Japan has never appeared to possess the attributes usually associated with building a biotech sector, in particular the risk-taking entrepreneurialism that requires a willingness to abandon secure jobs, to throw large sums of money at unproven ideas, and to fail and try again. Nevertheless, a handful of companies has sprung up.

This beginning is fragile, as much of the new management lacks experience; venture funding is limited and many VCs lack the expertise to evaluate new companies; and the service infrastructure of attorneys, accountants, management consultants and other support functions is virtually non-existent.

In addition, the inevitable attrition of these early players will test the staying power of the risk-averse Japanese investor.

Nevertheless, many Japanese pathfinders say that good science at university and government laboratories can be unlocked over time to feed the interest of entrepreneurs and investors who will become more seasoned and increase in numbers over time.

While Japan may be seeing its first crop of biotech seedlings, Shingo Kano, manager of the life science group at Nomura Research, pointed out that Japan took a crack at biotech once before - in the 1980s. "The first biotech boom happened because of genetic engineering, recombinant proteins," he told BioCentury.

Hiromichi Kimura, president and CEO of HuBit Genomix Inc. (Tokyo), a startup focused on SNP analysis of the Japanese population, noted that U.S. biotech successes in the late '80s, such as Amgen Inc. (AMGN) and Genentech Inc. (DNA) stimulated interest in biotech among flagship Japanese conglomerates, who were enjoying an economic bubble and were looking for ways to diversify. "Everyone at that time had three areas of focus; biotech, new materials and electronics. Unfortunately, they could not recruit the right people in a timely manner," he said.

The companies did not have flexible compensation systems, and their job offers were not attractive to good scientists with academic positions, Kimura said. "Also, many of their projects, mainly biopharmaceuticals, were killed when they found that the outcomes of these projects were already patented by the Americans. They underestimated the risk of preceding patents, and this defeated their programs and quickly cooled the biotech fad among Japanese," he said.

Although estimates vary, Japan's new wave of interest in biotech has spawned about 20 biotech companies, many formed in the last two or three years as attitudes toward entrepreneurship and enthusiasm over new economy business have improved. Kano put the number of companies at 18, two of them independent and the rest spinouts from laboratories or large companies (see "Getting Started", A2).

Ichiro Nakatomi, president and CEO of Nanocarrier Co. Ltd. (Kashiwanoha, Japan), a drug delivery startup established in 1999, estimated that five or six of the companies are developing drugs, while others are producing chips or other genomics enabling devices, or performing services such as SNP and protein analysis. For example, Dragon Genomics Co. Ltd., a subsidiary of Takara Shuzo Co. Ltd. (Kyoto), does gene sequence analysis, while Helix Research Institute Inc. and Protegene Inc. (both in Kisarazu) do cDNA analysis.

"Biotech is a tiny world in Japan. The venture business is so young, and the science is so raw. Companies are few in number and not well capitalized, and there are limited managerial resources," noted Susan Clymer of NichiBei Bio Inc. in San Francisco, which does development consulting for U.S. companies doing business in Japan.

Management experience

One of the critical issues for the formation and survival of a Japanese biotech sector is management, as the traditional Japanese corporate culture is widely seen as a polar opposite of the methods and mindset for building a biotech industry.