Japan’s biotech bubble makes the US look like a tiny fizz. Spurred on by a Nobel Prize for the country’s top stem-cell researcher and a promise of billions of yen of research funding, small biotechs have seen their value rocket in a way that looks comparable only to their US counterparts at around the turn of the century.
The 10 biggest-rising Japanese pharma companies have seen their share prices at least triple since Shinya Yamanaka won medicine’s biggest award in October, with Shin Nippon Biomedical Laboratories and Chiome Biosciences rising more than sevenfold (see tables). With a feeding frenzy under way, the trick will be to know which will stand or fall – and indeed, when will be the best time to exit.
|Stock index||% change*|
|NASDAQ Biotechnology (US)||9%|
|TOPIX Pharmaceutical Index (Japan)||34%|
|*From October 9, 2012 to March 11, 2013|
Global markets are nearing or exceeding record highs – the Nikkei index is crawling back towards pre-crash levels – so it is not necessarily surprising that Japanese biotech has benefited. What is surprising is how widespread this is, and indeed how much local enthusiasm has exceeded even that of the bubbly US biotech sector.
Only one Japanese pharma company, Yakult Honsha, has registered market losses in the past five months. The failure of Celsion’s ThermoDox, which Yakult had licensed for the Japanese market, might have something to do with this loss (Celsion bereft after ThermoDox failure, February 1, 2013).
The event that triggered the wave of sentiment was Professor Yamanaka’s shared Nobel Prize with John Gurdon on the reprogramming of pluripotent stem cells, awarded on October 8. This was followed by a change in government rule to the Liberal Democratic Party and Shinzo Abe as prime minister.
In January, Mr Abe promised an economic stimulus package that included ¥21.4bn ($223m) of funding for institutions working in the field of induced pluripotent stem cells.
|Japanese pharma companies: top 10 risers|
|Share price (Japanese ¥)||Market capitalisation ($m)|
|1||Shin Nippon Biomedical Laboratories||1,510||189||699%||620||82|
|5||Japan Tissue Engineering (J-TEC)||292,700||70,200||317%||639||163|
However, as a sign that the market might be overheating a bit, none of the companies on the top 10 risers actually works in stem cells, the field that will be the direct beneficiary of government policy.
The biggest growth since the Nobel Prize award has been experienced by a contract research organisation, Shin Nippon Biomedical Laboratories, which has the potential to benefit from public investment through a strengthened biomedical sector, but it is indirect.
Two companies, Chiome Biosciences and Immuno-Biological Laboratories, work with antibodies. Japan Tissue Engineering works in cell therapy, but only in culturing autologous skin, cartilage and corneal cells; Medinet activates mature monocytes and lymphocytes to induce an immune response.
The signs, then, are of an overexuberent market rather than one making discriminating choices. As with markets more broadly, analysts suggest that retail rather than institutional investors are driving the Japanese biotech bubble. Opportunism, rather than any change in underlying fundamentals, will not sustain a trend for long.