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FEATURE: As Japan Blasts into Genomics, Western Companies Look East for Revenues

TOKYO, April 27 –  As Japan lunges full blast into its government-supported genomics efforts, Western genomics companies have lately been showing signs they are turning eastward to seize the new market opportunities.

Tuesday, Qiagen announced it had shelled out $18 million of its stock to acquire the Tokyo-based Sawady Group, which, with $10 million in sales for 2000, is the second biggest nucleic acid supplier in Japan. This acquisition will give the Netherlands-based company a stronger foothold in the Japanese nucleic acid market, augmenting the market reach of its Japanese subsidiary, Qiagen KK.

Then Wednesday, Amersham Pharmacia Biotech told GenomeWeb that its sales of instruments and reagents to Japan and throughout Asia had increased enough to offset the effects of a weak North American market for its sequencers.

AP Biotech's rival Applied Biosystems reflected a similar shift in the sequencing and reagent market when it reported in its third-quarter conference call Thursday that 20 percent of its quarter’s sales had come from Japan, compared to its yearly average of 14 percent. Part of this increase, said ABI CEO Mike Hunkapiller, was due to the fact that Japan’s fiscal year ends March 31. But overall, Hunkapiller indicated, this larger proportion comes from the fact that the Japanese market for sequencers remains strong, while the American genome sequencing frenzy has subsided somewhat.  

“Japan is a very swiftly growing market for products and services,” said Stephen Barker, a pharmaceutical analyst at UBS Warburg.

In a sign that the demand for Western genomics products is bound to continue rising in Japan, the country’s third largest pharmaceutical company, Yamanouchi Pharmaceutical, announced Thursday plans to double its research spending on genomics, investing a total of 50 billion yen, or $411.8 million, over the next five years. Genomics-related spending will comprise an increased proportion of the company’s overall R&D funding, which the company estimated will grow from 60 billion yen ($494 million) to 80 billion yen ($659 million) during the period.

Yamanouchi spokesman Kazutaka Mizushima termed this move “essential” to the company’s efforts to continue producing market-viable drugs in the next decade. The company plans to focus its efforts on diabetes and urinary tract diseases, Mizushima said.

Analysts cited Yamanouchi’s announcement as a catch-up maneuver, as the company and others in Japan struggle to compete with Western pharma. “Better late than never,” remarked Barker.

The catch-up is also going on at a government level. With the completion of the human genome sequencing in the United States, the Japanese government realizes it needs to invest before patents are taken out on all the information, said a spokesperson for Qiagen in Japan. As a result, the government is funding a five-year Millennium Project, which includes promotion of biotechnology and drug development for the country’s graying society. In this is included RIKEN’s work on SNP analysis of the Japanese population and the Human Genome Center’s research on genetic links to disease.

Just how big can this market get? Hard figures for the size of the market in genomic goods and services in Japan are hard to come by, due to corporate standards of privacy and the slippery nature of the term itself. But Ministry of Economy Trade and Industry figures defined a 1.1 trillion yen ($9 billion) biotechnology market in Japan for 1997, the latest year for which figures appeared. By 2010 the size of the market is predicted to reach 25 trillion yen. ($206 billion).

The one feature of this market that has western companies salivating—and Japanese economists worried—is that Japan has as yet failed to produce its own genomics industry to serve this need, Barker said.

One notable exception is Takara Shuzo subsidiary Dragon Genomics, which officially started operations April 18 at its sequencing facility. 

The facility, which is reportedly the largest in Japan and has technology sharing agreements with Lynx Therapeutics, Geneformatics, and Mitusbishi Electric, is building its business on “research outsourcing,” filling orders for sequencing. The facility can sequence a bacterium for a customer in four days, can process 17 megabases per day at full capacity, according to Dragon. Dragon aims to triple that by the end of the year.

The company also has several internal projects in the works, from creating a database of genetic material unique to Asians, which could be used for drug testing, to sequencing local varieties of mushrooms and seaweed.

In the meantime, Western companies are bound to keep on looking to the East to beef up revenues during the economic downturn--or maybe, in the long run, for developments that can help them reap the fruits of genomics. 

During his recent trip to Japan, Celera chief scientific officer Craig Venter predicted that the country one day “could end up leading the world in terms of the implementation of new ideas in medicine.”

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