[Feature: The Future of Regenerative Medicine] Investing in Regenerative Medicine Ventures and Their Potential

2019/06/05

Image: Keio University Hospital Building 1

Investing in regenerative medicine ventures holds wonderful potential, with expectations for both social impact and significant profits.

The regenerative medicine venture attracting the most attention in the Japanese stock market is SanBio, where Professor Hideyuki Okano, the Graduate School of Medicine Dean at Keio University, serves as the founding scientist. The company is developing cellular medicines to treat cerebral infarction and brain injury. If central nervous system diseases for which there are no current treatments can be regenerated using cellular drugs, it will save many patients suffering from these illnesses, and the social impact would be immeasurable. SanBio listed on the Tokyo Stock Exchange Mothers market in April 2015, and as of the end of March 2019, its market capitalization was valued highly at 142 billion yen, ranking 5th among companies listed on Mothers. Yukiko Kato of SBI Investment, who invested in SanBio, gained 6.6 billion yen in capital gains from the SanBio investment alone and was ranked number one in the list of most influential venture investors in the January 2016 issue of "Forbes Japan." SanBio's cellular medicine has not yet received pharmaceutical approval; they are aiming to apply for approval by January 2020 for chronic traumatic brain injury, for which Phase 2 clinical trial results have been released in the US. While it will still take some time for patients to receive the benefits, investing in bio-ventures has the potential to kill two birds with one stone: social impact and investment returns.

Reasons why regenerative medicine ventures are attracting attention as investment targets include: (1) the increasing possibility of solving unmet medical needs (medical needs for diseases for which treatments have not yet been found) that could not be treated with conventional small molecule compounds or antibody drugs, using research results from research institutions such as universities—including iPS cells—as seeds; (2) the expectation of high long-term profits and increased corporate value if products are launched on the market; and (3) the shortening of the period until market launch due to the 2014 amendment of the Act on Securing Quality, Efficacy and Safety of Products Including Pharmaceuticals and Medical Devices (Pharmaceuticals and Medical Devices Act), which allowed for conditional early approval of regenerative medicine products, including cellular medicines.

(Table 1) is a list of major regenerative medicine ventures listed in Japan. Many listed regenerative medicine ventures conduct product development based on research results from universities and other institutions. Regenerative medicine ventures cannot exist without science, and the role played by research institutions is significant. For example, regarding iPS cell transplantation for age-related macular degeneration by RIKEN, which is said to be the closest to practical application as regenerative medicine using iPS cells, Healios has entered into a patent licensing agreement with RIKEN, received an exclusive license, and is proceeding with product development. Age-related macular degeneration is said to be the fourth leading cause of blindness among Japanese people and the number one cause of blindness in Western countries; while progression can be suppressed, no fundamental treatment for the disease exists. Healios's development pipeline also includes regenerative medicine for the liver under an exclusive license from Yokohama City University, and it has earned a high reputation in the stock market as a venture with the potential to solve unmet medical needs in collaboration with academia.

Whether regenerative medicine will truly become a highly profitable business is a matter that will be verified from now on. As of the end of March 2019, there are six regenerative medicine products approved by the regulatory authority, the Pharmaceuticals and Medical Devices Agency (PMDA), and no product has yet appeared that achieves sales of 100 billion yen or more on its own, a so-called "blockbuster." Among the approved regenerative medicine products, Novartis's cancer therapy Kymriah, approved in March 2019, has high business expectations. Kymriah is a new type of cancer treatment called Chimeric Antigen Receptor T-cell (CAR-T cell) therapy, which involves removing a patient's immune cells, enhancing their ability to attack cancer through genetic modification, and returning them to the patient's body to treat the cancer. It is expected to be an innovative cancer treatment following immune checkpoint inhibitors such as Opdivo. The drug price for Kymriah has not yet been determined, but it is expected to be around 50 million yen per dose, and considering the currently approved applicable diseases, the market size is estimated to be around 20 billion yen. If the application expands in the future, it could reach blockbuster-level sales.

