Japan could be, and perhaps should be, a BioTech startup powerhouse. The size of the market, the aging population and the depth and quality of the fundamental research being done here should make Japan a global player.

But something is holding her back.

Today we talk to Yutaro Kyono and Yoichiro Hara, two of the co-founders of Molcure about the challenges facing BioTech in Japan and how they have managed to get around them.

The Molcure system greatly reduces the time and resources to develop anti-body based drugs by identifying candidate gene sequences and automating the testing of those candidates. But Molcure’s vision is bigger than that. They envision a system so automated and complete they refer to it as “Sample in. Cure Out”

It’s an amazingly ambitious plan, even in the startup world, and they have some big challenges ahead of them. It’s a great story from an ambitious team, and I think you’ll enjoy the conversation.

Show Notes for Startups

  • Why antibody based drugs are important
  • Robotics in drug discovery and testing
  • How to become the Google of drugs
  • Why there is no bio-tech boom in Japan
  • When government startup assistance is useful
  • The importance of the startup community in Japan
  • Why Molcure real competition won’t come from bio-tech
  • When we will see Japan’s first round of bio-tech success stories

Links from the Founder

Transcript from Japan

Disrupting Japan. Episode 45.

Welcome to disrupting Japan. Straight talk from Japan’s most successful entrepreneurs. I’m Tim Romero and thanks for listening.

The team at Molcure has big ambitions. Now, I realize that’s a cliché. Talking about a company’s big ambitions is like talking about a founders driving passion. It can be and it usually is applied to every start-up on the planet. It’s different with Molcure however. They’ve developed and are bringing to market a system that can greatly reduce the time required to develop antibody-based drugs.

Molcure not only speeds up the process of isolating a handful of candidate gene sequences to combat a particular target by a factor of 10 but it then actually automates the laboratory tests required to confirm these candidates. Molcure has a vision of a drug discovery and testing systems so completely automated, they’re calling it sample in, cure out.

As ambitious as that seems however, the biggest hurdle to their success might not be the technological challenges. You see, Japanese biotech companies face some unique hurdles. Despite some amazing and groundbreaking research being done in the Japanese laboratories, a lot of changes need to be made before Japan will be able to successfully bring them onto a global marketplace, but I don’t want to get too far ahead of our story. So I’ll let both Yutaro Kyono and Yoichiro Hara, two of Molcure’s co-founders tell you all about it.

So let’s get right to the interview.

Tim: So I’m sitting here with both Yutaro Kyono and Yoichiro Hara, cofounders of Molcure. Molcure is a biomolecule engineering platform and you guys are focused on an antibody based drugs. That’s a really big concept for a software guy like me. So Yoichiro, can you explain it in a way that a 10-year-old could understand it? What is it that Molcure does?

Yoichiro: OK. Molcure is providing software for discovering the new antibody drugs for incurable diseases. It can lead a sequence of DNA and then recall that the big data from the library in the process of the screening of drug and then we analyze that data using our massive lining algorithms and then we can discover the 10 or 20 top candidates for the pharmaceutical company.

Tim: So you start out with a pathogen and you’re looking for DNA sequences of antibodies that will attack that pathogen?

Yoichiro: In particular difficult areas, like protein or peptide that is related to the disease. Antibody is missile weapon against the targets.

Tim: From what I’ve read, the advantage of antibody based drugs is that they tend to have much fewer side-effects than traditional pharmaceuticals.

Yoichiro: It has a high specificity and selectivity.

Tim: Right now what percentage of drugs are antibody based drugs and how many are the traditional chemical based?

Yoichiro: Now the top 10 in the global market, half of it is antibody drugs the other is normal drug, this growth laid on antibody drug market is so fast.

Tim: Your technology narrows down the choices to a small few that then can be investigated experimentally. Molcure has introduced app tracer technology is app tracer the basic software that does this function?

Yoichiro: App tracer software is the process of drug discovery. We can narrow down the number of a candidate from the library to the screened hit candidates, antibody library, the devaluation of the library is 10 to 12 or 10 to 9 if a huge devaluation it’s that point and then we do the screening against the target and we can pick out the candidates bind to the target and we get the sequence of the binding samples from the post screening samples. We can compare the prescreening sample and the post screening sample and we can compare what type of antibody has remained to the binded target.

Tim: That makes sense. Now your CEO has talked about vision Molcure which is a sample in and a cure out which is pretty amazing. Yutaro can you explain exactly what this vision will mean?

