Make Medical Ventures a Driving Force for Innovation!
“From Regulation To Development” “From Cautious To Speedy” “From Macro To Micro”(Summary)

July 29, 2016

The Advisory Panel for Fostering Medical Ventures
Ministry of Health, Labour and Welfare Japan

Make Medical Ventures a Driving Force for Innovation!
“From Regulation To Development” “From Cautious To Speedy” “From Macro To Micro”

CONTENTS

Introduction

・・・・・・・・・・1

1. Why do we need to foster medical ventures ?

・・・・・・・・・・1

2. Toward the Promotion of Medical Ventures in Japan・・・・・・・・・4(1) The Goals and Vision of Fostering Medical Ventures ・・・・・・・・4(2) The “Three Principles” and “Three Pillars” of Venture Promotion Policy
・・・・・・・・・・4(3) Specific Initiatives

・・・・・・・・・・5

1. Creating a System to Nurture Ecosystems

・・・・・・・・・・5

2. Developing Personnel Who Will Construct the Ecosystem and Creating aSpace for Exchange
・・・・・・・・・・7
3. Creation of an “All MHLW” Venture Support System ・・・・・・・・8

Introduction
This summarizes the report by the Advisory Panel for Fostering Medical Ventures, a private
round table to the Minister of Health, Labour and Welfare of Japan, first convened in December
2015. This report, delivered in July 2016, serves as a basic guideline for the development ofspecific policies to promote medical innovation by the Ministry of Health, Labour and Welfareof Japan (MHLW).

1. Why do we need to foster medical ventures1?
Globally, the medical field is a massive growth market, and Japan, that boasts high world-classlevel of its seeds created by universities and research institutes, has the potential to assume aleadership position in the medical field in Asia.
As the Japanese population continues to age and further decreases, it is extremely difficultand challenging to create a sustainable healthcare system and maintain a sizable working
population, yet providing an opportunity with great potential.
Innovation-creating engines are shifting from large established corporations to new ventures in
the United States and Europe,
Conversely, while Japan has outstanding basic research by academics and excellent
manufacturing technologies of small & medium-sized companies, Japan’s superior position inthis area has not been fully taken advantage of yet.
It is becoming increasingly essential that these “seeds” created by Japanese domestic
academia should be effectively incubated toward practical implementation and industrialization
both domestically and internationally. Therefore, it is crucial to foster entrepreneurship andinnovation in this medical field.

1 The word “medical ventures” in this report means venture companies which

manufacture drugs, medical devices, or cellular and tissue-based products.
3Medical ventures in Japan have the following characteristics:
1) High Scientific/Technological level and Development Risk
The success rate of medical product development is said to be approximately 30,000:1, andinnovation in the medical field requires considerably advanced scientific and technical levels,and at the same time, these have high risks.

2) Significant Length of Time and Amount of Capital Required for Approval
Developing medical products requires at least ten years from initial discovery of the “seed” toapproval. Also, massive amounts of capital are required.

3) Understanding and Responding to Regulations Concerning to Medical Care,
Pharmaceuticals, and Public Insurance
From the discovery of scientific seeds to medical products development and to their practicalimplementation, sufficient understanding of the regulations pertaining to medical care,pharmaceuticals, and public insurance is essential at each stage. At times, these can serve as
barriers to entry.

4) Difficulty in Recruiting Highly Skilled Personnel
It can be costly and time-consuming to develop personnel who are familiar with thecharacteristics of the medical field, and can manage the business as described above.
The United States occupies approximately 40% of the global medical products market, andJapan no more than 10%. This signifies a major difference in investment efficiency, andnecessitates effective policies with impact that will overcome these handicaps. Also, thisdemonstrates the great significance of positioning development from the global market
perspective, not just the Japanese domestic one.

