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

Image: Keio University Hospital Building 1

Investing in regenerative medicine ventures holds wonderful potential 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 Keio University Graduate School of Medicine Dean, serves as a 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 with cellular drugs, it will save many suffering patients, 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 Mothers-listed companies. Yukiko Kato of SBI Investment, who invested in SanBio, gained 6.6 billion yen in capital gains from that investment alone and was ranked number one in the "Forbes Japan" list of most influential venture investors in January 2016. SanBio's cellular medicine has not yet received pharmaceutical approval; they are aiming for a regulatory application 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 no treatment has 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; and (3) the 2014 amendment to the Act on Securing Quality, Efficacy and Safety of Products Including Pharmaceuticals and Medical Devices (Pharmaceutical and Medical Devices Act), which allowed for conditional early approval of regenerative medicine products such as cellular medicines, shortening the time to market.

(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 at RIKEN, which is said to be the closest to practical application for regenerative medicine using iPS cells, Healios has entered into a patent licensing agreement with RIKEN to receive 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 the West; while progression can be suppressed, no fundamental treatment for the disease exists. Healios's development pipeline also includes liver regenerative medicine exclusively licensed from Yokohama City University, and it is highly evaluated 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 here 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 so-called "blockbuster" products—those achieving sales of 100 billion yen or more on their own—have appeared yet. 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) 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 at around 20 billion yen. If the indications expand 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 Pharmaceutical 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) before the drug is approved and listed for insurance coverage. Conducting clinical trials requires funds ranging from hundreds of millions to billions of yen even up to Phase 2, and compared to IT-related ventures, the funds required by drug discovery ventures in the development phase were exceptionally large. The biggest risk for drug discovery ventures is that safety, efficacy, or superiority over existing drugs cannot be verified as a result of clinical trials, leading to the termination of trials or failure to reach regulatory application. However, an even earlier problem was that trials often could not be completed by the deadline because subjects did not gather as planned, making it impossible to recover funds through IPOs or corporate sales within the typical 7 to 10-year investment period of venture capital. 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 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 marketing under insurance coverage. As a result, the development costs required until 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 area.

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 with over 100 groups of ventures from both inside and outside Keio applying for the 3rd contest in fiscal 2018. Furthermore, in November 2018, the Office of Innovation and Entrepreneurship was established to accelerate industry-academia collaboration, listing venture cultivation as one of its core pillars.

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 globally, and there are high expectations for the activities of these ventures. K Pharma is a venture company established to commercialize 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 drug discovery effective 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 Assistant Professor Shin Hato of the Department of Ophthalmology, School of Medicine. Heartseed is a venture company established to commercialize the research results of heart regenerative medicine conducted by Professor Keiichi Fukuda of the Department of Cardiology, School of Medicine. 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 (former Dean of the School of Medicine) and Project Assistant Professor Yumiko Matsubara of the Clinical and Translational Research Center, School of Medicine. Metasela is working on the practical application of research results on heart disease treatment methods using fibroblasts by Takahiro Iwamiya, a former Project Research Associate at the Institute for Advanced Biosciences (currently a part-time staff member). Restore Vision is a venture established by Professor Tsubota, Project Assistant Professor Toshihide Kurihara, and Project Instructor Yusaku Katada of the Department of Ophthalmology, School of Medicine, and is developing gene therapy drugs for visual regeneration.

Keio Innovation Initiative (KII), where I serve 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.