Kyono: Molcure is a software company that actually we need more experiment. We have to do the wet laboratory operation.

Tim: What is wet laboratory operation?

Kyono: This means dispenser from liquid or we have the mixtures of DNA liquid.

Tim: This is the part where after you’ve narrowed down from millions and millions of potential DNA strands, where you’ve got 10 you want to test. This is the physical testing of each one and Molcure wants to also automate that process. How long does this process take? What exactly are you testing?

Kyono: Traditionally the experiment takes a half year to one year. Machine experiment works 24 hours if you use robotic automation.

Tim: So robotics can shorten the process because they can work around the clock but this process is it strictly chemical testing to determine whether this antibody is the right one? The vision, at least for now is app tracer technology can narrow the field down from millions and millions of matches to 10 or 20 and then the automation component can run the chemical testing automatically to narrow that down and confirm which, if any of these potential ones, actually have the potential to be effective against the target. Excellent. It seems to me there’s still one more step in the sample in and cure out that’s moving from chemical testing to the actual drug testing. How are you going to make that step?

Kyono: We still have to develop the robotics.

Tim: So now you’re focused on automating the chemical process, the screening of the antibodies?

Kyono: Yes.

Tim: So Yoichiro, how does this translated in the future after you’ve automated the screening of the antibodies? What’s the next step in order to pursue that sample in, cure out vision?

Yoichiro: The next step of automation is if anyone of the new disease target are broader information of that disease target online and we can start the process of screening and identify the top 10 or top 20 candidates and we can do that synthesis. In the future, we hope to make the synthesized one mission system of prodding and then we can do the test against patients in the future.

Tim: That’s a big jump. So right now…

Yoichiro: It’s the support testing. Synthesized protein is for testing. We have to collect the data because our software is machine learning algorithms so we have to get more testing data from the real world.

Tim: So is your current business model to sell services to pharmaceutical companies but your long-term vision is to be able to actually do the full cycle research yourself?

Yoichiro: It’s future. At this moment just we provide for software to the company but in the future we have to do the overall process in-house.

Tim: Let’s talk a bit about biotech in Japan in general. Molcure has raised a modest amount of money. You’ve raised about $2 million.

Kyono: Originally, our company has spin out from software company.

Tim: OK. In general funding in Japan is much lower than funding in San Francisco.

Kyono: Yes.

Tim: Biotech companies in particular require a lot of capital, they take long time to reach profitability. How are you guys dealing with that?

Yoichiro: Our business category is not drug development company typical biotech is providing the new drive by themselves. It’s discovery to development or the process doing by the company and then license on to the big Pharma in the later stage. Our strategy is drug discovery platform.

Tim: You’re providing services?

Yoichiro: Yes services on this platform. So it’s not a typical biotechs.

Tim: Molcure is one of the few biotech start-ups in Japan but are there start-ups in Japan that are focused on drug development in the way biotech’s in the states and Europe are?

Yoichiro: About 10 to15 years ago the most of the Japanese start-up is focused on the drug development by themselves. Recently, some of the Japanese public service company have IPO so some of the investor I didn’t understand about all the typical biotech business model but low risk and low return the service business model is good for in-house. It’s more easy to get profitable. So our strategy is getting the huge data in the short term year that Google in the drug discovery world.

Tim: OK.

Yoichiro: So we hope to collect some more huge data and then do the machine learning so our software is more smart and the more accurate identification is like a search engine of the drug. In the target we give our software to identify oh this is good tracks.

Tim: In America for the past few years, there’s been a real biotech boom. Really for the last couple decades, this huge boom in biotech investment and start-ups. Have you seen something similar happening in Japan or are biotech start-ups still kind of rare here?

Kyono: The first boom in biotech it was 10 to 15 years ago in Japan, it’s same.

Tim: The same timing as in the states.

Kyono: Yes I think so. For five years the market is showing down.

Tim: It went down.

Kyono: It happened again four years ago. Starts from the genome sequencing boom. So the biotech trend is starting again in Japan now but the amount of investment is still small.

Tim: Is your investment all from VCs? I know there many government programs that have been set up to support biotech research particularly university sponsored research. So is your investment been primarily from venture capital or have you received funds from government programs as well?

Kyono: After funding in a company we’ve got some grant from governments that is amount of the granting is not so huge so we have to fundraise from Japanese venture capital.

