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by Cynthia Robbins-Roth, Ph.D.
Network Drives Opportunity
How Frustrated Firm ReqMed Created New Biotech Strategy
By Cynthia Robbins-Roth
BioWorld Today Columnist
A great example of networking driving an intriguing business strategy is Tadashi Matsumoto's company, ReqMed Co. Ltd. I met Matsumoto, a Kyowa Hakko scientist turned business development manager, in the 1990s. We collaborated to bring a new clinical area of study into his company through alliances with U.S. biotech and academic teams, but the crashing Asian stock markets led the conservative corporation to nix the move.
His employer's reticence helped nudge Matsumoto to take the entrepreneurial leap. Eight years ago, on the birthday of Florence Nightingale - the mother of modern nursing - he created a new company, ReqMed, to help bring required medicine for all who request it.
Kyowa Hakko helped co-found ReqMed, which became independent in 1999. Matsumoto built an international network that identifies intriguing product and technology opportunities, then acts as a matchmaker to build alliances with big pharma companies in Japan.
ReqMed has brokered five large deals since 1999 and many small supporting collaborations. Matsumoto's role in the 2004 deal between FibroGen Inc., of South San Francisco, and Yamanouchi (now Astellas) led to last month's deal with its hefty $300 million up-front fee and $50 million equity component.
His success convinced Nomura Securities in 2000 to help raise about $30 million for the first Japanese life science venture fund. (The name? Life Science Venture Fund.) In 2004, the $11 million Fund II was raised. Thirty companies in the U.S. and Japan are in the portfolio, including two that went public - Cytokinetics Inc., of South San Francisco, and Oncotherapy Science in Japan.
Bridging Drug Development Gap
The most recent addition to the ReqMed plan is a drug development component. Matsumoto came across many early stage companies unable to raise sufficient venture money to move their promising compounds into clinical testing and attract serious strategic partners.
He decided the answer lay in using his strengths in networking and licensing to create a cost- and time-efficient path to early proof of concept (POC) in man - Phase I and early Phase II studies. A good data package would support a partnering deal with much better terms, with higher up front and higher royalties, than a preclinical compound.
ReqMed's drug development team works with the group that created the compound, providing the strategy, paying for and coordinating the clinical trials in Japan (required for Japan sales), and then acting as the business development (BD) group to obtain an Asian corporate partner.
Matsumoto's network allows ReqMed to move preclinical packages forward into the clinic very quickly. A key partner is Fuji Biomedix, a contract research organization with a preclinical facility, a Phase I clinic and a reputation for speedy, high-quality work.
The strategy, based on profit-sharing, means ReqMed expects to contribute about $3 million and management over about three years, providing a significant increase in project value that is recognized in partnership deal terms. ReqMed doesn't ask for patent rights for existing technology.
Matsumoto believes that allows ReqMed to generate better returns in a shorter time frame than other approaches. He is focused in Asia for clinical development and partnering, working with biotech groups that want to retain North American and European rights for themselves or other partners. At some point, ReqMed might expand globally.
Serendipity Working In ReqMed's favor
The drug development strategy is being tested on several programs. The most developed project is exploring with bene Pharma Chem, of Germany, the use of sodium pentosan polysulfate (SPP) to treat osteoarthritis.
After World War II, Germany was not able to import heparin, used to prevent blood clots. The founder of bene Pharma Chem discovered that SPP, derived from the beech, had an activity similar to heparin. The product has been on the market for decades, providing reams of human and manufacturing data.
At Nagasaki University, professor Niwa, a colleague of Matsumoto with a screening assay to identify prion inhibitors, found that SPP was an effective prion blocker. Niwa asked Matsumoto to help set up a collaboration with bene. Along the way, Niwa found a paper by an Australian veterinarian, Dr. Ghosh, describing potent anti-arthritic properties of SPP in animals. Ghosh was running a pilot study in humans and seeing promising early results.
Suddenly, a very early stage prion project presented a chance to move rapidly into clinicals for a large market - arthritis. ReqMed jumped into action, preparing the investigational package for KIKO (Japan's FDA), and developing a subcutaneous formulation for the formal Phase I. The drug appears to improve circulation in the knee, block local inflammation and encourage hylauronic acid synthesis in the joint.
Once a clinical dataset is in place, ReqMed swings into business development mode. A consummated licensing deal will bring ReqMed 50-50 profit-sharing of all payments, including up front, milestones and royalties, and reimbursement of business development expenses.
A very intriguing market opportunity with an accelerated path to POC - all based on Matsumoto's personal network supporting very early stage university work.
ReqMed's attention deficit hyperactivity disorder (ADHD) program with PsychoGenics Inc., of Tarrytown, N.Y., also is a result of Matsumoto's network. Back in his Kyowa Hakko days, Matsumoto met Emer Leahy while exploring a potential partnership with her company.
When Leahy became CEO of PsychoGenics recently, she recruited Matsumoto to develop and partner an ADHD drug with lots of existing clinical data in a different indication. PsychoGenics is working with the FDA to move the drug forward in U.S. Phase IIa studies, and ReqMed is working with KIKO to enter Japanese Phase I. ReqMed believes that the dual dataset will support a strong Asian partnership, which will help PsychoGenics move forward in other markets.
ReqMed made the introduction that led to PsychoGenics' recent deal with Sosei Co. Ltd. and is acting as business development lead to promote the company's unique animal testing system for neurological drug testing.
The next two years are very important for ReqMed, during which it hopefully will generate evidence of a successful model in positive POC data and complete a deal. The arthritis program might generate Phase I data this year to support a partnership, and the ADHD program may have clinical data by early 2007.
Matsumoto wants that proof to drive an initial public offering. He points out that while the existing product portfolio has a great potential for success, drug development is inherently risky - he needs to diversify. And that means more money than ReqMed will generate through its venture and business consulting.
Finding compounds is no problem. I have many friends within the network with interesting compounds. The challenge is cash to expand, he said. To date, ReqMed has raised more than 1 billion yen (US$8.8 million) from Japanese venture investors. Matsumoto remains the largest single shareholder.
Happy Birthday, ReqMed!
-- May 8, 2006
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by Cynthia Robbins-Roth, Ph.D.
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