Japan Gives a Hug to the Cell Therapy Industry

Original Source: George S. Mack of The Life Sciences Report (10/22/14)

Last year, Japan rolled out the red carpet for cell therapy developers with new legislation designed to expedite development of regenerative medicine solutions for all manner of disease. In this interview with The Life Sciences Report, former regenerative medicine consultant R. Lee Buckler, now a vice president with RepliCel Life Sciences Inc., puts his consultant's hat back on to talk about Japan's hospitable stance on proposed cell therapies. He provides an update on the meaning of the new law and discusses a small cohort of companies poised to reap the advantages.

The Life Sciences Report: (TLSR) Lee, you've been around the stem cell and regenerative medicine industry for quite a long time, and you have a special interest in the new legislation enacted by the Japanese Diet (parliament) back in November 2013. The intention of the law is to hasten clinical development of cell therapies and regenerative medicine therapies. A new cell therapy can get conditional approval in Japan for a limited time with clinical (Phase 2) data showing safety in humans. This new law goes into effect in November. Tell me your thoughts.

R. Lee Buckler: The entire industry is watching Japan and this new regulatory model with an incredible amount of interest. We're on the brink of seeing more detail around the regulations.

This initiative sets up a paradigm of conditional approval, where a company can bring an application to the Japanese regulators, and if it shows sufficient safety evidence and some evidence of efficacy, the company could get conditional approval to sell its product in the Japanese marketplace. This conditional approval would be for a seven-year window, during which the sponsor or sponsors would have an obligation to continue to file clinical data toward an eventual final market approval—a biologics license application (BLA) or the Japanese equivalent thereof. There is also some suggestion that during the seven-year window, some reimbursement will be attached to the product being sold on the market.

TLSR: In mid-September, Pluristem Therapeutics Inc. (PSTI:NASDAQ), an Israeli company, said it was going to pursue a development strategy in Japan. It hired consultants to help the company get into that market. The company's lead indications are peripheral artery disease, intermittent claudication, critical limb ischemia and muscle injury. But otherwise, I don't see a lot of other companies initiating programs in Japan. Do you see companies from the U.S., Canada or Europe getting into that regulatory environment?

RLB: I think most companies in the regenerative medicine industry have a tremendous desire to have a Japanese strategy right now. The problem is that a lot of companies in this sector don't have enough bandwidth, or capital, to execute on that.

However, a few are making Japan a high priority. Currently, less than a handful of companies have a clearly articulated Japanese strategy, and only that many again have begun executing on the opportunity.

Pluristem has made the announcement about pursuing opportunities in Japan, and Chairman and CEO Zami Aberman has done an admirable job of executing deals. The company has the partnership with United Therapeutics Corp. (UTHR:NASDAQ), which is conducting a Phase 1 study of the company's PLX-PAD (full-term placenta-derived adherent stromal cells) product in pulmonary arterial hypertension, which is a fatal disease and happens to be a very large market. Pluristem also has a nice deal in place in Korea with CHA Biotech Co. Ltd. (CHA:KOSDAQ).

Going it alone all the way to market is not a good option for most cell therapy companies, and with the change in the Japanese regulation there is an appetite for regenerative medicine products in Japan that foreign companies in the sector need to capitalize on.

TLSR: You said there were a few others. Give me an overview, please.

RLB: Athersys Inc. (ATHX:NASDAQ) has announced a desire to move into Japan, and I know it is putting boots on the ground in the country to develop a strategy there. Back in January, the company announced some new Japanese patents in graft-versus-host disease (GvHD) and autoimmune diseases, such as inflammatory bowel diseases.

Cytori Therapeutics Inc. (CYTX:NASDAQ) has always had strong relationships in Japan, and has been there for a decade. It has a subsidiary in Tokyo called Cytori Therapeutics K.K.

Also, my own company, RepliCel Life Sciences Inc. (RP:TSX.V; REPCF:OTCQB), has an existing relationship with Shiseido Company Ltd. (4911:TSE), which will launch a clinical trial in Japan for pattern baldness in the next few months. This is one of the few cell therapy deals—perhaps the only one to date—that involves putting manufacturing capacity in Japan.

