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marketing billion-dollarplus patented drugs. inaugurated One difference is that this antibody research facility Japanese companies in Singapore have not resorted to last year. mass layoffs of R&D staff to improve the bottom line. That decision could benefit productivity in the years ahead as the R&D engine revs up again. As part of their effort to come up with a new generation of moneymakers, Japanese firms are attempting to end the isolation in which their researchers have traditionally worked. Major companies have internationalized their research activities, either by setting up new labs or acquiring companies. Most spectacularly, Takeda acquired the U.S. oncology firm Millennium Pharmaceuticals in 2008 in a $9 billion deal. And whereas Japanese drug firms used to keep almost all their R&D in-house— and still harbor a preference for doing so— they are now more likely than in the past to outsource projects to contractors in China and India, or to team up on research projects with other companies. For instance, Astellas announced in May that it will work with the U.S. biotech firm Amgen to develop new drugs for the Japanese market. And last year Takeda initiated a multiyear collaboration with the Indian drug discovery firm Advinus Therapeutics. “As Japanese companies diversify their portfolio and expand into new therapy areas, they realize that they need outside support, at least until they can build a more solid in-house team,” says Alan Thomas, director of client relations at the Tokyo office of IMS Health. OUT IN THE WORLD Chugai
JAPAN RETOOLS DRUG RESEARCH Transformation under way could make Japanese companies more effective at LAUNCHING NEW DRUGS JEAN-FRANÇOIS TREMBLAY, C&EN HONG KONG
THE STOCK PRICE of Takeda Pharmaceu-
tical increased by almost 40% in the four months after the U.S. Food & Drug Administration approved, in January, the company’s new treatment for type 2 diabetes. The approval was somewhat unexpected because FDA had twice rejected the drug in the five years since Takeda submitted its first application. FDA’s approval of the Takeda drug, alogliptin, was one of a string of successful U.S. launches for Japanese companies. In 2012, Astellas Pharma and Eisai each received FDA approvals for two novel pharmaceuticals. And this year FDA gave the green light to a treatment for menopause symptoms discovered by Noven Pharmaceuticals, a subsidiary of Tokyo-based Hisamitsu Pharmaceutical. Like Takeda’s stock price, Japan’s drug R&D engine—flagging in recent years—appears to be recovering. Success is never guaranteed in the highrisk endeavor of researching and developing new pharmaceuticals and putting them on the market. But Japanese firms started to reform their approach to R&D several years ago to improve their odds of successful drug launches. The efforts appear to be beginning to pay off. And this renaissance is occurring at a time when biotech firms
are sprouting in a country notorious for being inhospitable to high-tech start-ups. “We are close to recovering from our patent cliff,” says Hiroyuki Kato, Eisai’s executive director of portfolio strategy and strategic operations. The patent cliff he refers to is the loss of $3 billion in annual revenue his company suffered in 2010 when U.S. patent protection expired on the Alzheimer’s drug Aricept. Eisai is bouncing back through the launch of Halaven—a cancer treatment—in 2010, with last year’s launch of the epilepsy drug Fycompa, and by licensing foreign drugs to sell in Japan, Kato says. In 2012, Japanese drug companies lost patent protection on products that had recorded sales of $6.1 billion in 2011, according to IMS Health, a life sciences industry consulting firm. Sales actually shrank by only $2.3 billion last year, but IMS expects the impact to grow in coming years. The struggle that Japanese drug companies are facing resembles that of their counterparts in Europe and the U.S. that have also lost the fat margins generated by
EISAI PROVIDES an illustration of the
changes under way at Japanese drug companies. It has aspirationally renamed its R&D organization Product Creation Systems. “One goal of the renaming is to make the minds of researchers focus on new product launches,” Kato says. The change, implemented in 2009, is aimed at achieving shorter drug development times. Product Creation Systems seeks to develop products that Eisai can launch globally and sell through its own channels. In the past, Kato explains, Eisai typically worked with foreign partners on interna-