Tim: Let me ask you about that because this is something I find interesting. A lot of the start-ups I talked to have had some government funding and most of them said, “Well the money is nice but it wasn’t very much.” So is there value in the government programs that are set up to support biotech start-ups and start-ups in general?

Kyono: The value is just the money.

Tim: Every little bit helps.

Kyono: Yes, and there is a tether with the money we cannot use freely, for example if we get grant fund from government that we cannot use freely. Its purpose is strictly limited.

Tim: So you could use it for buying equipment but not for salaries, for example?

Kyono: Yes, it’s like that. The grant is for buying the machine or else or something.

Tim: It sounds very much like university research grants actually.

Kyono: Maybe it’s like same.

Tim: All of your founding team has a background in biotech right? So how did the founding team come together?

Kyono: Before Molcure funding is the spin-off from the software company and I know the CEO of the software company.

Tim: What were you doing at that time?

Kyono: I’m obligated to start off by myself. I know the CEO of this software company as a friend of entrepreneur community.

Tim: That is really encouraging because that is something that didn’t used to happen all. There was no entrepreneurial community. I think one of the biggest advantages that San Francisco has is that there is a strong community when people leave one start-up, they can start another and kind of cross-pollinate ideas. You all had a background in biotech but Yutaro, you also you have a particular focus on robotics as well, didn’t you?

Kyono: I studied in pharmacy but in my hobby I have made robots. I run by myself I will see you’re looking for robotics person, and I am a robotics person.

Tim: So you are the CEO of that to discuss it? Now that the teams together, you’ve got the software, you’ve got funding, now biotech start-ups really seem to be very different from say software start-ups which is what I’ve always done. In software start-ups, everyone always says fail fast, try different things, if it doesn’t work cave it but you can’t really do that as a biotech. What would you say is the biggest challenge you face?

Kyono: I think the typical biotech strategy is the not feature our company. We hoped to do the same way in the software industry is manner we start-up or learning from the testing and feedback is the same in machine learning. We hope to collect the failed data and the success data more and more data. Our Software can identify and predict the best one. Our biggest challenge is collecting the huge failed data and the success data in the field of the pharmaceutical industry.

Tim: When you’re talking about failed data and success data, do you mean the DNA or the protein sequences you are looking for, those successes and failures?

Yoichiro: It’s matching like a blueprint and the protein so we had to do the more test and get the more record and the feedback to the software so we can predict, this kind of blueprint is good or not.

Tim: From where you are now to where you want to be, which is truly sample in, cure out, what do you think is the biggest challenge you’ll have to overcome to get there?

Yoichiro: The big challenge is how to fight with the big company in our industry, not Pharma. We think protégé competitor is Microsoft or Google.

Tim: So other big data AI companies?

Yoichiro: Yes, we think that. How to fight with them and the keep the trends? Like the first company in the field in the market.

Tim: Something you can defend.

Yoichiro: Yes, defend it so we have to collect the more huge data, more quickly is the best key to fight with them. You have to collect the more huge data and brush out the software.

Tim: Even though this is very heavily AI and big data driven, the key to success is not just the technology it’s also getting that reference data and controlling that. In that sense, in the short-term even if you’re working with pharmaceutical companies and you’re losing money on some of the engagements, the data you’re getting is going to be extremely valuable in years to come. That makes a lot of sense. Back to the future of biotech in Japan, why haven’t we seen many biotech success stories in Japan?

Yoichiro: In Japan, there is no big success in biotech field. Not yet.

Tim: Why do you think that is? What’s holding it back?

Yoichiro : It depends on the money supply and should go development takes long time and huge cost. The least money supply in Japan is not so huge, it’s not featured in Pharma.

Tim: OK.

Yoichiro: IT or are gaining company or what will cause all the maybe if good thing to do with my and the start-up.

Tim: That makes sense, the Japanese, there is not enough risk capital in Japan that’s willing to make the tens of millions or hundreds of millions of dollars of investment over 10 or 15 years to really push many biotechs forward.

Yoichiro: I think investing in Biotech is high risk, high return game that the Japanese people cannot do it.

Tim: Do you see that changing?

Yoichiro: I think it was a better solution focused collaboration of the biotech and IT is more big chance for the small biotech start-up in Japan.

Tim: It seems like almost a waste because Japan’s ageing population seems like it would be really good case for investing in medical technology, investing in new drugs. America, Europe, Japan all have rapidly ageing societies but Japan is about 10 years ahead in that curve. The VCs don’t seem to think that way.

