Long resistant to consolidation, Japan's drug industry is now beginning to hurt too much to ignore the possibility, notes Yoshio Yano of Japan's International Pharma Consulting. So far, most of the M&A activity has focused on the diversified industrial companies and on the smaller pharmaceutical pure-plays. Asahi Breweries Ltd. , for example, discontinued its undersized ethical drug business and sold its majority stake in Torii Pharmaceutical Co. Ltd. to Japan Tobacco Inc. [See Deal]. Kanebo Ltd. sold its drug business to Akzo Nobel NV 's Organon Group [See Deal]. Mitsubishi Chemical Corp. merged its drug unit into Tokyo Tanabe Co. Ltd.[See Deal].
The economic pain is simply too severe for many Japanese firms to continue to bear it alone, argues Yano. The...