For investment in regenerative medicine ventures, the early approval system under the 2014 amendment of the Pharmaceuticals and Medical Devices Act has a significant impact in terms of reducing the time and cost to market, downsizing investment amounts, and shortening the investment recovery period. Traditionally, in drug development, safety and efficacy are verified in clinical trials (Phases 1 to 3), followed by approval as a drug and inclusion in health insurance coverage. Conducting clinical trials requires funds ranging from one billion to several billion yen even up to Phase 2, and compared to IT-related ventures, drug discovery ventures required exceptionally large amounts of capital during the development phase. The greatest risk for drug discovery ventures is the inability to verify safety, efficacy, or superiority over existing drugs as a result of clinical trials, leading to the termination of trials midway or failure to reach pharmaceutical application. However, an even earlier problem was that clinical trials often could not be completed by the deadline because subjects did not gather as planned, making it impossible to recover funds through stock listing or corporate sale within the typical 7 to 10-year venture capital investment period. For regenerative medicine products, if safety can be confirmed and efficacy can be estimated with a significantly shorter trial period and fewer cases than normal clinical trials, conditional early approval can be obtained at the discretion of the PMDA—on the premise of re-examination after a certain period—allowing for commercial sale under insurance coverage. As a result, the development costs required until market launch have decreased, the period until fund recovery has been shortened, and the reduced risk has increased the attractiveness of the field as an investment sector.

At Keio University, movements to foster ventures have become active over the past few years, centered on the School of Medicine. Under the mission of putting university research results into practical use and contributing to society, the Keio Healthcare Venture Contest, hosted by the School of Medicine since fiscal 2016, became a major venture contest in its third year in fiscal 2018, with over 100 venture groups from both inside and outside Keio applying. Furthermore, in November 2018, the Office of Innovation and Entrepreneurship was established to accelerate industry-academia collaboration, with venture cultivation listed as one of the pillars of its operations.

Regenerative medicine is attracting attention among Keio-related ventures, and as of March 2019, six regenerative medicine ventures have been established (Table 2).

In particular, regenerative medicine using iPS cells is a field where the Keio University School of Medicine leads the world, and there are high expectations for the activities of ventures. Knopp Biosciences (K-Pharma) is a venture company established to put into practical use the research results of Professor Hideyuki Okano and Professor Masaya Nakamura of the School of Medicine, who are working on clinical research for spinal cord injury treatment using iPS cells. They are working on the practical application of nerve regeneration technology and the development of effective drug discovery for intractable neurological diseases. Cellusion is working on corneal regenerative medicine using iPS cells based on the research results of Professor Kazuo Tsubota, Associate Professor Shigeto Shimmura, and Project Lecturer Shin Hato of the Department of Ophthalmology, School of Medicine. Heartseed is a venture company established to put into practical use the research results of heart regenerative medicine that Professor Keiichi Fukuda of the Department of Cardiology, School of Medicine, has been working on. They are developing treatments for ischemic heart diseases such as myocardial infarction and dilated cardiomyopathy using iPS cells.

There are also ventures working on regenerative medicine other than iPS cells. AdipoSeeds aims for the medical application of ASCL-PLC, which is induced to differentiate from adipose-derived mesenchymal stem cells, based on the research results of Professor Emeritus Yasuo Ikeda, the former Dean of the School of Medicine, and Project Research Associate Yumiko Matsubara of the Clinical and Translational Research Center, School of Medicine. Metcela is working on the practical application of research results on heart disease treatment methods using fibroblasts by Takahiro Iwamiya, a former Project Assistant Professor at the Institute for Advanced Biosciences (currently a part-time staff member). Restore Vision is a venture established by Professor Tsubota, Project Research Associate Toshihide Kurihara, and Project Assistant Professor Yusaku Katada of the Department of Ophthalmology, School of Medicine, and is developing visual regeneration gene therapy drugs.

Keio Innovation Initiative (KII), where the author serves as president, has a mission to foster ventures that utilize Keio's research results and has invested in AdipoSeeds and Cellusion. Not only at Keio but throughout Japanese academia, there are many attractive seeds for regenerative medicine, and the entrepreneurial mindset of researchers is also rising, making it an attractive investment target. On the other hand, although the hurdles have been lowered, human resources with high management capabilities are essential for the success of regenerative medicine ventures. I hope that more management talent will enter the regenerative medicine venture field in the future.