The company that is potentially in the pole position in Japan at the moment, however, may be Mesoblast Ltd. (MSB:ASE; MBLTY:OTCPK). The company inherited a relationship with Japan-based JCR Pharmaceuticals Co. Ltd. (4552:TKY) when, in 2013, it acquired the Prochymal (remestemcel-L or allogeneic, adult human mesenchymal stem cells) product portfolio from Osiris Therapeutics Inc. (OSIR:NASDAQ). The Osiris/JCR partnership, which was put into place a number of years ago, had been stagnant until the reemergence of the Japanese market as an important one for the regenerative medicine sector. Now Mesoblast has "regenerated" that relationship, and announced on Oct. 1 that JCR would be filing a market approval application for Prochymal in Japan for the treatment of pediatric GvHD, following similar approvals in Canada and New Zealand.

TLSR: Will a company be able to take Phase 2 data generated in the U.S. or Europe or Canada, including positive proof-of-concept and safety data, and submit that in Japan, potentially getting a seven-year conditional approval?

RLB: That's an important question. The best intelligence I have, based on interacting with people who have been working with the Japanese, including Professor Chris Mason from University College London, indicates the answer is "yes." The Japanese government is intentionally welcoming ex-Japan data for conditional market approval in Japan.

If a company gets conditional approval to market a product in Japan, it will also have to generate pivotal data outside of Japan, because no patients in Japan will want to risk being involved in a placebo trial when they have the option to buy the product in the marketplace. The end result of the paradigm is that there will continue to be data generated outside of Japan, which will be brought into Japan to support eventual final approval.

TLSR: Thank you for your time.

RLB: Many thanks to you.

[Editor's Note: Between the time this interview was scheduled and the time it was conducted, Buckler left his consultancy firm to become vice president of business and corporate development at Vancouver-based RepliCel Life Sciences Inc., a cell therapy company.]

R. Lee Buckler, vice president of business and corporate development at RepliCel Life Sciences Inc., has been an executive in the cell therapy sector since 2000, beginning with Malachite Management in the Stem Cell Technologies group of companies. Most recently he was the managing director of Cell Therapy Group, a firm he formed in 2008 to do business development consulting for companies and organizations working in or interested in the cell therapy sector. His work included deal-targeting, transactions, market intelligence, competitive analyses, strategic assessments and market profile planning for companies ranging from top-tier multinationals to start-ups. Buckler served six years as executive director of the International Society for Cellular Therapy and just over two years as director of business development for Progenitor Cell Therapy. Buckler has a bachelor's degree in education, and a law degree. He is on the editorial advisory boards of the journalRegenerative Medicine and the BioProcess International magazine. He is also co-chair of the Alliance for Regenerative Medicine's Communications and Education Committee. He is an active industry commentator in publications and in social media and serves on numerous industry advisory boards.

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1) George S. Mack conducted this interview for Streetwise Reports LLC, publisher of The Gold Report, The Energy Report, The Life Sciences Report and The Mining Report, and he provides services to Streetwise Reports as an independent contractor. He owns, or his family owns, shares of the following companies mentioned in this interview: None.

2) R. Lee Buckler: I own, or my family owns, shares of the following companies mentioned in this interview: RepliCel Life Sciences Inc. I personally am, or my family is, paid by the following companies mentioned in this interview: RepliCel Life Sciences Inc. My company has a financial relationship with the following companies mentioned in this interview: None. I was not paid by Streetwise Reports for participating in this interview. Comments and opinions expressed are my own comments and opinions. I determined and had final say over which companies would be included in the interview based on my research, understanding of the sector and interview theme. I had the opportunity to review the interview for accuracy as of the date of the interview and am responsible for the content of the interview.

3) The following companies mentioned in the interview are sponsors of Streetwise Reports: RepliCel Life Sciences Inc., Athersys Inc. Mesoblast Ltd. is not affiliated with Streetwise Reports. The companies mentioned in this interview were not involved in any aspect of the interview preparation or post-interview editing so the expert could speak independently about the sector. Streetwise Reports does not accept stock in exchange for its services.