“It’s really difficult to abandon the power of the business card.” CEN.ACS.ORG
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tional sales while the company focused on firms boost their ability to tap innovation Kouji created Prism in 2006 when he Japan. This has changed. “The Japanese all over the world, Japan itself is becoming a left the Japanese chemical manufacturer drug market—the world’s third largest more fertile ground for homegrown science. Asahi Kasei. Whereas he wanted to continue after the U.S. and Europe—is huge, but our Eisai recently acquired the oncology market researching protein-protein interactions, first priority is the global launch of new rights to a compound under development Asahi promoted him into a headquarters drugs,” Kato says. by Prism Pharma, a biotech start-up located position, he recalls. “Asahi was not interA general trend among major Japanese in Yokohama, a city adjacent to Tokyo. ested in oncology, and I was not interested drug companies nowadays is to directly Called PRI-724, the Prism compound in management,” he says. manage their international sales. “If you completed its first phase of clinical trials in look at how much smaller Japanese drug the U.S. in November 2011. The compound IT’S UNUSUAL for employees of large comcompanies were 10–15 years ago, you uninhibits certain protein-protein interacpanies to strike out on their own in Japan. derstand why they tended to out-license tions that are responsible for cancer cell “It’s really difficult to abandon the power their products outside Japan,” of the business card, the respect IMS’s Thomas says. “But given you get from presenting a busiPHARMA’S HEALTH the investment that Japanese ness card from a major compaR&D budgets at several major Japanese drugmakers companies have made in expandny,” Kouji says. Ignoring his colrepresented about 20% of sales in fiscal 2012 ing their global sales presence, leagues’ advice to stay with Asahi they’re less likely in the future to Kasei, he established Prism in a license out their new drugs.” business incubator between ToSALES NET PROFIT NET PROFIT R&D SPENDING kyo and Yokohama that provided MARGIN ($ MILLIONS) $ MILLIONS % OF SALES IN ADDITION to the renaming, the infrastructure for setting up Astellas $12,598 $1,038 8.2% $2,279 18.1% Chugai 4,901 604 12.3 690 14.1 Eisai has abandoned a sitea chemistry laboratory. To miniEisai 7,186 605 8.4 1,508 21.0 oriented research model and mize costs of operation, Prism Takeda 19,510 1,644 8.4 4,063 20.8 reorganized R&D along global outsources much of its research lines under which researchwork to contractors in China. NOTE: Monetary statistics were converted at the 2012 average exchange rate of $1.00 = 79.82 yen. Fiscal year ends on March 31 of the following year, except ers, wherever they may be, are Prism is 50% owned by DBJ Chugai’s, which is the same as the calendar year. SOURCE: Company data grouped together depending on Capital and Innovation Network the type of work they perform. of Japan, a government fund. The units to which clinical and nonclinical proliferation, according to Prism’s chief The other half of the company is in the researchers are attached may be focused executive, Hiroyuki Kouji. Prism is working hands of venture capital firms and indion certain types of diseases, such as cancer, in a difficult area that has inspired a lot of viduals, including Prism founders. In June, or technology areas, such as the study of research—mostly resulting in failure—at Prism raised $15 million in new capital, biomarkers. “The structure integrates the major drug companies. PRI-724, Kouji bemostly from Japan, to initiate clinical trials best features of bioventures but without lieves, also can be effective in applications of PRI-724 in non-oncology applications the problem of having to operate hand to besides cancer. such as fibrosis. mouth in terms of project funding,” Kato Prism’s primary contacts have been Eisai “We could have attracted venture says. people based in New Jersey, says Kouji. capital in the U.S.,” says Dai Takehara, The 2009 reorganization has sharply in“Dealing with Eisai has been like dealing Prism’s chief financial officer. But there’s a ternationalized Eisai’s R&D efforts. Among with a U.S. drug company,” he says. “The trade-off, he adds. “U.S. investors are more Eisai’s 11 senior R&D managers, four are drug development function of major Japaknowledgeable