- News Features -


Feature Directory

Biotechnology in Japan

- A brief industry overview -

by Armin Rump in March, 2000

Based on the development of recombinant DNA technology in the early 1970s, the modern biotechnology industry established itself in the United States in the 1980s:  Small high tech research enterprises were created, mostly out of university laboratories.  Such new companies, highly specialized and flexible, continue to spring up and push the technology forward.  The startups have benefited from the support of venture capital companies which supply not only capital but also expert advice in management and other services which the scientist entrepreneurs may need.

Europe has been following the same path in the 1990s, but in Japan great obstacles to entrepreneurship were not removed until 1999:  For example, it used to be illegal for a university empoyee to work in a commercial enterprise.  Furthermore, Japanese venture capitalists used to see their task in brining a small company with a promising technology forward and into the stock market.  They were shying away from the risky early stages, when a company is created around a new idea, before the technology and infrastructure are in place.

Be it biotech or internet business, in Japan, the risk takers have not been individual entrepreneurs setting up new companies.  New industries are carved out by the big players:  Pharmaceutical companies and breweries have strong in-house research and are actively acquiring technology in the United States and in Europe through technology licensing, joint ventures and takeovers. Major pharmaceutical companies have research centers in Europe and in the United States to complement their Japanese research activities and to stay in touch and broaden their company culture.  It is not a secret that in the field of biotechnology, there is a substantial inflow of technology into Japan and an outflow of investment in the reverse.

Innovations from Japanese academic laboratories are of course being taken up and implemented by the pharmaceutical industry. There is a firm informal network between industry leaders and academic researchers, as well as formal links such as industrial sponsoring of academic laboratories. What has been lacking thus far in Japan is the personal union of the inventor and the implementor, the entrepreneur taking his own idea to the market.

Legal obstacles were removed in October 1999 and lead to a surge in high risk capital in Japan. The financial bubble in venture capital which had developed in the United States over three years developed in Japan in a mere six months. The NASDAQ-lead worldwide decline in share prices in March 2000 deflated the bubble: Softbank, a financier of mainly internet ventures, has seen its stock price decline by 70% since. Still lacking is the know-how on the side of the venture capitalists in how to evaluate a biological innovation or a biotech business plan: There are very few biological scientists in the investment business - I know of a single one. In a word, the Japanese venture capital market is developing rapidly, even violently, with added support services and know-how lagging behind the raw capital supply.

Japanese legislation often takes a particularly business and research friendly stance, as exemplified in the ethical debate about human embryonic stem cell research: Human embryonic stem cell research is tied to guidelines and inspections, but legal, and is being carried out in Japanese universities.

Features Directory

Updated Jan.3, 2001 by Armin Rump