Like many other regions in the world, Japan is facing a demographic problem that threatens to pose enormous challenges for their national healthcare system in the years ahead, as the elderly segment of the population expands dramatically. According to analysis by the Ministry of Health Labor and Welfare (MHLW) in Japan, the percentage of the population that is over the age of 65 is expected to nearly double in the coming years. Given that the aging segment of the population requires greater healthcare resources and that this shift will place substantial pressure on the national healthcare system in Japan, it is understandable that the trend has received considerable attention from policy makers.
As demand for healthcare resources continues to escalate, over the past several years the political leadership in Japan and the MHLW have given consideration to areas of technology that may enable more effective treatments, while also reducing overall healthcare costs and the economic impact on society. Traditional medical approaches have thus far had limited impact in many diseases that become more prevalent in an aging population, and have failed to address a range of areas that represent substantial unmet medical needs that impose a high social burden, as well as enormous direct and indirect costs to society.
New technologies could change that, and the MHLW is committed to promoting the development of new approaches that could provide more effective solutions for conditions like stroke, heart disease, and a range of other areas. One area in particular, regenerative medicine, may have a dramatic impact. However, despite some exciting technological achievements in recent years, there has been only modest clinical trial activity in Japan over the past decade. This has threatened to impede the development and delivery of new therapies into the Japanese healthcare system.
Last year, policy makers announced an important new initiative that could change all that. Last spring, the MHLW and PMDA (the equivalent of the U.S. FDA in Japan) announced the concept of a new framework designed to dramatically accelerate the development of new regenerative medicine therapies that could help address areas of significant unmet medical need. In November 2013, the National Diet passed the legislation that revised Japan's Pharmaceutical Affairs Law and also established the new Regenerative Medicine Law that could help establish Japan as a global leader in regenerative medicine in the years ahead. This important legislation was passed with the primary goal of expediting the development path and commercialization of 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.
The rest of the world is watching and should be cheering the visionary move. In a recent keynote speech at the World Economic Forum in Davos, Switzerland, Prime Minister Shinzo Abe reiterated Japan's national commitment to leadership in regenerative medicine, saying, "We will make it possible to generate cells (i.e. cell based medicines) at private sector factories." Clearly Japan is looking to benefit from the initiative in terms of helping its citizens obtain access to better medicines, but also because of the economic development activity it might drive.
First, let's take a look at the changes in Japan and why the country is in the global spotlight with their initiatives. Then we'll briefly take a look at three regenerative medicine companies that may ultimately benefit from the new initiative: Athersys, Inc. (NASDAQ: ATHX), Mesoblast Limited (ASX: MSB), and Cytori Therapeutics (NASDAQ: CYTX), that are each showing an active interest in Japan and well-positioned to be a part of the regenerative medicine revolution there.
Historically, Japan has not been typically viewed as sitting at the forefront of innovation, particularly in biotechnology; they are, however, a country that has shown an acute ability to research, optimize and effectively industrialize emerging technologies. That dynamic in the area of biotechnology is changing, though, fueled in part by the national interest resulting from the paradigm bending discovery of 2012 Nobel Prize co-winner Shinya Yamanaka that had a positive impact on the country's psyche. Addressing the thorny ethical issues surrounding embryonic stem cells, Yamanaka and his colleagues ascertained, then demonstrated that induced pluripotent stem cells (iPSC's) could be derived from normal adult cells, potentially eliminating the need to harvest embryonic tissue, representing a truly landmark breakthrough in the field.
Japan's new Regenerative Medicine Law serves to shepherd new cell therapies, and contemplates a range of such technologies, including iPSC based and other approaches. This new framework could create a more efficient path for medicines to reach patients, and the market. In the broadest view, the Regenerative Medicine Law realigns the thinking and process of clinical trials for stem cell technologies. Currently, most developed countries are quite rigid in requiring three stages of clinical trials, including lengthy mid- and late-stage trials before new therapies are even considered for approval. With that structure, it's not uncommon for a drug to take a decade to reach commercialization. Japan's new policy requires an early stage clinical trial (call it a Phase I or small Phase II) at the minimum to confirm safety of the therapy and provide some plausible evidence of efficacy. Rather than requiring that the therapy then be evaluated in subsequent trials before making it available to patients, Japan's new law will allow for a "conditional approval" enabling the product to be brought to market, and for the product to obtain reimbursement in an accelerated manner.
Access visual representation of Japan's conditional approval here: http://www.tdmfinancial.com/emailassets/athx/PMDA_Approval.png
Conditional approval by no means implies that regulatory approval process is over. It simply allows the therapy to be made available to patients earlier in the process, and for the sponsor company to begin commercialization and obtain reimbursement. Following conditional approval the sponsor company will continue to monitor and evaluate the clinical performance of the therapy for additional safety and efficacy data. Upon completion of the necessary post-conditional approval studies, the owner may file for a final approval, in a manner similar to the traditional approval pathway.
Which companies may benefit from this new regulatory framework? There are several logical possibilities. To identify the potential winners, it helps to know where the largest areas of significant unmet medical need are in Japan and who might be well positioned to address them. Second, it's worth examining which regenerative medicine companies are already active in Japan, as that may provide such companies with something of an advantage.
