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Insight & Intelligence : Jan 28, 2014
Japan Moves to Regain Prominence in Biotech
“Abenomics” sparks new interest among U.S. industry in the Land of the Rising Sun.!--h2>
While China still scrambles to fulfill its 12th Five-Year Plan to grow biopharma into a RMB 4 trillion ($630 billion) sector by 2015, and fulfill predictions to overtake Japan as the world’s second largest market, Japan is looking to new policies by Prime Minister Shinzo Abe and new business activity to maintain and even expand its industry—with increasing interest from U.S. companies and advocates.
Earlier this month, the Abe government set aside ¥17.2 billion (about $165 million) in FY2014, which begins April 1, to cancer initiatives involving three agencies. Abe’s government is also shelling out a total ¥4.5 billion this fiscal year and FY2014 to a consortium of 24 companies and two universities formed late last year to establish a pilot factory for biologic drugs.
Last year, in his first full year in office, Abe’s government committed ¥110 billion (about $1.1 billion) over 10 years toward more study of induced pluripotent stem cells (iPSCs), building on research by Kyoto University investigator and 2012 Nobel laureate Shinya Yamanaka, M.D., Ph.D. On January 6, Dr. Yamanaka announced plans to establish an international iPSC bank involving more than 10 countries, including the U.S. and U.K.
In addition, Abe’s government has launched “Abenomics,” a series of broad economic policies designed to reverse some two decades of stagnancy by positioning Japan as business-friendlier—such as stimulus spending and targeted deregulation designed to remake Japan into, as he puts it, “the easiest country in the world for companies to operate.”
Perhaps Abe’s smartest move toward boosting Japanese biopharma, however, goes beyond business attraction or economic recovery. Japan will finally launch its own basic-research funding agency akin to the NIH in FY2014. At ¥47.6 billion ($480 million), the new Headquarters for Healthcare and Medical Strategy Promotion will be funded at just a fraction of the $31 billion budgeted for its U.S. counterpart.
The new agency’s budget is far less than the $9.5 billion spent by government on biomedical R&D in Japan in FY2012, up 32% from FY2007, according to “Asia’s Ascent—Global Trends in Biomedical R&D Expenditures,” a New England Journal of Medicine study published this month. Private biomed R&D has risen by the same percentage, to $27.6 billion in FY’12, the study showed.
Yet the new agency will benefit industry by uniting three related functions long separated among portions of three existing government bureaucracies: basic research (overseen by the Ministry of Education, Culture, Sports, Science and Technology), clinical treatments (Ministry of Health, Labour and Welfare), and industrial applications (Ministry of Economy, Trade and Industry).
“Although the budget allocation for setting up the Japan NIH is modest in comparison to the annual expenditures of the U.S. NIH, it has the potential to allocate critically needed resources to the most promising research projects from across Japan,” Richard A. Brown, general partner and head of the Tokyo office of pharmaceutical business development firm Plexus Ventures, told GEN.
“Whether or not the Japan NIH achieves its goal of stimulating world-class biotechnology breakthroughs will largely depend on how adroitly the NIH bureaucrats and its advisors can channel these funds to the most deserving projects,” Brown said.
Another challenge for Japan will be its ability to afford all its extra biopharma-related spending, since its gross public debt is projected by the Organization for Economic Cooperation and Development to reach 230% of gross domestic product this year—the world’s highest percentage of public debt: “Stopping and reversing the rise in the debt-to-GDP ratio is crucial,” OECD concluded last year in a largely favorable report on Abenomics.
Japan’s biggest biopharma challenges, according to Brown, are both internal and business-related: Japanese financial institutions and investors tend to shun the sort of risk that’s inherent in the industry, and the nation has a shortage of experienced entrepreneurs with the skill and drive to lead organizations through the long and difficult path of advancing compounds to proof-of-efficacy, when an established biopharma might be willing to license them and bring them to market.
Successful venture firms with entrepreneurial management do exist in Japan, and the ability to replicate these firms is the “regenerative medicine” that the Japanese biopharmaceutical industry needs to ensure its continued growth.
