Japan Industrial Solutions supports troubled local drug maker

The private equity firm, which was established by Development Bank of Japan, Mizuho Bank, Sumitomo Mitsui Banking Corporation, and MUFG Bank, will commit capital from its third fund, according to a filing. The vehicle launched last September and the JIS website gives no indication of target size. Fund II closed on JPY 105bn in 2016.

The investment agreement coincides with Nichi-Iko initiating a business turnaround alternative dispute resolution (ADR) process, an out-of-court procedure that allows Japanese companies to forgo bankruptcy proceedings and negotiate solutions with creditors.

The company said it wanted to use the dispute resolution mechanism “with the aim of establishing a solid profit structure and drastically improving our financial position to re-establish growth.” The basic agreement with JIS also includes these goals.

Nichi-Iko claims to be Japan’s leading generics supplier by revenue and number of products sold domestically. As of March 2020, it was responsible for 1,218 products for the domestic market and 288 sold overseas. It covered 97% of Japan’s hospitals and dispensing pharmacies. Recent initiatives include pushing into the US market and developing biosimilar and COVID-19 treatments.

In March, operations at the company’s plant in Toyama prefecture were suspended for compliance violations. Although the suspension was lifted a month later, shipments of certain products have yet to resume and sales of products from a specific subsidiary that was subcontracting manufacturing to a third party are still barred.

Nichi-Iko recorded impairment losses and inventory asset appraisal losses of JPY 64.8bn relating to delays in its launch of biosimilars and drugs for rare diseases and to the disposal of raw materials at the Toyama plant. This prompted a revision of financial results for the 12 months ended March 2022.

Revenue fell from JPY 185bn to JPY 179bn, while the net loss widened from JPY 18.6bn to JPY 104.9bn. In 2021, revenue came to JPY 188bn and the net loss was JPY 4.2bn.

Nichi-Iko’s stock collapsed at the end of last week as the full extent of the problems emerged. Having closed on JPY 772 on May 11, it reached an all-time low of JPY 196 on May 16. It revived to JPY 318 the following day, which translates into a market capitalisation of JPY 17.5bn.

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• Topics
• North Asia
• Healthcare
• Restructuring
• PIPEs
• Japan
• Japan Industrial Solutions (JIS)
• Pharmaceuticals