12:00 AM
 | 
Mar 18, 2013
 |  BioCentury  |  Strategy

Japan's biggest biotech

KHK's scientist-CEO expanding beyond Japan with in-house tech, academic targets

Japanese pharmaceutical companies have historically been thought of as stodgy, insular and opaque, but that is changing fast. One year into the job, Kyowa Hakko Kirin Co. Ltd.'s CEO is building his company along lines that would sound familiar to any Western biopharma CEO: growing organically by combining the company's technology - much of which he helped discover - with targets out of academia.

Nobuo Hanai became president and CEO last March. To compete in today's environment, his senior management has concluded KHK must transform itself from a Japan-centric company into a global specialty pharmaceutical player.

To do so, the strategy has four basic components: creating new products based on KHK's core antibody-related technologies; strengthening its competitiveness in Japan in selected disease categories; expanding its business base in the U.S. and Europe; and building a biosimilars franchise.

KHK was created in 2008 through the merger of Kirin and Kyowa Hakko Kogyo Co. Ltd. The newco began its transformation in 2009 when it divested its food business under then-CEO Yuzuru Matsuda. In 2011, the company divested its chemicals business, leaving pharma and biochemicals.

As a result of both moves, total net sales have declined by 28% since FY08, and the company's market cap has hovered around $6 billion for the last four years (see "Kyowa's Sales by Segment").

In the same period, however, pharmaceutical sales have grown by 19% to ¥249.7 billion ($3.1 billion).

The company made its first move outside Japan with the 2011 acquisition of ProStrakan Group plc for £292 million ($474 million). The U.K. company provided an EU and U.S. sales force, as well as U.S. and EU rights to pain drug Abstral fentanyl citrate, a sublingual mucoadhesive formulation of the mu opioid receptor agonist from Orexo AB, which reacquired the U.S. rights last year (see BioCentury, Feb. 28, 2011).

Also in 2012, KHK entered the biosimilars business by forming a joint venture with Fujifilm Corp. called Fujifilm Kyowa Kirin Biologics Co. Ltd.

KHK released a new medium-term business plan at the end of January. By the end of 2015, the company hopes to launch five new pharma products in Japan and to grow global pharma sales by ¥10.2 billion (4%) to ¥260 billion.

Overall global sales are expected to grow by ¥24.9 billion (7.5%) to ¥358 billion. That includes KHK's biochemical business, which includes amino acids and nucleic acids for use in pharmaceuticals and their intermediates, health foods, dietary supplements and cosmetics.

As the plan comes on line, the company projects only modest growth this year: it forecasts net sales of ¥338 billion ($4 billion), an increase of 1.5%, and operating income of ¥55 billion ($647.1 million), up 4%.

The payoff is slated to come later, after 2015, when KHK hopes to launch its first three home-grown products outside of Japan: Poteligeo mogamulizumab, an anti-CCR4 antibody; istradefylline (KW-6002), an adenosine A2A receptor (ADORA2A) agonist for Parkinson's disease (PD); and KRN23, a human antibody against fibroblast growth factor 23 (FGF23) for X-linked hypophosphatemic rickets/osteomalacia (XLH).

Thus, the next several years are all about execution - including testing Poteligeo in multiple cancer indications - after which the big drivers for sales will be Poteligeo and istradefylline.

Not your average CV

Hanai doesn't have the typical CV for a Japanese CEO.

He did a postdoc in biochemical oncology at the Fred Hutchinson Cancer Research Center.

He discovered the company's Potelligent technology, which enables commercial-scale production of antibodies free of fucose on their sugar chains. According to KHK, lower fucose content results in up to a hundredfold increase in antibody-dependent cell-mediated cytotoxicity (ADCC) in animal models compared to conventional mAbs.

Potelligent improves Fc receptor binding by increasing a mAb's affinity to Fc gamma receptor IIIa (CD16a; FCGR3A; FcgammaRIIIa), the major Fc receptor for ADCC in humans. The technology also allows lower dosing while decreasing the cost of goods.

In 2003, Hanai started and ran KHK's BioWa Inc. subsidiary in Princeton, which was created to form partnerships in the U.S. with antibody developers interested in Potelligent.

Hanai also led the team that created the second KHK technology that BioWa licenses, called Complegent. It is designed to enhance complement-dependent cytotoxicity of antibodies via isotype chimerism, in which portions of IgG3 are introduced into corresponding regions of IgG1.

Hanai and his research team at KHK also discovered Poteligeo, KW-2871 and benralizumab (KHK4563), a humanized antibody against IL-5 receptor alpha (IL5RA; CD125).

Poteligeo, the first marketed drug that uses Potelligent, was approved in Japan in March 2012 for adult T cell leukemia-lymphoma. A companion diagnostic was approved at almost the same time.

Under a 2008 deal, Amgen Inc. has exclusive rights to mogamulizumab for all non-cancer indications outside of Japan, Korea, China and Taiwan.

KW-2871 is a chimeric mAb that binds to GD3 ganglioside, a cell surface antigen expressed on 90% of melanoma cells. KHK licensed it to Life Science Pharmaceuticals Inc. in 2007. It is in Phase II trials in malignant melanoma.

Under a 2007 deal, benralizumab is being developed as MEDI-563 outside of Japan and other Asian countries by the MedImmune LLC unit of AstraZeneca plc.

Benralizumab is in Phase II trials in Japan and Korea to treat asthma. MedImmune has it in Phase IIb trials in severe refractory eosinophilic asthma and in Phase IIa studies for eosinophilic chronic obstructive pulmonary disease (COPD).

Hanai noted KHK's last two presidents also were scientists. "The history of the company is the president is science-based," he told BioCentury. "This affects the character of the company. I'm not a marketing guy, so I have an eye to see the long-term future, not the short-term future."

Indeed, Hanai is focusing the company's strategy on organic growth based...

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