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— Analysis —
The Los Angeles-based consultant to the drug industry keeps his clothes and business cards in room 1285 of Tokyo's Imperial Hotel. He was recently getting ready for his 163rd trip to Japan, one of a cadre of chaperones, consultants and middlemen who help Western firms, usually small biotechs, make connections with potential Japanese partners. But these matchmakers -- often just known as "agents" -- may begin to find less demand for their services. Japanese drugmakers are expanding their overseas outposts, scientists and biz-dev types are connecting at conferences and information about tiny startups is just a click away.
"There is a business for matchmakers if you have no contacts," says Anil Goyal, vice president of business development at Serenex Inc., which Pfizer Inc. recently bought. Goyal has made trips to Japan for more than one employer, and he says building contacts through scientists and investors makes more sense than using a middleman. When Alastair Riddell wanted Japanese contacts for his human-tissue supply firm Pharmagene Laboratories Ltd., he leaned on a fellow Brit living in Japan who has helped American firms find molecules in Japan to in-license. But for his next company, Paradigm Therapeutics Ltd., a designer of specialized mice for lab research, Riddell struck a licensing deal with Takeda Pharmaceutical Co. Ltd. without agents. "Takeda said they didn't want to deal with them," Riddell says. Lacking a middleman, Riddell later e-mailed Takeda head of research Shigenori Ohkawa directly and proposed an acquisition. He worried that the move was too aggressive, but it didn't seem to matter; Takeda bought Paradigm last year. Several agents interviewed also say they help clients limit costs during their visits to Japan, no small thing in a country where "you can blow through $600 a day for taxi fare," says Tanaka. He takes at least three client trips a year and says he can limit costs to about $8,000 per person for a week. He gets a monthly retainer and his expenses reimbursed, but if the client doesn't strike a deal, he says he makes no extra fee. He says he's about to close his 22nd deal. Where once a trip to Japan was necessary to make contacts, the expansion of Japanese companies stateside makes it a lot cheaper to drive or fly to Chicago, where Takeda's North American business development team is stationed, or New Jersey, where Ono Pharmaceutical Co. Ltd., one-tenth Takeda's size, wants to house a team in charge of early research partnerships. "If the deal in discussion involves the U.S. market, the U.S. subsidiary will probably take the lead," says Tanaka. "But the bank account is still in one place, and the parent company is still the parent company." Millennium Pharmaceuticals Inc., Takeda's $8.8 billion acquisition, is an example of one acquired company that will have significant autonomy from the mother ship. According to second-in-command Anna Protopapas, Millennium will be in charge of Takeda's oncology development and dealmaking. There's still plenty of need to visit Japan, as Millennium's executives did a year before their deal with Takeda. But you're also less likely to need an interpreter. Several of the agents interviewed for this story don't speak Japanese anyway -- Tanaka, born in the U.S. to Japanese parents, is one exception -- and they don't need to, since most top executives as well as their business development staffs speak well enough. So what do the agents offer, exactly? For one, encyclopedic knowledge of every Japanese drugmaker, large and small. They might also help negotiate licensing deals, which can become quite intricate when regional rights and different indications come into play. Some boast extensive knowledge of hidden gems -- compounds in Japanese labs that are sitting idle and ripe for licensing. Sequel Pharmaceuticals Inc. of San Diego is built around an atrial fibrillation treatment, K201, it found at a tiny Japanese biotech with the help of consultant scouts. "I'd like to say it was more my brilliance, but I don't want to lie," says Brian Farmer, Sequel's vice president of corporate development. Sequel hopes to repeat the trick of its parent. Along with K201, it was spun out of NovaCardia Inc., a San Diego startup that Merck & Co. bought last year for $350 million in stock. Farmer and his scouts found K201 while at NovaCardia, which was built on the same principle: digging through Japanese labs to find a drug sitting idle. Indeed, to found NovaCardia, Domain Associates LLC venture capitalist Eckard Weber licensed a cancer drug from Kyowa Hakko Kogyo Co. Ltd. in 2003 and redirected it toward congestive heart failure. Even with his success, Farmer says agents' claims of hidden treasure should be approached with caution: "If you're in a hurry, those guys can help you, but there's no vast gold mine of clinical-stage compounds. A lot of people have focused there for a long time." Still, Farmer says he's looking for more compounds for Sequel, and
his search could take him back to Japan. He'll probably use an agent
but not one who chaperones him around. "All the signs are in English,"
he says. "It's easy to get around, and the food's great." |
When Ted Tanaka (pictured) goes to Japan, he travels light. 
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