It’s April, which in Japan means baseball is back, and cherry blossoms are in full bloom (side note: April really is the best time to visit Japan for those considering a trip). April is also the start of the 2nd quarter, and at Locust Walk Japan we have noticed a marked increase over the past few weeks in the number of western companies reaching out to discuss their interest in doing “a regional partnership” in Japan/Asia. This is likely due somewhat to timing, as we are now between the craziness known as the JP Morgan Conference held in January, and the upcoming international partnering meetings such as BIO International in June. However, I also sense an acceleration of interest from western companies – and not simply US companies – in partnering their assets in Asia. There are several factors adding fuel to the trend to seek Asia partnerships, but the primary driving factor is simple: western companies are looking for Japan/Asia partners for non-dilutive funding and validation of their technology, and do not want to give up commercialization rights in their core markets (US, Europe). And due to the hundreds of IPOs in the biopharma space over the past few years in the US alone, there are many new companies with assets to partner. (Also read:  It’s Not You, It’s US: The Value of Keeping US Rights in Biopharma Partnering)

When considering a potential partnership in Japan and other countries in Asia, a western company needs to first consider the capabilities of Japanese companies, both in terms of track record in the specific therapeutic area, as well as their development and commercial footprint in the region ex-Japan. Most of the larger Japanese biopharmas have operations across the key countries in Asia, including China, Taiwan, Korea and Thailand. Some however have capabilities only in specific countries. For example, Business Development executives at Ono Pharmaceutical, who has become one of the leading oncology companies in Japan due primarily to the success of their PD-1 immuno-oncology therapy OPDIVO®, are quick to point out that Ono has Asia operations only in Japan, Taiwan, and Korea. Therefore, if a company is looking to to do a regional partnership with Ono, they will need to separately look to partner for China and other countries in South East Asia

Ono is not alone among Japanese companies not actively building out a commercial franchise in China. Other mid-size companies such as ASKA Pharmaceutical and Kissei Pharmaceutical have decided (at least for now) not to aggressively enter China, while larger firms such as Shionogi and Mitsubishi Tanabe are still working to establish a China foothold. While the promise of a pharmaceutical market serving 1.2 billion people is certainly enticing, China poses many challenges (including cultural and political) for Japanese companies seeking to expand into China. I have some direct experience in this regard, having established the initial China operations for Solasia Pharma during my time as CEO of that firm. I had never lived in China, and was not fluent in the language. Simply finding talent to fill out the core management team who would fit in well with the Japan team and culture was a very challenging task. Solasia was eventually successful in finding talent, and are presently busy building up their presence in China.

On the other hand, Japanese firms have had more success establishing operations in other countries in Asia such as Korea and Taiwan. My personal sense is that these two countries may have more cultural and business similarities with Japan compared to China. Increasingly, Japanese companies are expanding into other markets in South East Asia including the Philippines, Thailand, Vietnam and Indonesia.

All of the above have implications on which territories are included in a deal with a Japanese company that involves a license grant for Japan and other countries in Asia. In many cases, China will be specifically excluded from the defined “Territory”. Locust Walk has represented a number of clients who have structured their Asia deals to include Japan and Asia countries, but exclude China. Recent examples include Locust Walk clients Regeneron (partnership with Mitsubishi Tanabe for fasinumab, anti NGF mAb for pain), and Pieris Pharmaceuticals (collaboration on PRS-080, anti-hepcidin mAb for anemia associated with chronic kidney disease) to ASKA Pharmaceutical. It will be up to these firms to consider if and when to approach a separate partnering initiative for China.

At Locust Walk, we assist our clients with regional deals that involve Japan, China, Korea and other countries across Asia. We will be attending BIO International in June and would be pleased to set up time to meet. Please contact us if you would like to discuss how we can support your company: steve@locustwalk.com