Japanese Bioventures: Challenges and Potential Prepared for: New York - - PowerPoint PPT Presentation

Japanese Bioventures: Challenges and Potential

Prepared for: New York Pharma Forum June 22, 2011

Andrew M. Saidel President & CEO Dynamic Strategies Asia, LC

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Andrew M. Saidel

 Established DSA in 1996.  Collaborated with senior U.S. and Japanese corporate executives and policy makers on business, investment, regulatory, and legislative issues for two decades.  Spoken widely on U.S.‐Japan business and policy issues at venues including the World Affairs Council, the U.S. National Intelligence Council, the U.S. Department of State, the U.S. National Institutes of Health, the U.S. Chamber of Commerce, the Japanese Cabinet Office, the Japan Institute of Invention and Innovation, and the University of Tokyo.  Director and Member of the Board of RaQualia Pharma Inc., a life sciences venture based in Nagoya, Japan, from July 2008 through March 2010.  Member of the International Collaboration Advisory Council at the University of Tokyo, the Scientific Advisory Committee at the Kitasato University Global Clinical Trials Center, and the Administrative Advisory Council at RIKEN: The Institute for Physical and Chemical Research.  Policy aide for three years to 21 members of Japan’s Liberal Democratic Party in Tokyo, from 1990 to 1993.  Worked for the Institute for Defense Analyses,in Alexandria, Virginia, in 1993 until joining the Central Intelligence Agency’s Directorate of Intelligence as an East Asia Analyst.  Member of the Board of Trustees of the Morikami Museum and Japanese Gardens in Delray Beach, Florida. Served on the Board of Directors at the Washington Japanese Language School, the oldest Japanese government‐sponsored language school in the United States.  Speaks and reads Japanese fluently and lived in Japan for five years. Earned a B.A. from Colgate University, a Certificate with Honors from Kansai University of Foreign Studies in Osaka, Japan, and an M.A. from the Center for East Asian Studies at Stanford University.

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DSA Vision

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DSA Mission

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Current and Past Clients

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The Challenges

 Impossible to look at venture challenges in Japan’s life sciences sector without also looking at broader sector issues.  Broader sector sets the context within which ventures must succeed.

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The Diagnosis

 Opaque and inconsistent reimbursement system  Very expensive clinical research environment  Longest approval process  Very high cost of doing business (delivering product to patients)  Inefficient mechanisms to translate discoveries into commercial success

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The Root Causes

 Government‐led universal HI system works against innovation  Basic research = high prestige v. clinical research = low prestige  HIV AIDS scandal in 1980s, PAL reform in 2000s essentially froze PMDA  Slow hospital consolidation and Centers of Excellence build  Risk aversion and lack of experience a drag on venture starts

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The Prescription

 Reimbursement system reform  Improvement to clinical research environment  PMDA and risk management reform  Rationalization of health care delivery  Development of new market pathways

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New Market Pathways

 Improve people liquidity  Strengthen venture capital bench  Deregulate  Slash cost of clinical research  Do everything faster

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The Good News

 Support for these changes is definitely growing  Politicians understand the need to drive change  Ability of entrenched interests to resist reform is at a historic low  U.S. is in a great position to be a catalyst for change  Generational change is underway across society

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Wa will only take you so far

“Japan is a pleasant country. Made‐in Japan products have the highest reliability in the

• world. We can learn much from the spirit of ‘wa,’ and the Japanese are reliable. If the

Japanese maintain their culture infused with these inherent virtues, Japan will surely stage a comeback. But Japan does lack one ingredient of success: open innovation.” Richard Dasher, Director, US‐Asia Technology Management Center, Stanford University “Open innovation refers to the process of combining internal and external resources and activities (ideas, opportunities, people) and formulating a high‐growth strategy. In practice,

• pen innovation includes collaborative R&D involving companies and universities, the

forging of links with startups or their acquisition, and an active market in intellectual property, including technology licensing. Open innovation explains the skyrocketing growth of many Silicon Valley ventures. In this context ‘open’ does not mean free of charge or open to the public. Open innovation does not eliminate the need for internal R&D, either. On the contrary, open innovation stimulates the emergence of new talent from among internal R&D teams.” Wataru Izumiya, President, Sangyo Times, Inc. (publisher of The Semiconductor Industry News)

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Open Innovation: A model that can work in Japan

 Open innovation now endorsed by many thought leaders  Matches very well with government‐academia‐industry nexus  Presents an efficient way to hedge risk for young ventures  Allows large organizations to leverage investments  A scalable way to optimize IP portfolios

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 250+ collaborations  Flat, horizontally‐matrixed organization  Speed, agility, and flexibility  Fully optimized for internal collaboration  Trust and accountability – one layer to decision point

Example: IOCN ‐ Integrated Open Collaboration Network

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 Many large corporations have IP better suited to smaller ventures  Parent ownership stake can represent risk hedge for other investors  Seasoned managers already in the mix at launch  Keiretsu connections can present efficient growth opportunities and value  Could become platforms for acquiring Japanese companies trading at very low valuations relative to ex‐Japan acquisition targets  Existing relationships can help bridge cultural gap from large to small

Carve Out Model is well‐suited to Japan

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Moving Ahead: The Post‐311 Innovation Imperative

 Time to move faster for the nation  It’s now or never for politicians  Drug and Device Gaps remain for MHLW  Technology Flight major concern for METI  Health care a security issue for all

The Great Wave off Kanagawa (1830‐32) Katsushika Hokusai

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What else could be done

 Make it easier to start companies  Launch a global angel network  Incubate companies outside Japan and then reinsert  De‐fang risk taking at an early age  Recognize the value of good failure

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Removing Impediments…

The key to achieving successful bioventures in Japan is the key to all ventures in Japan: removing impediments that block an enormous well‐spring of talent from efficiently reaching the market, relative to what it takes to do same elsewhere.

…to Vision, Risk, Execution, and Reward

"He was the visual Shakespeare of our time. He is the only director who right until the end of his life continued to make films that were, or will be, recognized as classics...He was a celluloid painter—he was as close to an impressionist as you can get in film.” Steven Spielberg speaking about Akira Kurosawa “At Pixar, when we have a problem and we can't seem to solve it, we often take a laser disc of one of Mr. Miyazaki's films and look at a scene in our screening room for a shot of inspiration. And it always works! We come away amazed and

• inspired. Toy Story owes a huge debt of gratitude to the films of Mr. Miyazaki.”

John Lasseter writing about Hayao Miyazaki

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Thank you very much!

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It can be done!