Nichi-Iko Pharmaceutical Co., Ltd. (E00963) Stock Price

Nichi Iko is a specialized manufacturer focused on producing and selling generic drugs (follow-on medicines). The company develops pharmaceuticals using the same active ingredients as original drugs after their patents expire, and supplies them to hospitals, clinics, and pharmacies. Medical pharmaceuticals account for over 99% of sales, and the company is characterized by a diverse product portfolio and high market share.

The company's primary customers are pharmaceutical wholesalers, through which it delivers products to approximately 136,000 medical institutions nationwide. Revenue is primarily generated through sales to pharmaceutical wholesalers, with a stable supply system built through four distribution centers that ship orders on the same day they are received. The company also operates important functions including information provision activities by approximately 260 medical information representatives (MRs) and customer support services.

The company operates through two business segments: the Nichi Iko Group and the Sagent Group. The Nichi Iko Group handles domestic operations and consolidates manufacturing capabilities by dosage form across seven factories nationwide, located in Toyama, Aichi, Shizuoka, and other regions. The Sagent Group, centered on a U.S. subsidiary acquired in 2016, manages overseas operations and serves as a platform for establishing presence in the injectable drug sector and entering the U.S. market.

Nichi Iko is currently undertaking business restructuring to overcome a serious management crisis. The company is advancing discussions with financial institutions through the Alternative Dispute Resolution (ADR) procedure under the Industrial Competitiveness Enhancement Act. Nichi Iko issued a temporary suspension notice in May 2022 and is developing a business restructuring plan with the consent of all transaction financial institutions, aiming to establish a robust earnings structure and fundamentally improve its financial position. The company has secured sufficient credit facilities from its main bank, Sumitomo Mitsui Banking Corporation, and is laying the groundwork for recovery while stabilizing cash flow.

The priority issue in the company's business restructuring is normalizing production operations halted due to quality problems. The Toyama No. 1 Plant, which received a business suspension order in March 2021, has gradually resumed production and shipments following rigorous quality assessments, though some planned products remain unable to resume shipment. Additionally, the production suspension at Kobayashi Kako has led to the discontinuation of products that subsidiary Elmed had outsourced for manufacturing, further impacting revenues. Addressing the sales decline resulting from these quality issues has become urgent.

In overseas operations, the company has implemented a major strategic review, reassessing the entire development pipeline for biosimilars and orphan drugs that it had been continuously investing in for North American operations. As a result, the company recorded impairment losses centered on goodwill and intangible assets in the fiscal year ended March 2022. Going forward, the company plans to optimize its business portfolio through selective focus. Nichi Iko is developing a business restructuring plan under the guidance of the Business Restructuring Professionals Association and continues discussions aimed at securing approval from all financial institutions.

On the technology front, the company is focusing on rebuilding its manufacturing and sales system for high-quality pharmaceutical products, positioning itself as a world-leading generic drug manufacturer. While implementing work-from-home arrangements and workplace vaccinations as COVID-19 countermeasures, the company is minimizing the impact of reduced patient visits and restricted sales activities, while capitalizing on positive factors such as increased sales of COVID-related products. The company has set evolution into a "global comprehensive generic drug manufacturer" as its long-term vision, with details of growth strategies following business restructuring completion to be disclosed in the future.