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Lessons from Toronto on the Future of Regenerative Medicine in Japan

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One of the early pioneers of cell therapy as we know it today is Professor Arnold Caplan commonly thought of as responsible for the identification and isolation of the mesenchymal stem cell.  Several years ago Dr. Caplan launched a summer course at Case Western Reserve University he called Business of Regenerative Medicine. This year it was hosted by the Centre for Commercialization of Regenerative Medicine (CCRM) in Toronto - the first time it's been hosted outside of Cleveland.  

I was fortunate to be invited to participate in this year's 7th Annual “Business of Regenerative Medicine: New Therapies, New Models”.  Signals blogger, Mark Curtis, has done a nice job of summarizing the highlights of this year's course.  

One of the most valuable take-aways for me was from a talk given by the inimitable Professor Chris Mason of University College London who has reportedly been advising Japanese lawmakers and regulators on their new proposed regulatory framework for regenerative medicine.  

Let me back up.  In June 2012, regenerative medicine was given priority status in the national Cabinet Secretariat’s Five-year Healthcare Innovation Strategy. In October 2012 Prof. Shinya Yamanaka of Kyoto University won a share in the Nobel Prize in Physiology or Medicine for his work in the development of iPS cell technology. This solidified regenerative medicine as an area of national pride and one of the areas in which Japan wanted to demonstrate innovative global leadership not just for scientific discovery but for the development of an industry around those discoveries. However, the Japanese regulatory framework which applied to cell therapies was widely recognized as being in desperate need of revision in order to support true commercialization of these products.  It made sense, then, that the Japanese started their innovation with the regulation. 

In November 2013, the Japanese legislature (the National Diet) passed legislation that revised Japan's Pharmaceutical Affairs Law and created the new Regenerative Medicine Law intended to be the groundwork for establishing Japan as a global leader in regenerative medicine in the years ahead. The import of this legislation was that it created a legislative mandate to create regulation that established an expedited development and commercialization pathway for regenerative medicine therapies while continuing to ensure and protect patient safety. The legislation passed with overwhelming support in both the lower and upper houses of the Diet.  Since then the policy makers and regulators at the MHLW and PMDA have been busily attempting to build a regulatory framework around this mandate.

There has been a lot written about this potentially ground-breaking approach to regulating cell therapies (see also here and here) but until now I have seen very little detail around how the mandate of the new law might be translated into operational regulation.  On that front, here is my brief second-hand synopsis of what I think I learned from Chris:

• conditional approval will be available to any cell therapies that provide evidence of safety and early signals of efficacy - this is reportedly not limited in any way by the indication or by product type 
• in other words there is no need to be addressing an orphan indication or for the product to be autologous in order to qualify
• at least in the early days of this implementation it is expected that this data will be 'imported' from trials conducted outside of Japan 
• once conditional approval is granted, a sponsor company will have 7 years to obtain final approval
• there is likely to be a requirement that a product be manufactured in Japan to obtain final approval 
• conditional approval will also come with reimbursement though there is no indication yet as to how pricing will be determined
• there is an expectation that the pivotal studies needed to obtain final approval will be done outside of Japan - since the product is already being sold in Japan, conducting a placebo-controlled trial would be next-to-impossible

There are a number of Japanese companies already in the regenerative medicine and cell therapy space that may be the initial and primary beneficiaries of this new regulatory paradigm.  Most of these are involved in the Forum for Innovative Regenerative Medicine (FIRM) established in 2011 to promote and support the commercialization of regenerative medicine in Japan. 

As largely an industry organization, FIRM really started emerging as a key national player with its involvement in the development of this newly emerging regulatory framework.  To quote FIRM, "Commercializing this state-of-the-art technology is not just a question of scientific and biotechnological prowess; the broad-ranging manufacturing capabilities nurtured by Japan’s industrial community will also be an indispensable element. Indeed, this is an opportunity for Japan to leverage its unique technologies to grow an internationally competitive industry."

Over the past months it has been interesting to observe how companies in Japan (even large multinational conglomerates) have responded to this new national mandate.  Many of them appear quite anxious to demonstrate to their shareholders, government, and peers that they have active programs in regenerative medicine and thus are supporting this national initiative.  This appears to be creating considerable appetite among Japanese companies, many of whom have not been in the sector to-date, for regenerative medicine technologies with which they can associate. 