Japan’s moves toward building biopharma appear to give U.S. companies a faster option for expansion into Asia than has been seen after a decade of engagement with China, Joseph Panetta, president and CEO of Biocom, the industry group for San Diego and southern California, told GEN.
As a result of the recent moves, plus member concerns about China’s regulatory efficiency and knowledge of Western-style business practices, Panetta said, “what we’ve been doing in the last year is focusing more on Japan, and we see a lot of potential opportunity in Japan.”
Another factor stoking that interest, he added, was growing interest in U.S. partnerships by Japanese biopharmas; he cited Ajinomoto’s $175 million acquisition of San Diego-based Althea Technologies last year. That activity predates Abe: Daiichi Sankyo bought another San Diego company, Plexxicon, in 2011, while Takeda snapped up Intellikine for $190 million upfront (plus up to $120 million in milestone payments) that year and Millennium for $8.45 billion in 2008.
But last year in the first public-private effort of its kind, the Abe government joined five Japanese pharmas—Astellas Pharma, Daiichi Sankyo, Eisai, Shionogi, and Takeda Pharmaceutical—and the Bill and Melinda Gates Foundation to launch the Global Health Innovative Technology (GHIT) fund, designed to develop medicines, vaccines, and diagnostics for infectious diseases in developing countries. Japanese companies are also looking north of the border for deals: Also in 2013, Mitsubishi Tanabe Pharma acquired Canadian-based vaccine developer Medicago for C$357 million (about $322 million).
“You have a lot of mid-sized pharmas in Japan. Their pipelines are becoming depleted, and they’re just beginning to try to figure out how to take advantage of creative partnerships with biotech companies. So we’re going to spend a lot more time in Japan,” Panetta said, during in an interview during the recent JP Morgan 32nd Annual Healthcare Conference in San Francisco.
Panetta’s group last year joined several San Diego-area business groups in a trade mission to Japan that involved meeting his group’s Japanese counterpart, the Japan Bioindustry Association. Panetta said the trade mission laid groundwork for cross-promotional efforts launched this past fall at the bioindustry association’s meeting in Yokohama, and set to be launched February 26–27 at Biocom’s Global Life Science Partnering Conference.
One company increasing its presence in Japan is Biogen Idec. Within a year, the biotech giant plans to double its workforce from 70 to 140 staffers, as well as double its office space to accommodate the growth.
“We will be hiring a majority of the positions in our commercial, research and development, and medical affairs functions. There will also be additions in manufacturing and G&A roles,” spokeswoman Shannon Altimari told GEN.
Altimari said Biogen Idec has been committed to the Japanese market for more than a decade, building an organization focused on understanding patients’ specific needs. To Biogen Idec, Japan is attractive because its healthcare system provides low-cost, universal coverage for patients with diseases for which the company is developing treatments, such as MS and hemophilia.
“We are building stronger R&D and technical capabilities to enable us to engage with local experts at the earliest possible stage, ensuring our clinical development plans take into consideration specific requirements for Japanese patients,” Altimari said. “The Japanese Government’s focus on healthcare as a source of economic growth and its long-term commitment to rewarding innovation are strong reasons to be confident in our ongoing investments there.”
The company says Abe’s commitment to building biopharma, plus a commitment from regulators to expedite their handling of new product reviews, may reduce time to approval, to the benefit of patients and healthcare providers.
It’s Okay to Fail
For Japan’s biopharma industry to thrive, the Land of the Rising Sun must attract similar enthusiasm from other biotech and pharma giants, as well as smaller companies focused on partnering to develop new drugs. That will require Abe’s government to continue cutting red tape while spending public dollars smarter, if not more, given the need to contain debt, as even OECD acknowledged.
The need for restraint should stoke more private investment, which inevitably will produce both successes and failures among new companies—but which Japan will need in order to grow biopharma beyond its current set of established pharmas, which are vulnerable to M&A activity as the industry increasingly consolidates.
“Abe is trying to deliver a message that it’s okay to fail, which has never been a good thing in Japan,” Panetta said.
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