By Jennifer Van Brunt
Contrary to conventional wisdom, it doesn't have to take three or four years for a biotechnology company to establish a research-based collaboration with a major Japanese pharmaceutical house. For tiny RiboGene Inc., it took a mere 13 months to get its deal with Dainippon Pharmaceutical Co. Ltd. off and running. In fact, it took privately held RiboGene no longer to consummate its alliance with Dainippon than it did to finalize its collaboration with the U.S.-based giant Abbott Laboratories (NYSE:ABT). "That doesn't mean that the Abbott deal took a long time, but rather that the Dainippon deal went quickly," explained Charles Casamento, RiboGene's chairman, president and CEO.
The difficulties of partnering with Japanese pharmaceutical companies are legendary in the biotech sector. The barriers run the gamut from significant differences in corporate culture to the vast expanse of ocean that separates Japan from America. These challenges to doing business, among others, go a long way toward explaining why there are so few collaborations between biotech companies and Japanese pharmaceutical firms. Year after year, they represent a mere 15 percent or less of all the new research and development-based partnerships formed by biotechs on a global basis. In fact, they are on par with the percent of new deals biotechs sign with U.K.-based pharmaceutical companies — even though there are numerous Japanese companies and only a handful of U.K. pharmaceutical giants today. (See the graph on p. 2 for a comparison of biotech's big pharma partners, based on country of origin of the big pharma company, from 1994 through the present.)
RiboGene's Japanese collaboration is just the latest in a series of alliances the Hayward, Calif.-based biotech firm has struck over the last several years. It's also signed on three biotech partners — Pharmacopeia Inc. (NASDAQ: PCOP), ArQule Inc. (NASDAQ:ARQL) and Trega Biosciences Inc. (NASDAQ:TRGA). Together with the Abbott alliance, RiboGene has signed up five corporate partners in the last three years. RiboGene's research and development efforts are centered on one approach to fighting bacteria, fungi and viruses: discovery of anti-infective compounds that inhibit pathogen-specific translation mechanisms (i.e., the assembly of amino acids into proteins).
According to its initial public offering prospectus, which was first filed in late October 1997 and is still pending, RiboGene's antiviral program focuses on the hepatitis C virus (HCV), for which it has one target (HCV IRES, or internal ribosome entry site) in the lead discovery phase and another (HCV NS5A/PKR, which centers on the interaction between HCV's non-structural protein, 5A, and a human RNA-activated protein kinase) in the assay development phase. In its antibacterial program, RiboGene has two targets — deformylase and ppGpp (guanosine tetraphosphate) degradase — in the lead discovery phase and several more in the assay development phase.
The Abbott alliance, which was signed in April 1996, is focused on exploiting this technology to produce new drugs for treating fungi. At this point, there are two targets, EF3 and GCN4, at the lead optimization phase of development and several others that are in various phases of development. The Dainippon partnership targets bacteria, especially drug-resistant bacteria; and the biotech deals all center on combining respective technologies to improve the search for new drugs for undisclosed pathogenic organisms. For instance, in its collaboration with Pharmacopeia, signed in October 1997, RiboGene will screen Pharmacopeia's small molecule combinatorial chemistry libraries to identify drugs for two undisclosed pathogens. If any promising lead compounds pop up, the companies will then sit down and negotiate a definitive development and commercialization deal. But, like the other two biotech collaborations, this one is structured first and foremost as a technology-sharing arrangement.
For a good number of years, Japanese alliances with biotech companies (or with larger pharmaceutical houses, for that matter) tended to focus on in-licensing by the Japanese partner of late-stage (or even FDA-approved) drugs for development and marketing in Japan. That still occurs to this day, but since 1995 or so there's been a tendency for the Japanese pharmas to seek partnering arrangements at the very early stages of product development, or even at the discovery stage.
And what better place to identify potential partners than at a conference set up specifically for that purpose? That's how RiboGene and Dainippon met — at a Japan-U.S. biopartnering meeting in October 1996. RiboGene's Casamento explained that one of his company's research scientists got to chatting with a Dainippon representative during a break in the sessions. According to Casamento, that representative, the research planning and licensing person, is responsible for identifying new products and technologies for Dainippon. He apparently was attracted to RiboGene's science and technology, for two months later Casamento and several RiboGene scientists were in Osaka for the first meeting between the two companies.
On the surface, it looked like a good match. One of Dainippon's major areas of interest is infectious disease; it's been developing and marketing quinolone antibacterial drugs for more than 30 years. In 1997 about 25 percent of its pharmaceutical revenues came from the sale of anti-infectives. And RiboGene focused on discovering compounds that specifically interfere with or inhibit protein production in pathogens — including drug-resistant bacteria.
The deal was finalized 13 months later, in January 1998. The companies racked up frequent flyer miles in the interim, meeting a total of 11 or 12 times in either Osaka or Hayward. "The first meetings were all about the science," Casamento explained. Dainippon's head of antibacterial research was convinced there would be value in bringing the two companies together. "They were very interested in our science and our approach [to drug discovery]," Casamento said. "We zeroed in on that early in the discussions."
Once that was achieved, it was a question of establishing the type of relationship that would be formed. "We wanted Dainippon as a true partner," Casamento continued. The companies had agreed on the basic terms of the relationship by the early fall of 1997, and by January 1998 the deal was done. Dainippon bought $2 million in RiboGene equity and agreed to pay the California biotech firm up to $2 million per year for three years in research support. In exchange, Dainippon gets exclusive worldwide rights to develop and market antibacterial compounds discovered using two of RiboGene's principal antibacterial targets. As well, Dainippon sent one of its research scientists to Hayward to work on the project.
According to Casamento, the general dearth of collaborations between Japanese pharmaceutical houses and American biotech companies "might not be a reluctance on the part of the Japanese to deal with Americans so much as it is the other way around. Americans tend to want to get down to terms early in partnering discussions. They're impatient, and want to know right away whether or not they're wasting their time. But dealing with Japanese companies requires patience. The Japanese build relationships on trust and understanding."