The company said it intends to grow its contract manufacturing business from Y2.3 billion (€17 million) in 2002 to Y7 billion for the fiscal year ending March 31, 2005, as part of a broader plan to nearly double group sales to Y32.6 billion.

The firm is planning to increase its capacity to make antibiotics, particularly cephems and penems, at its facility in Takayama, and will also add a new production line for injectables drugs later this year.

Demand for contract manufacturing services is increasing in Japan in light of the legal changes. The revision of the Pharmaceutical Affairs Law goes into effect in April 2005, making it easier to contract out entire manufacturing.

Last year, Sumitomo revealed its own ambitions in contract manufacturing. At the time, it estimated that the contract manufacturing sector is on a rising trend, with the active pharmaceutical ingredient (API) and intermediates market forecast to grow 7 to 8 per cent annually.

Meanwhile, Taiyo said it also plans to increase its sales of generics , although specifics of this programme were not disclosed.