about life sciences and based in Japan and seven in the U.S. Six of nese drug companies is now usually based therefore more likely to get involved in the them are Japanese nationals. “Under the in the U.S. because it’s much easier to conday-to-day running of the company.” new structure, oncology people work toduct clinical trials there.” By Japanese standards, a “biotech gether, whether they are based in Japan, the U.S., or the U.K.,” Kato says. PALATIAL START The The globalization of R&D activities is a headquarters building of fundamental trend among major Japanese RaQualia, a former Pfizer R&D lab near Nagoya, Japan, that has been drug firms. Even Chugai Pharmaceuticals, spun off and sold to its employees a company that has been majority-owned and now operates independently. by the Swiss drug giant Roche since 2002, is expanding its R&D internationally although it could just rely on Roche to supply it with new products to market in Japan. Last year, Chugai, which employs about 400 researchers in Japan, opened a second R&D facility in Singapore, this one to conduct research on antibodies. Chugai, notes spokesman Hitoshi Aikawa, is interested in launching its own drugs across the globe. As Eisai, Chugai, and other Japanese CEN.ACS.ORG
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boom” has taken place in Japan over the past five to eight years with the emergence of a handful of companies similar to Prism, says Shinichi Koizumi, a director of the drug discovery firm RaQualia. Although the venture capital market in Japan is far less developed than that in the U.S., “the research environment is excellent in Japan owing to the availability of instrumentation and experts,” he says. Several Japanese biotech firms have successfully executed initial public offerings (IPOs), he says. RaQualia itself was listed on the Osaka Securities Exchange in July 2011. RaQualia was created in 2008 after an employee buyout of a Pfizer R&D facility near Nagoya that the U.S. giant had announced it would shut down. From 70 people at the time of the closure, R&D employment at the site has grown to about 100, Koizumi says. Before its IPO, RaQualia survived through private equity funding from investors both in Japan and abroad. “We would like to be an example to others that it is possible to operate a successful biotech firm in Japan,” he says.
in 2009 for developing the immunosuppressive drug Actemra in a successful collaboration with Osaka University. Chugai initiated its development of the drug, primarily used to treat rheumatoid arthritis, on the basis of breakthrough research done by Osaka professor Tadamitsu Kishimoto in the 1980s. The changes taking place in Japan’s drug research community are very much a work
MOSTLY FOCUSED on gastrointestinal
diseases, much as it was in Pfizer’s days, RaQualia has a plan to complete early-stage discovery work and then license out its preclinical drug candidates to larger companies. “We can license out at any stage of the discovery and development process,” Koizumi says. “But our strengths lie in the discovery part.” RaQualia collaborates on research projects with several major drug companies, both Japanese and foreign. But the foreign ones, Koizumi observes, appear to embrace the concept of external collaboration more readily than the Japanese ones do. “It’s not natural for a Japanese drug company to outsource its drug discovery function,” he says. “It feels more comfortable for the Japanese firms to acquire, much like Takeda did when it bought Millennium.” At Eisai, portfolio strategy manager Kato asserts that the company is eager to collaborate with start-up firms, be they located abroad or in Japan. He points to Eisai’s current work with Prism in oncology. “Compared with companies from abroad, Eisai has an advantage in terms of its ability to access breakthrough medical research coming out of Japan,” he says. “But there aren’t at this stage that many start-up firms to work with in Japan.” Chugai’s Aikawa notes that his company won a prize from the Japanese government CEN.ACS.ORG
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in progress. But luck comes to those who help themselves. By taking a decisive stab at breaking down the insularity that used to characterize drug R&D in Japan, Japanese companies are trying to improve the odds that they will routinely launch new drugs on the international market. Their performance with FDA this year and last suggests that they are succeeding. ◾
