HONG KONG – The Japanese government is tightening its grip on its listed companies, including those working on promising COVID-19 treatments.

On May 8, the Japanese Ministry of Finance released a list of 518 companies that would be subject to stricter restrictions on receiving foreign investments. Starting on June 7, foreign investors buying a stake of 1% or more in Japanese firms will be pre-screened, compared with the previous limit of 10%.

In a statement, the ministry said that the move was related to “the degree of impact of the investment on maintaining the basis of production and technologies in the business sectors that relate to protection of national security, maintenance of public order, or safeguard of public safety.” Essentially, it aims to curb the possibility of leakage and unapproved use of technologies or information that are highly sensitive.

The attributes of the foreign investor, including its capital structure, beneficial ownership and business relationships, and the foreign investor’s plan and track record of its behaviors relating to the investment (including the degree of potential direct or indirect influence by foreign governments and other related parties on the foreign investor) will be assessed.

Tokyo-based Fujifilm Corp. Holding is among the corporations on that list. The company is currently in the midst of testing its flu drug, Avigan (favipiravir), as a potential treatment for mild cases of COVID-19.

Some of the Avigan raw material suppliers, such as chemical makers Denka Co. Ltd. and Kaneka Corp., are also on the list of companies that are subject to the revised ownership rules.

A Fujifilm spokesperson told BioWorld that the company was “not in a position to comment on the decision of Japan's Ministry of Finance” and did not disclose how the new rules could affect the approval trajectory of its Avigan.

But at least Fujifilm can count on government support in other areas; a source at the Japanese Ministry of Health, Labour and Welfare (MHLW) said the ministry has accelerated the process but is awaiting further data before giving its approval.

"Avigan is currently awaiting phase III trial results," the MHLW spokesperson told BioWorld. “No other Japanese company has submitted an application for a COVID-19 drug so far.”

Japan has also given a speedy green light to Gilead Sciences Inc.’s remdesivir to treat COVID-19. The approval went through in just four days from submission and was based on U.S. data. Japan will begin importing a supply of remdesivir from the U.S. soon.

If approved, Fujifilm is likely to see brisk business in Japan for its Avigan, as it stands to benefit from part of an economic stimulus package worth $1 trillion. So the restrictions on foreign direct investment may not affect it.

“The package sets aside ¥2.5 trillion [US$23 billion] to assist medical institutions and pay for the development of drugs to treat coronavirus patients,” Sakshi Sikka, a senior pharmaceuticals and health care analyst at Fitch Solutions, told BioWorld. “The government plans to stockpile enough of flu treatment drug Avigan to treat 2 million people, with reports saying it can shorten the recovery time in coronavirus infections.”

As such, Fitch has revised its health care spending for Japan.

“We now expect health care spending to increase by 3.7% in 2020 as compared to 2.5% before the revision. Moreover, like most developed APAC markets, health expenditure will be driven by an aging population and rising chronic disease burden, which requires more advanced care,” said Sikka.

Fujifilm Holdings’ subsidiary, Fujifilm Wako Pure Chemical Corp., is also working on a COVID-19 testing reagent that could shorten the test result period to just 75 minutes, compared to the usual four to six hours. With COVID-19 expected to resurge in the future, it could drive demand for such diagnostics and treatments.

Globaldata has produced three scenario peak-week models for all countries experiencing more than 100 cases of COVID-19. For Japan, the consultancy firm expects it will stamp out the current resurgence but also believes future waves of infection could be likely.

"It is unclear what has caused the second surge in cases, but it is likely due to a combination of uncontrolled imported cases, undetected domestic transmission, and failure to meet testing demands. Unlike South Korea, testing in Japan was not scaled up to the general public and was limited to those fitting specific criteria," said Kasey Fu, the director of epidemiology at Globaldata.

As of May 8, Japan had almost 16,000 cases of COVID-19 and close to 800 deaths. Japanese Prime Minister Shinzo Abe has also extended a state of emergency until the end of May.

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