Yoichiro: The risk money does not come. It’s difficult I think. Japanese biotech is just focused on the pharmaceutical, the new drug but then I think regenerative medicine is the new opportunity for Japanese people to solve that kind of program, organ transportation is new frontier. Five years ago, the Japanese Academics Institutes, they have the technology of IPSL and applied IPSL for regenerative medicine. The advantages but is so slow. Now in the global, we don’t have trends.

Tim: This frustrates me about Japan. Sometimes the pure research that’s done in Japanese laboratories and Japanese universities is fantastic but…

Yoichiro: No company…

Tim: They don’t productize it.

Yoichiro: It’s problem of Japan. The government hope to spend money for researchers, the basic researching, they invest money but…

Tim: They do great research.

Yoichiro: Yes but no application or no utilization of the technology.

Tim: A lot of universities now have been starting programs to try to change that. Keio and Todai have both introduced programs. Do you see them having much of an effect?

Yoichiro: Most of the investment for the Todai or Keio is invest for the professor but the professor has no skill to apply the start-up and also know if I go to typical Japanese big companies here is not fit to their start-up

Tim: This is true.

Yoichiro: The kind of the start-up operation experience person is not so much in Japan, it’s program.

Tim: You have several university professors on your board.

Yoichiro: Scientific advisory board.

Tim: Even that is relatively new in Japan. 10 years ago, 15 years ago a university professor acting as an adviser for a start-up would have been very unusual.

Yoichiro: Yes I think so.

Tim: Maybe we are just seeing like small baby steps of progress.

Yoichiro: Yes small progress. It’s happening now.

Tim: Well, hopefully we’ll be able to see the business creation, catch up with the R&D development. Let me ask you what I always call my magic wand question. If I gave you a magic wand and I said you could change anything at all about Japan, Japanese educational system, the legal system, the way people think about start-ups, anything at all to make Japan better for start-ups. What would you change?

Yoichiro: People’s way of thinking is the first point I think.

Tim: How would you change it?

Yoichiro: In the industry of Biotech, many people are working in the big Pharmas. They don’t feel their emergency now. They don’t survive peacefully, so no stress and no pain for survive.

Tim: So you think it’s too comfortable in Japan?

Yoichiro: Yes too comfortable to survive in Japan, its problem I think. Change their environment to the more emergency all we have to of this program in short time because we can also buy like that if required to change the way of thinking.

Tim: So you would give Japan a new sense of urgency?

Yoichiro: Yes.

Tim: I think that would be hugely helpful and some of my mentors and friends who are now in their 70s, I think have more in common with Japanese now in their 20s and 30s because I think the generation who is now 40 to 60 had a very easy time in Japan, their career grew up during the bubble, they just had to work hard, be smart and they get promoted. The people who are now under 70s didn’t live in that world and the people who are the 20s and 30s certainly don’t live it that world. So listen guys, thank you so much for sitting down with me and next time let’s go out for a couple of drinks in a bar.

Yoichiro: Thank you very much.

And were back.

It makes good strategic sense that Yoichiro and Yutaro have positioned Molcure as a software company. A platform that will provide services to pharmaceutical companies and potentially build-up a valuable and defensible library of vetted antibody sequences.

I think they’ll do well and yet with the state of biotech here, well, it seems like Japan is missing out on one of the markets in which she could actually take global leadership. The market needs being introduced by Japan’s ageing population and the depth of research being done at the universities here, gives Japan the raw materials to be a biotech start-up powerhouse.

Biotech investment requires both a lot of capital and investors with strong hands. Investors who are willing to make large bets that will take decades to pan out. Japanese pharmaceutical companies are willing to make these bets and the government is willing to subsidize those bets, but that’s not really bringing us much in the way of biotech innovation. Japan’s biotech start-ups with a real chance for global innovation resides remains underfunded and must rely on big Pharma rather than the market place to vent their ideas, at least for now.

If you’ve got story about biotech or innovation in Japan, the Molcure team and I would love to hear about it. So come by disruptingjapan.com/show045 and let us know what you think and when you drop by you’ll find all the links and sites we talked about and much much more in the resources section of the post and most of all thanks for listening and thank you for letting people interested in Japanese start-ups know about the show.

I’m Tim Romero and thanks for listening to Disrupting Japan.