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Proteomics is Big (and Getting Bigger) in Japan, Driving Software Vendors to Expand Footprint

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Matrix Science’s announcement last week that it plans to open a subsidiary in Tokyo is only the latest sign that demand for proteomics software in Japan is on the upswing. The London-based company made the move because around 30 percent of its total revenues come from Japan now, according to John Cottrell, CEO of Matrix Science.

“We feel we need to give Japan more attention because it’s very important for us,” said Cottrell. “Japan has always been very strong in mass spectrometry, and proteomics still seems to be a very hot field [there],” he said, adding that there is no sign of “any kind of plateauing, like possibly one might say about the US market or the European market.”

For the nine-person outfit, this rising demand was reason enough to open a two-person outpost on the other side of the world, and other proteomics software vendors that BioInform spoke to reported similar demand. Nonlinear Dynamics, for example, estimated that the Japanese market made up approximately 10 percent of its business about a year and a half ago, but has grown to about 15 percent today. And Geneva Bioinformatics said that around 25 percent of its software revenue comes from Japan.

“You can probably see into the next three years a lot of increases in proteomics software and services” in Japan, said Philip Fersht, a life science IT analyst with the Yankee Group. Fersht said that strong life science investment from the Japanese government in recent years has led to several “gangbuster” research areas that should fuel demand for bioinformatics, including proteomics, haplotype research, cell simulation, and gene expression analysis.

This sentiment was echoed by a life science manager at a Japanese distributor — who asked not to be identified — who said that while demand for gene-finding and sequence-related software has “passed its peak” among his company’s clients, there is a “very high need” for products related to proteomics, largely because of the lack of qualified proteomics software developers in the country, and the fact that proteomics freeware is relatively scarce.

“We see the Japanese market actually increasing,” said John Spreadbury, sales and marketing director for Nonlinear Dynamics. With venture capital funding in Japan on the rise, “we are going to see, I would say, above average growth in ‘04, ‘05, and we’re predicting quite a boom in ‘05, ‘06, when the actual funds will be through and the money spent.”

Multiple Routes to Market

But taking advantage of the boom in Japan isn’t a simple as hanging out your “protein informatics for sale” shingle. “The Japanese market is very complex, and their routes to market are many,” said Spreadbury. Direct sales efforts in the region are a relative rarity for small US or European companies, which generally rely on local distributors or larger partners as sales channels.

Matrix Science, which is known primarily for its Mascot software, previously sold its products in Japan through mass spectrometry vendors such as Bruker, ABI, Sciex, and Shimadzu, as well as through the Japanese IT firm InfoCom, which also serves as a distributor for GeneBio, Electric Genetics, Genedata, and several other bioinformatics vendors. As sales began to take off, however, Matrix Science decided to end its relationship with InfoCom in favor of direct sales through a local subsidiary, a move that Cottrell said will enable the company to “localize our products and provide Japanese documentation and Japanese user interfaces,” as well as carry out some product development efforts in Japan.

“We were very happy with InfoCom. It’s just that we saw an opportunity to go a step further, and it doesn’t make sense to run the two in parallel,” Cottrell said.

But opening a local branch is still too much of a financial commitment for some firms. GeneBio, for example, has not even considered the possibility, according to Alistair Blair-Davies, marketing manager for the company. “We wanted to apply our internal efforts to other products and activities and a Japanese distributor was a good way to enable this,” he noted in an e-mail to BioInform. “Since we signed with InfoCom we have been impressed by the level of activity they have generated, the contacts they have, their involvement in the Japanese proteomics industry, which is an undeniable key to their success, and their sales performance,” he said.

Nonlinear, on the other hand, relies solely on various OEM deals it has signed with its partners: PerkinElmer and, most recently, Shimadzu [BioInform 01-19-04]. The company is also in discussions with another partner to sell its Progenesis software in Japan, Spreadbury said. “Our software complements hardware,” he noted, and this fosters a vendor-focused distribution strategy. “If our product was a standalone product and didn’t complement the hardware, it would be very difficult to find a partner to invest in the time it takes to sell and support,” he said. Given that Matrix Science has a standalone product, Spreadbury commented that opening a subsidiary is “a good move for them.”

“Maybe we will add direct support in the near future,” Spreadbury added, “but for the moment we use our partners, and we could have at any one time 100 or 200 representatives [in Japan] with the two collaborators that we have.”

Breaking Through the Barriers

Even with reliable sales channels, however, the Japanese market can be a tough nut to crack for many informatics vendors. According to the Japanese distributor BioInform spoke to, European and US vendors tend to price their software too high for the Japanese market, and provide “no flexibility” for customizing their products — “mistakes” that have caused a “big problem” for many informatics companies who have tried to sell into the country. However, he noted, Japanese distributors have been known to cause a few problems of their own, because “they have no skills to customize products as desired by the Japanese customers.”

Another risk associated with dealing with a distributor is lack of control, Cottrell added. “Sometimes a distributor moves off to someone else’s product, or they want to put resources elsewhere,” he said, “So I guess the main motivation [in opening a subsidiary] is a greater degree of control for us.”

Relying on distributors or other local partners not only overcomes the obvious language barriers, but also addresses the “more delicate procedures and behaviors” associated with Japanese culture, said Blair-Davies. Prior to the company’s relationship with Amersham Biosciences to sell its Melanie software under the ImageMaster name, he said, “[W]e sold [Melanie] from Geneva and encountered a few difficulties.” Amersham has a subsidiary in Japan, which will sell the ImageMaster software there, Blair-Davies said.

An additional consideration for software vendors in Japan is whether to develop local-language interfaces for their products. Cottrell said that Matrix Science’s most recent product, called Mascot Distiller, is geared more toward end-user biologists, “and we think in the near future we really need to have local-language interfaces for that kind of software.”

Spreadbury, however, said that Nonlinear has “considered” developing a Japanese language version of its software, but has so far only translated its user manuals and product demos into Japanese. Although the software is in English, it is icon-driven, Spreadbury said, “so it’s never been an issue with any user to date.” Blair-Davies said that GeneBio has translated into Japanese the license agreements and other documentation for Swiss-Prot and its other databases, which “did seem to have a positive effect on the sales process, but not directly on sales figures.”

Cautious Growth

Despite the new subsidiary and the promising outlook for its software, Cottrell said that Matrix Science intends to stick to the strategy of organic growth that has served it well so far: The company is profitable and is approaching the 1,000-license milestone for its Mascot product, he said.

Matrix Science currently operates a one-person subsidiary in the US “that’s really to have a presence in the right time zone, and be able to provide marketing and technical support,” and has no plans to open further overseas offices in the near future “for the sake of it.” The Tokyo office “will grow as the business supports it,” Cottrell said. “We just want to be a size where we can do the development and produce products that are useful.”

The company does, however, have plans to continue expanding its product line beyond Mascot. Cottrell said that Matrix Science has entered a partnership with LIMS vendor LabVantage, and anticipates releasing more information about that relationship at the ABRF meeting in Portland, Ore., at the end of February.

— BT

 

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