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Japan’s strengths and weaknesses pertaining to medical ventures are summarized as follows:＜Strengths＞
1) High-Quality “Seeds”
The “seeds” created by universities andresearch institutions stand highly evaluated in
the world, and are not inferior to those of theUnited States and Europe.
2) Diffusion of Clinical Research
Unlike in Europe and the United States,
clinical research is routinely conducted athospitals in Japan.
3) Excellent Manufacturing TechnologyIncluding Japan’s skillful small & mediumsized companies, Japan has superb
craftsmanship technology.
4) Speedy Approval Process
The approval process for pharmaceuticals is
being further expedited. In particular, for
products such as regenerative medicine,Japan’s newly developed approval process isfaster than those in Europe and the UnitedStates.
＜Weaknesses＞
1) Personnel Shortages and Low Japan has few medical venture entrepreneurs,
Personal Mobility
and securing the personnel needed for such
ventures is also difficult.
2) Limited Capital Support and Incentives Investment in Japanese medical ventures
for Ventures
tends to be cautious. Financial support forventures by government and foundations isalso weak. Additionally, unlike European andAmerican large enterprises, there are few
cases of the products developed by venturesacquired at substantial valuations.
3) Weak International Connections and There is little international human andExchanges
financial exchange (both inbound andoutbound), and connections are weak.
4) Regulations and Systems Unfavorable Many systems pertaining to medical care wereto Ventures
created with large corporations in mind, andare difficult to engage from the venture
perspective.
5) Lack of Model Cases
Japanese medical ventures are not particularly
active yet, have a limited impact, and modelcases are still scarce.

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2. Toward the Promotion of Medical Ventures in Japan(1) The Goals and Vision of Fostering Medical Ventures
The goals for fostering medical ventures are as follows.
・ Contribute to health and medical developments in Japan and the world.
・ Contribute to Japan’s economic growth.
The vision brought forth by these goals is as follows:・ Center of Innovation
In terms of predictability, transparency, and speed, we will aspire to become the nation withthe world’s best business environment. This intent is for developing an open innovation
center, not a closed-off one limited to Japan.
・ Virtuous Cycles
Outstanding research “seeds” are commercialized as ventures and released into the world.
High growth ventures flourish. The number of large companies that develop throughcollaboration, or acquire venture companies, will increase. A virtuous cycle is born whereinnovation becomes the driving force by these ventures, and the process will become highlyaccelerated.
(2) The “Three Principles” and “Three Pillars” of Venture Promotion Policy
Policies for the promotion of medical ventures require endeavors that are aligned with thefollowing “Three Principles (Paradigm Shift)” and “Three Pillars.”“Three Principles”
i. “From Regulation To Development”
MHLW not only aims to ensure that companies comply strictly with regulations, but also aims
for optimal regulation while recognizing that proper regulation is the foundation for supporting
the sound development of an industry. MHLW must radically change its viewpoint to one that
understands the characteristics and potential of new enterprises and ventures, supports andcultivates these endeavors, and promotes growth.
ii. “From Cautious To Speedy”
Business success mandates a speed that does not let opportunities slip by. This is especially true
for ventures, which exist to take risks in creating businesses and products that have yet to beestablished. Venture promotion requires endeavors with a sense of urgency.

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iii. “From Macro To Micro”
Ventures are often targeted to seeds that do not fit into a particular model. A variety of policies
must be developed from a micro-standpoint suited to specific characteristics so thatcorporations, such as ventures, can fully display their unique traits.

