Hatsuo Aoki is not a typical Japanese pharmaceuticals executive. Fluent in English, with extensive experience in the US, Fujisawa's new president-elect is one of a handful of young executiveswho now lead Japanese drugs companies, and are anxious to give their groups international reach.

Such ambitions are unusual. Traditionally, the men at the top of Japan's drugs companies have been obsessed by domestic market share. But Mr Aoki is dismissive of such an approach. "Japan's pharmaceutical industry cannot survive without inter-nationalisation," he says. His target is to increase turnover from Y277bn in the year to March 1999 to Y400bn within five years. Half should come from outside Japan. At the moment, the ratio of overseas sales is 37.4 per cent.

The rationale for Mr Aoki's internationalist strategy is the current dire state and prospects for domestic sales. He predicts the Japanese market will not grow over the next five years, while European and American demand should continue to increase strongly. Although Japan's ministry of health and welfare has abandoned controversial plans to introduce reference pricing (whereby governments set limits on reimbursement for certain drugs) and there will be no price reductions this year, he expects big price cuts of between 10 per cent and 20 per cent in 2000.

Mr Aoki has adopted a twin-track strategy. The first track is to defend Fujisawa's domestic position. The group has tackled costs by reducing the number of medical representatives from a peak of 1,300 to 1,000 - one of the smallest forces in big Japanese drugs companies. More import- antly, it is looking to bolster the group's development pipeline by licensing in compounds from overseas.

"We have two options. One is to strengthen the development of in-house products and the other is to seek alliances with outside partners. Since we have inadequate in-house products, we are eagerly looking for drugs from other companies," he explains. He has just completed negotiations with AstraZeneca, the Anglo-Swedish group, to market Seroquel, a treatment for schizophrenia, in the Japanese market. The group has also signed agreements with Nextar of the US in the area of immuno-suppressants, and QBI to investigate the role of genes in the incidence of strokes.

The second track is to replicate the international development skills of Fujisawa's overseas rivals. The group must build up its development capabilities so that it can submit dossiers to regulatory authorities simultaneously in Japan, Europe and the US. Mr Aoki boasts that seven of the eight compounds in Fuji-sawa's development prog-ramme are being developed for foreign markets.

Mr Aoki admits that Fujisawa's international marketing reach remains limited. The aim, he says, is to develop drugs for the hospital market - rather than general practitioners - so that fewer medical representatives are required.

He gives the example of Prograf, the group's immuno-suppressant used to prevent transplant patients rejecting new organs. "Prograf is targeted at hospitals. That means the target audience is small and we don't have to build up a huge sales force," he explains. Two compounds in development - FK463, an anti-fungal agent, and FK317, a treatment for solid cancers - fall into this hospital-only category.

There are some compounds in development that do not meet this definition, admits Mr Aoki. A diabetes treatment, FK614, will have to be marketed to general practitioners. Similarly, the company has a migraine treatment, FK888, and FK960, a drug for Alzheimer's, in development.

"For the diabetes treatment we can either increase the number of overseas medical representatives dramatically, or form a marketing alliance with a foreign partner. To be honest I prefer the latter option. I don't want to build up the huge fixed costs associated with a big infrastructure. That would prove difficult to sustain," says Mr Aoki.

Mr Aoki argues that the progress in genomics (which looks at the relationship between genes, the environment and disease) and other technologies means there are opportunities to create a network of virtual companies and partners, allowing Fujisawa to buy in expertise in particular areas. Mr Aoki acknowledges this strategy has been developed from work conducted by the Boston Consulting Group.

There are clearly limits to Mr Aoki's radicalism. He uses the Boston Consulting Group analysis to argue that there is no need for Japanese groups to participate in the wave of mergers and acquisitions shaking up the global pharmaceuticals industry. He rules out the need to merge with a foreign company. "It would be better to have a network of two or three companies, rather than having one headquarters that dictates everything from overseas," he says.

He also believes that, unlike other industries in Japan, there will be little merger and acquisition activity among the big domestic drugs companies. "This is because after the mergers we cannot do anything about cutting staff - the rationale behind many of the deals outside Japan. Japanese culture is against such drastic measures," he explains.

For the moment, Mr Aoki's strategy looks the most promising among those of the Japanese drugs groups. Now the new president of Fujisawa must implement it.

NET RESOURCES: Japan links

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