The elusiveness of the Japanese deal

While biotech companies have shifted to corporate partnering over the past two years as equity capital became unavailable, the return of a somewhat more open environment is likely to lure some companies away from the path of shared development.

But no matter how wide open the equity spigot - and few think it will run full blast - one reality of worldwide development won't change: companies will still need partners to enter the Japanese market and Japanese companies will be increasingly attracted to the innovative products coming out of biotech companies.

Partnering between Japanese pharmaceutical and U.S. biotech companies has been limited, constrained by the ups and downs of the Japanese economy and by the cultural gulf between the two sides. Activity has been at fairly low but steady levels over the past few years, according to G. Steven Burrill of Burrill & Craves in San Francisco. In the first quarter of 1995, Japan accounted for 12 percent of corporate alliances versus 28 percent in Europe and 60 percent in North America.

No hurry

"Companies can get deals done with U.S. or European companies faster than with Japanese companies, so they make it a lower priority," he said. "Even Korea, Singapore and Taiwan deals are easier.

"Coming from the other direction, the Japanese are convinced that American companies will have to come to them anyway if they want to enter Japan. They're not in a hurry to have large stakes in capital-consumptive U.S. companies. Still, I continue to be amazed at how little activity there actually has been by Japanese companies over the last four or five years - that they haven't taken the opportunity to snap up the significant opportunities that exist."

In part, that's because of the lack of an R&D tradition in the Japanese pharmaceutical industry. "For the most part, Japanese pharma companies are marketing companies rather than R&D companies," said Koichi Itoh of Venca Management, a San Francisco firm that helps put together deals.