Unlocking the Future: Japan’s Cutting-Edge Innovations Revealed
- In recent years, ``economic security'' has been featured a lot in newspapers and news.
- In the 6th session, we will consider "pharmaceuticals," which is one of the priority areas for economic security.
- Open innovation, which is now the mainstream of technology development, and the pharmaceutical R&D ecosystem have no borders.
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In recent years, “economic security” has been featured a lot in newspapers and news. How does the globalizing “economy” relate to the context of national security? In this series, “What is economic security?Part of the content has been excerpted and re-edited from ” (edited by the Institute of Geoeconomics, International House of Japan/Toyo Keizai Inc.). What kind of national strategy should Japan take in the future in the areas of U.S.-China, Japan-U.S., and Japan-China relations, as well as digital/cyber, energy, health/medical, and production/technology infrastructure? Humans analyze and make recommendations.
In the 6th session, we will consider “pharmaceuticals,” which is one of the priority areas for economic security. We will discuss the current situation in which Japan is at a disadvantage compared to Europe and the United States in the drug discovery industry, and the importance of growth investment by VC (venture capital).
Startups and VCs play a leading role in drug development
Open innovation, which is now the mainstream of technology development, and the pharmaceutical R&D ecosystem have no borders. It takes time for emerging technologies to be implemented in society. Startups have an overwhelmingly high chance of failure.
Still, in drug development, startups are launched one after another based on promising seeds originating from academia, supported by VCs, and promising startups go public or are acquired by pharmaceutical companies (M&A), allowing emerging technologies to be implemented in society. An ecosystem leading to this has been established. Drug development is no longer possible without a discerning eye for technology, financial strength, and a detailed investment strategy based on the latest research trends in the life sciences, including in academia.
Both the United States, Europe, and Japan focus on pharmaceuticals as a priority area for economic security, but Japan is at a disadvantage compared to Europe and the United States. Of the world’s top 100 sales of ethical drugs, 47 are from the United States, 44 from Europe, and only 19 from Japan (as of 2021).
Major pharmaceutical companies account for 64% of global pharmaceutical sales, but startups account for 80% of the total number of drug discovery and development items. In other words, startups are leading the global drug discovery market. The fact that the mRNA vaccines were developed by startups BioNTech and Moderna was in line with trends in the drug discovery market.
Generally, it takes more than 10 years to develop a new drug through clinical trials and approval, and R&D costs range from tens to hundreds of billions of yen. Moreover, the probability of success is decreasing year by year.
The number of candidates needed for one drug to be approved was about 13,000 20 years ago, but now it is about 30,000. In other words, the probability of success is extremely low at 1 in 30,000. Successful drug discovery is becoming increasingly difficult and costs continue to rise. In order to recover investment, drug discovery with global expansion in mind from the beginning is essential.
Even during the coronavirus crisis, there are many candidates for therapeutic drugs, vaccines, and testing methods that have attracted great expectations as “originated in Japan,” but have not been put into practical use. The drug discovery business has a long development period, a low success rate despite the large amount of development funds, and no sales unless it receives regulatory approval, making commercialization one of the most difficult for startups.
Even after progressing to clinical trials, the Phase 1 trial evaluates safety and the Phase 2 trial evaluates efficacy in a small number of subjects, although there is still a long way to go before commercialization (sales). ~10 billion yen of capital will be required. However, in Japan’s drug discovery ecosystem, it is barely possible to obtain investments ranging from tens of millions of yen to hundreds of millions of yen from VCs.