As a result of this phenomenon, we expect there will be many regenerative medicine companies outside of Japan which will find wins for themselves as a result of this national initiative.  Naturally, companies in the regenerative medicine and cell therapy space outside of Japan are tripping over themselves to prioritize Japan as part of their corporate planning and to elucidate their Japanese strategy to investors and partners as a competitive advantage and potential earlier route to market if not return on investment.  Some of the companies distinguishing themselves early in this race are Cytori (NASDAQ:CYTX), Mesoblast (ASX:MSB), and Athersys (NASDAQ:ATHX). 

Cytori has long been in Japan and is making sure no one forgets that by press releasing the importance of their Japanese focus.  

Mesoblast inherited a Japanese licensee when they took over the Prochymal portfolio from Osiris.  JCR Pharmaceuticals has the license for the allogeneic mesenchymal stem cell (MSC) product in Japan to treat steroid refractory graft-versus-host disease (GvHD). Mesoblast has announced its intention to leverage this door to the Japanese market. Given that the product has already received approval in Canada and New Zealand for pediatric GvHD, it has been speculated that JCR may be the first company to secure conditional approval for a cell therapy in Japan.

Not to be outdone, Athersys announced in January, "We are actively evaluating the potential for accelerated development of MultiStem cells in a number of therapeutic areas in Japan, and will seek to establish strategic collaborations to assist in the rapid development of products that will help Japanese patients." 

One of the sleepers in this race may be an emerging regenerative medicine company named RepliCel Life Sciences (TSXV:RP).  In May 2013 RepliCel announced a Collaboration and Technology Development Transfer Framework Agreement with Shiseido Company, Limited (Tokyo Stock Exchange Code: 4911) for an exclusive geographic license for RepliCel’s RCH-01 hair regeneration technology.  Shiseido has an exclusive geographic license to use RCH-01 in Japan, China, South Korea, Taiwan and the ASEAN countries.

This deal garnered RepliCel ~$4M in upfront cash and was valued at over $30M in milestone payments and sales royalties.  Perhaps more importantly, since that time the companies have executed a tech transfer agreement, RepliCel was granted a key patent in Japan, and Shiseido recently celebrated the opening of its new cell-processing facility at the Kobe Biomedical Innovation Cluster (KBIC).  This facility will focus on the commercialization of RepliCel’s RCH-01 hair regeneration technology for Shiseido's markets.

In speaking with management, I understand Shiseido has plans to conduct its own clinical trial of the product in Japan and that the companies are collaborating closely (through a joint development committee) on the continued improvement of the technology to ensure a single product emerges.  This means there will be data from two concurrent trials (RepliCel's proposed phase 2 trial in Germany and Shiseido's proposed trial in Japan).

My own take on this is that it seems RepliCel/Shiseido may be well positioned to take advantage of early conditional approval of this technology in Japan in a way that generates near-term revenue while they continue to generate clinical data and optimize the treatment (dose, frequency) and manufacturing.  In due course this data will be available to RepliCel to use in licensing discussions for non-Shiseido markets.  Furthermore, RepliCel/Shiseido have already solved the anticipated hurdle of having manufacturing in the country as a predicate to eventual final approval.

The fact that their Shiseido collaboration may position RepliCel as a leader among foreign companies taking early advantage of this new regenerative medicine framework in Japan has not been lost on management (see here) but given RepliCel's expanded technology platform and product/clinical pipeline combined with the 3rd party validation and unique attributes of the Shiseido deal, I'm not sure the message has sunk in with investors yet given the ~$30M market cap.

I'll be watching the Japanese regenerative medicine race with great interest over the next few months.  It has been reported that there will be a MHLW-sponsored public comment period for the new regenerative medicine law announced soon. All stakeholders are encouraged to provide feedback on the new legislation aimed at regenerative medicine therapies. 

Also of note will be to monitor how other regulatory agencies respond.  Already we have seen moves toward expedited or conditional approvals (in limited circumstances) in Europe and potentially expedited pathways (e.g., breakthrough designation) in the U.S.  Other jurisdictions such as South Korea, Canada, and Australia have apparently taken a more functional approach to expediting certain cell therapy product approvals but on a case-by-case basis.