenue and adjusted operating profit(JPY BN)
Approach to sustainability
We have been pursuing the sustainability of the pharmaceutical business by creating first-in-class drugs, fostering employees’ ethical awareness and emission reduction, among others.
In 2024, the pharmaceutical business spent 33.9 billion yen on its research and development activities. As a result of activities so far, in June 2024, VTAMA® Cream 1% for the treatment of atopic dermatitis and plaque psoriasis received manufacturing and marketing approval in Japan. In addition, in September 2024, LEO Pharma A/S, our license partner for delgocitinib, obtained approval in Europe and submitted a marketing approval application in the United States for the treatment of adult patients with moderate to severe chronic hand eczema (CHE).
Case study
Pharmaceutical development leveraging patient opinions
We are promoting efforts to utilize patient opinions in pharmaceutical development.
- Calling this approach “patient centricity,” we are continuously providing relevant information to employees to ensure their understanding.
- We send thank-you letters to all clinical trial participants to express our appreciation to them for their participation.
- We are preparing a system to release Patient Lay Summaries (PLS) for the public.
Progress in FY2024
To continuously cultivate employees, expand their sense of mission and ethics to save patients, we conduct an internal awareness-raising activity called the “For the Patients Project.” We select about 10 members each year to investigate patient healthcare needs through exchanges with healthcare facilities and internal events.
Specifically, we gather information through interviews with medical specialists and university professors who are active in JT’s R&D areas, and provide that information internally on drugs that are urgently needed in the medical field. Moreover, we hold employee-participatory events and lectures to increase opportunities for employees to think about drug development from various perspectives and empathize with the patient’s standpoint.
In addition, for the purpose of providing information on clinical trials to a wide audience, information on clinical trials conducted in Japan is available on the JT corporate website.