Important note: Information in this article was accurate in 1997. The state of the art may have changed since the publication date.
The Wall Street Journal - Tuesday, 25 February 1997.
David P. Hamilton, Staff Reporter of The Wall Street Journal
In a transaction scheduled for Oct. 1, the Japanese company will be fully absorbed by Yoshitomi Pharmaceutical Industries Ltd., another major drug maker. The move spells a dramatic end for Green Cross, an internationally known maker of blood products whose troubles have mounted over the past year as a result of civil and criminal actions in the AIDS scandal.
Green Cross and other drug companies stand accused of continuing to sell bloodclotting products that were tainted with the HIV virus that causes AIDS, despite mounting evidence in the early 1980s that the products were unsafe. Some 1,800 Japanese hemophiliacs, the main users of such products, were infected with the virus, and more than 400 have died.
The combined company will use the Yoshitomi name, the companies said in a statement. The move will retire a corporate name in use since 1950, when Green Cross was founded by a member of Japan's Unit 731, an army unit that conducted biological experiments on Chinese prisoners during World War II.
In addition to an array of civil lawsuits from hemophiliacs and their families, Green Cross also is reeling from a boycott of its products by Japanese hospitals. For a year, Green Cross has been engaged in a frantic attempt to restructure itself by closing factories and cutting employment by attrition. The company reported an unconsolidated pretax profit of 520 million yen ($4.22 million) on sales of 36.2 billion yen for the fiscal six months ended Sept. 30, and forecasts a meager parent pretax profit of 500 million yen on sales of 71 billion yen for the fiscal year ending March 31.
What's more, last year then-Green Cross President Takehiko Kawano and two former company officials were indicted on charges of criminal negligence in the scandal. They still are awaiting trial.
The combination is also partly a consequence of a much tougher operating environment for Japanese drug companies. For decades, high government-mandated drug prices and generous health-care reimbursement kept profits fat. But with health-care costs accelerating, the government is starting to lower drug prices and cap national health-insurance spending, moves that analysts say will lead to consolidation within the industry.
In the combination, the two companies will exchange five shares of Green Cross for three shares of Yoshitomi. Yoshitomi's president will become president of the new company; the current Green Cross president will become a vice president of the new company. Green Cross shares closed Monday in Tokyo at 566 yen, up 36 yen; Yoshitomi fell 10 yen to 890 yen. The transaction was announced after the close of trading. Green Cross shares had risen sharply before the news, prompting Tokyo Stock Exchange officials to tell the Kyodo News Service that they would investigate the sudden surge in trading.
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