“Three Pillars”
In order to realize a paradigm shift addressing these three principles, venture promotion
measures that surpass existing frameworks will be implemented, fostering a medical venture
ecosystem.
i. “Creating a System that Nurtures Ecosystems”
Nurturing a venture ecosystem requires creating a system allowing swifter approval andinsurance listing based on regulatory science, according to the needs of each venture’s growthstage.
ii. “Creating a Space for Developing and Interacting with Personnel that will Create theEcosystem”
In order to lay the groundwork for the stimulation of innovation, it is important to create
positive spirals by linking various stakeholders involved with ventures.
People are the lifeblood of an ecosystem, so attracting and securing personnel to promoteexchange and mobility, and further personnel development is required. Furthermore, for thefuture, overseas connections and growth and developments into new areas will be required.
iii. “Creating an “All MHLW” Venture Support System”
We should establish a system that will plan, implement, and monitor medical venture
promotion policies, create an organization to support ventures at key institutions, and toenhance endeavors to continuously support and promote ventures.
(3) Specific Initiatives
1. Creating a System to Nurture Ecosystems<Fast Break Scheme (Accelerated Approval for Innovative Medical Devices)>
A system for accelerated approval of innovative medical devices should be created, minimizing
the burden on pre-market clinical trials and expanding after-market studies.

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<Examination of the System for Drug and Materials Prices>a. Creation of a Drug Price System to Evaluates Innovation
1) Drug prices should be evaluated, taking into account its characteristics based on studies on
actual conditions, including medical ventures’ cost structures.
2) A working group of the Central Social Insurance Medical Council should examine pricing
of innovative products expected to be effective for critical conditions which existingtreatments have limited impact on. Since the current pricing process does not adequately
assess innovation, long-term cost-effectiveness should be considered and innovation
should be additionally counted on pricing.
b. Exemptions from Approval Examinations/Consultation Fees and Enhancement ofDevelopment Subsidies
Along with expanding exemptions from approval examinations and consultation fees for
Pharmaceuticals and Medical Devices Agency (PMDA) in medical device ventures that are notprofitable to include medical ventures of cellular and tissue-based products, development
assistance should be increased for “orphan disorders.”<Post-Market Support>
a. Promotion of PMS Utilizing Electronic Clinical Data
In PMDA, the promotion of post-market surveillance (PMS) based on regulatory scienceutilizing electronic clinical data is essential. Therefore, the promotion of enterprises to create
databases of medical data (MID-NET enterprises) and clinical information networks (CIN) will
be required.
b. Promoting the Development of a Registry for Each Disease in CIN
For venture companies, starting development from niche disease fields such as intractablediseases and rare diseases is the secret to success, and in order to support these, it will benecessary to advance the development of disease-specific registries in CIN.
c. Financial Support
For PMS, financial support, with combination of financial support in a development stage, will
be required to meet financing needs.
<Overseas Development Assistance and Export Promotion>a. Support for Overseas Development via International Pharmaceutical Consultation
Under the coordination of the “Venture Support Strategy Office (Provisional Name, Details
Below)” to be established in MHLW, information acquired via by MHLW or PMDA will be
provided regarding overseas pharmaceutical regulation, and should support overseas
development.
b. Promotion of Research and Development Targeting the Creation of Evidence According toNeeds and Conditions
In order to receive research and development suitable for local specs for developing countries,
8and to obtain regulatory on-site approval, research and development aimed at the constructionof evidence considering race and environment, etc. should be promoted. Even in the domestic
unapproved stage, we should also support information sharing, experience sharing, etc. as one
strategy for ventures to make clinical trials and sales advances in this market.
<Medical Venture Investment Promotion>
The relevant ministries and agencies should cooperate to improve the tax system andaccounting standards for promoting investment in medical ventures.

