Chief Strategy Officer / Japan
Three decisions that declined revenue for a reason
- Annual revenue
- ¥38.6bn
- Year ended March 2026; contract manufacturing for 58 pharmaceutical companies
- Products manufactured
- 420
- Tablets, capsules, topicals and oral liquids across two plants
- Employees
- 1,240
- Plants in Toyama and Ishikawa prefectures and head office
Decisions & consequences
01Taking nine of twenty-three transferred generics and charging for their validation
In spring 2021, after prefectural authorities had suspended operations at several generic manufacturers, five customers asked us to take over 23 products within a year. Our sales team valued the opportunity at ¥4.1 billion of annual revenue. The Toyama solid-dose plant was already scheduled at 81% of practical capacity, and every transfer needed validation batches, stability studies and an approved change of manufacturing site before we could supply a single pack.
The head of sales argued for accepting at least fifteen products, and one outside director asked whether refusing customers during a national shortage was defensible. I shared the concern; I had seen shortages from a dispensary. But our head of quality assurance told us her team could absorb the documentation and investigation work for about ten transfers without delaying existing customers. Promising more would have put the supply we already provided at risk.
I proposed criteria rather than a number: the clinical consequence of a gap, fit with validated equipment, and the customer's willingness to fund validation and commit to a five-year term. Nine products met them. Customers paid ¥240 million towards validation, between ¥18 million and ¥35 million per product. We declined fourteen, suggesting other contract manufacturers for several, and two long-standing customers moved work elsewhere as a result.
All nine products were approved and in supply by September 2023. They earned ¥1.8 billion in the year ended March 2026, against the ¥4.1 billion first discussed, so we gave up about ¥2.3 billion of annual revenue. Plant loading rose to 88% without an increase in overdue investigations, and none of the nine has left. The criteria became our standard for transfer requests.
What I would do differently is speed. We took eight weeks to tell customers which products we had declined, because I wanted the analysis complete. Those weeks mattered to customers searching for alternatives. Next time I would give a provisional answer within two weeks, naming the products unlikely to fit, and confirm the remainder later.
Declining a ten-year exclusive contract from our largest customer group
In 2023 two of our generic customers merged as Kurenaigawa Pharma Holdings. Together they provided 21% of our revenue. Within months the new group proposed moving 64 products to us under a ten-year exclusive agreement, with our prices reduced each April by the average NHI cut on those products. Accepted in full, the proposal would have lifted the group to about 39% of our revenue.
Our president was inclined to accept, and our chief financial officer valued a decade of predictable volume. The plant director liked the scheduling simplicity of one large customer. I recommended against the agreement as drafted. Automatic reductions linked to NHI revisions would pass the full effect of public pricing to us while our labour, energy and material costs were rising. Ten years of exclusivity would also leave us exposed if the merged group later reorganised its production or changed hands.
After two board discussions, and a concentration analysis requested by an outside director, we offered a five-year, non-exclusive agreement for 31 products. Prices would be reviewed annually against documented input costs and volumes, with a minimum batch quantity per product. We would build a dedicated packaging line costing ¥1.2 billion, and Kurenaigawa would prepay ¥400 million against future invoices. Kurenaigawa accepted in March 2024 and placed the other 33 products, worth roughly ¥3.0 billion a year, with its own plants and another manufacturer.
The packaging line began operating in January 2025. In the year ended March 2026 Kurenaigawa provided 27% of our revenue, and the first annual review produced a 1.8% price reduction rather than the 4.6% the automatic formula would have applied. We gave up volume that would have filled our Ishikawa plant, and two shifts there remain below plan.
I would change how I presented the risk. I described the concentration mainly in financial terms, and directors only saw its operating consequences at the second meeting. I should have shown from the start what a ten-year dependence would mean for our staffing and future investment choices.
Licensing a film technology for manufacture instead of buying Japanese marketing rights
In early 2025 Vaskerholm Formulations, a Swedish developer of orally dissolving films, offered us the Japanese marketing rights to film versions of two established medicines widely prescribed to older patients. The asking price was ¥1.5 billion upfront plus royalties. Films suit patients who find tablets difficult to swallow, a growing group in Japan's care homes, and our business development team saw a route to our own branded products.
The head of business development and one outside director supported the purchase, and management's case estimated operating profit of ¥700 million a year at peak. I argued that holding the marketing authorisation would make us a competitor of customers selling medicines in the same therapeutic areas, and would demand pharmacovigilance, distribution and sales capabilities we did not have. I also doubted the price assumptions, because reformulated versions of established medicines are not always priced well above the originals.
I proposed a different structure. We negotiated a licence to manufacture Vaskerholm's films in Japan for ¥260 million plus a per-unit royalty, exclusive for manufacture in Japan but carrying no marketing rights. With Vaskerholm's consent, a domestic customer that already serves prescribers in eldercare took the marketing rights and became the applicant. We agreed a seven-year supply arrangement with that customer, which contributed ¥500 million towards a ¥1.6 billion film line in our Ishikawa plant.
The trade-off was explicit: we gave up the own-product margin, and the customer may choose another manufacturer when the term ends. Validation batches were completed in July 2026, and the customer's approval applications are under PMDA review. The line has earned nothing yet, and I report it to the board as an unproven investment with a stated fallback use for other film products.
The sequence of conversations is what I would change. We negotiated with Vaskerholm for four months before testing customers' appetite for the marketing rights. Had I spoken to customers first, we would have known sooner that the structure worked and could have negotiated the manufacturing licence with more confidence.