Selection and concentration: cutting non-pharma to focus on prescription drugs (1993)

The path concentration opened, and the weakness it left

Kunio Takeda’s selection and concentration was not a single decision but a strategy that took shape over more than a decade, from his 1993 accession to the presidency to the 2007 divestment of the non-drug businesses. At its root lay a reading of the numbers: a conglomerate still carrying food and agrochemicals could not recover its swelling R&D costs from the domestic market alone. The policy of pouring resources into prescription drugs and rewarding shareholders with high value-added and high payouts bore fruit as the most profitable body in the Japanese industry, and it built the concentration of resources that the later North American push and the big overseas acquisitions would require. The weight of this decision lies in a single generation turning a diversified chemicals company back into a drug specialist.

Concentration, though, threw another weakness into relief. The more Takeda cut non-drug lines and narrowed onto prescription medicines, the more its fortunes rode on the depth of its own new-drug pipeline. It had not, in fact, been generating its mainstays — Leuprin, Takepron — to a plan; part of the success rested on judgment in the field and on chance. The choice of where to place the cash earned at home — on drugs — would in time lead to the “buy time” M&A line that ran from Hasegawa’s Millennium purchase to Weber’s Shire deal. Deciding what to abandon, selection and concentration left its successors the next question: what to grow at home.