At the top of the healthcare priority list is stroke, which represents the leading cause of death, and the leading cause of serious disability in Japan, and is a major challenge for the national healthcare system. Current standard of care for ischemic stroke patients relies on administration of the anti-clotting factor tPA, but the drug must be given to the patient within the first several hours after a stroke and most stroke victims don't get to the hospital in time. Many strokes experience what physicians refer to as "wake-up" strokes, meaning the stroke happened sometime in the evening, but the patient wasn't aware of it until the next morning, effectively missing the window for potential treatment with tPA. Currently it's estimated that only 5 – 8% of stroke patients actually get treated with tPA, unquestionably ranking it as one of the largest areas of unmet need in medicine today.
The standard of care for stroke patients may soon change however. One prominent regenerative medicine company that is visibly active and leading in the stroke area is Athersys (NASDAQ: ATHX). Athersys is developing MultiStem(R), a proprietary "off-the-shelf" stem cell medicine that is distinctive among stem cell medicines, since the product can be manufactured on a commercial scale, kept conveniently on site at the hospital and is administered to the patient like a traditional biologic (via IV or local injection), without the need for any tissue matching or immune suppression. These characteristics have the potential to take stem cell medicine out of the "procedure" category, and put it squarely in the scalable "biotech drug" category.
In contrast to the narrow window for tPA, the company has published data from preclinical studies with independent labs that has demonstrated that administration of MultiStem even a few days after a stroke enabled virtually complete recovery. The company is currently engaged in an international Phase 2 clinical trial at leading stroke centers in the United States and the United Kingdom that involves treating patients 1 – 2 days after a stroke has occurred. By extending the window out to something that is far more practical than tPA, and by offering up the potential to accelerate recovery and healing in some powerful ways, the company could redefine stroke medicine as we know it and provide help to many more patients. It could also make Athersys a household name – both in Japan and elsewhere.
In addition to stroke, the company has other clinical programs of note, including a Phase 2 program exploring the potential for MultiStem to help patients suffering from ulcerative colitis that have previously failed other forms of treatment. This program is part of a partnership with Pfizer Inc. (NYSE: PFE), which is running the Phase 2 trial. Pfizer has extensive experience in the Inflammatory Bowel Disease area, a disease class including ulcerative colitis and Crohn's Disease. The partners expect to have data in late April or May from the trial, which could provide some important clues to the potential for treating IBD. Athersys also has other clinical stage programs that could also be relevant under the new framework in Japan, such as a planned Phase 2 involving the treatment of patients that have suffered a serious myocardial infarction (heart attack) and a Phase 2/3 for preventing Graft versus Host Disease in patients being treated for leukemia or related conditions.
Chairman and CEO at the company, Dr. Gil Van Bokkelen has spoken publicly about the importance of the new initiative in Japan, recently commenting, "Japan is showing tremendous international leadership in an area that they recognize has transformational potential. This new framework could enable medicines to reach patients in a more rapid and efficient manner, and also helps address some of the most significant challenges facing the national healthcare system in Japan, and we believe it represents a game changer. I think it's already having a positive impact on investor views, since it could dramatically accelerate development of therapies like MultiStem, and by regulatory complexity and shortening the development path, it translates into tangible value creation."
Athersys shareholders clearly agree. Since the passage of the new regenerative medicine framework in November, the stock has risen almost 170%, on sizeable volume, and has seen some noteworthy institutional shareholders recently added to its list.
There are other players that also appear poised to capitalize on the opportunity in Japan. Industry giant Mesoblast (ASX: MSB) has a strategic partnership in Japan with JCR Pharmaceuticals for its allogeneic mesenchymal stem cell (MSC) product to treat steroid refractory graft-versus-host disease (GvHD), a side affect associated with bone marrow and transplant surgeries. Mesoblast's move to acquire a portfolio of stem cell therapies in 2013 from Osiris Therapeutics (NASDAQ: OSIR) opened the doors to Japanese markets. JCR is expected to file its application this quarter to market the MSC product in Japan, which sets the stage for it to possibly become the first company to benefit from the accelerated pathway under the new Japanese law.
Cytori Therapeutics (NASDAQ: CYTX) has been investing in Japan for more than 10 years and has a well-established presence with its Tokyo-based medical subsidiary Cytori Therapeutics K.K. Cytori is engaged in development of therapies centered on autologous adipose (fat)-derived regenerative cells for treating cardiovascular disease and other conditions. The company has already conducted several clinical trials in Japan with more underway that have shown a consistent safety profile for Cytori's technologies. Cytori also offers StemSource(R), a cell bank product line, that could see an uptick in use as stem cell research increases in Japan.
Regenerative medicine on the whole appears to have gotten some wind behind its sails, thanks to advances on multiple fronts, including the progress being achieved by leading companies, and the regulatory progress in Japan, as well as in other countries. Spearheaded by so-called Abenomics, the country has charted a course for change that includes planting its ensign as a pioneer in regenerative medicine and the clinical process, one that can inspire investment for the benefit of its country and the world over.
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