2. Developing Personnel Who Will Construct the Ecosystem and Creating a Space for
Exchange<Implement Activities that Match Key Personnel>
For medical ventures, obtaining enterprise/development partnerships with large pharmaceuticaland medical device companies is a matter of life and death, and is extremely important.
MHLW must take the lead and match individual executives at potential
enterprises/development partners such as large corporations with executives at medicalventures. Aside from individual introductions, MHLW should attempt to host supporting eventsand contests with prizes. Also, MHLW must promote the creation and development ofecosystems that also include products and services through combinations with information
technology.
<Securing and Introducing Mentor Human Resources>
In order to secure mentors, a domestic and international registry should be created of persons
who possess vast knowledge (intellectual property, pharmaceuticals, insurance, management,etc.) relating to issues that occur at the stages from the development of to the practicalimplementation of pharmaceuticals and medical devices, and persons with practical experience
leading up to expansion and diffusion in global markets. These persons should be matchedaccording to the needs of the respective ventures. Also, ventures should be educated on how toaccept personnel. Furthermore, attempts should be made to create a voluntary community ofmentors and ventures.
<Developing Judgment Personnel through Personnel Mobility>
In Japan, a lack of “judgment” capable of serving as a bridge between medical ventures andfinancial entities is a problem. To overcome this problem, a diverse career development
environment should be created by MHLW, targeting career veterans through personnel
exchanges between financial institutions and cutting-edge global ventures. By promoting such
personnel exchanges, in addition to enhancing the market value of these people, it willencourage financial entities to evaluate specialized areas.
<Development from the Young Generation and International Personnel>
Education pertaining to medical and health care technology should be incorporated into high9school, technical colleges, and undergraduate university engineering departments. Also, thedevelopment of international personnel in Japan (dispatch to overseas agencies andcorporations, study abroad, etc.) and the utilization of overseas personnel should be activelyimplemented.
<Creating an Environment that Fosters the Creation of Intellectual Property andCorporations>
In health care areas that target researchers, training programs should be created pertaining toenterprise strategy, from the protection of intellectual property and non-clinical testing up toPOC acquisition via clinical testing, and should be utilized when applying to researchenterprises.
<Efforts to Create Overseas Links>
a. International Perspectives Utilizing Overseas Personnel and Development of Personnel
We will take efforts to engage in information exchanges and joint operations with overseas
medical and health care research institutes, MHLW, and private-sector organizations. We willpromptly establish partnerships between key institutes and organizations. Also, we will
promote the establishment of international joint operations for overseas medical and healthcare
startups.
b. Creation of a Japanese “Patent Box”
Allowing for the “Patent Box” in Japan would assumedly be beneficial, because corporations
developing advanced technology from overseas can register them in Japan. This would be
effective not just for developing domestic companies, but also for inviting personnel fromoverseas.
<Expansion into New Fields>
The potential of new fields, such as frameworks surpassing existing ones for pharmaceuticals
and medical devices, and innovations through new mergers of pharmaceuticals, medical
devices, ICT and services should be pursued and incorporated into the ecosystem.
This is to encourage medical ventures to actively accept the challenges of research anddevelopment fields previously untapped, for example, promoting “Assessment Method
Research Support” for medical ventures engaged in innovative medical product and device
research and development.

3. Creation of an “All MHLW” Venture Support System<Establishment of a Venture Support Structure at the MHLW, PMDA and Core ClinicalResearch Hospitals>
a. Establish a new Venture Support Strategy OfficeFirst, within one year a Venture Support Strategy Office (VSOO) should be established within
MHLW to act as the “control tower” for planning, implementing, and monitoring policies that10promote medical ventures. VSOO must coordinate with the relevant government agencies anddepartments, and with PMDA. VSOO should provide comprehensive consultation to newventures as the gate for entrepreneurs and researchers.
Second, PMDA should also establish an office to support the practical application of the“seeds” held by small-scale enterprises, including medical ventures, within one year.
Third, a venture support department should be established within core clinical researchhospitals that are closest to the front lines of innovation, and a finer nationwide support
structure should be constructed.
b. Construct a PDCA Cycle for Venture Support Policies
It will be necessary to establish a Plan-Do-Check-Act (PDCA) cycle to verify the effectivenessof medical ventures support measures, and lead to improvement. Also, for the initiatives
presented in this report, in addition to creating opportunities for discussion with the relevant
persons in industry, academia, and government, the implementation status of this report should
be checked annually, and as necessary, routed through a PDCA cycle where a new action planis created.

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