Emerging Drug Developer: Acucela

Acucela grows with one foot in the U.S., one in Japan

Over the years, Dr. Ryo Kubota has developed some keen insights into the strategic thinking taking place among large Japanese pharma companies. And that's helped him gain the backing he's needed to help grow Bothell, WA-based Acucela.

"The Japanese market is shrinking in the long term," says Kubota in a telephone interview from Japan. "The country has a diminishing population. Medical expenditures are tight. It's not a promising market in the long term. They have to be global and penetrate the U.S. market to survive global competition."

Ten years ago, most Japanese pharma companies would have been satisfied just to ink deals for the Japanese rights to a new drug, says Kubota, who has undertaken research at both Keio University in Japan as well as the University of Washington. "Nowadays, they need to have a presence in the U.S. market. Unless they can participate in U.S. commercialization, there's no real value. This is a general, recent trend."

And one that has continued to buoy the developer.

Last week Acucela announced twin collaboration deals with Otsuka Pharmaceutical for its clinical development programs: ACU-4429, an early-stage therapy for dry, age-related macular degeneration and Rebamipide, headed into a late-stage trial for dry eye. Acucela snared $5 million upfront for ACU-4429 with a $258 million schedule of milestones for a North American co-promotion deal and an unspecified amount for the development of Rebamipide with rights to negotiate a co-promotion deal for the U.S. market following regulatory approval.

A Phase I trial of 4429 should be completed this year, which will include data on the pharmacological response to the drug. A brief Phase IIa is planned for 2009 with an 18-month Phase IIb trial set to begin next year, says Kubota. If it works as expected, 4429 will stop the build-up of A2E, a toxin that plays a role in spurring AMD.

Rebamipide is much further along. Rebamipide is designed to raise the level of mucin in the tear covering the conjunctiva and cornea. By stabilizing the tear film, researchers believe it should improve the corneal-conjunctival damage associated with dry eye.

"Within two months we plan to initiate a pivotal study," says the CEO. We would like to see significant improvement in discomfort from dry eye. We're hoping to commercialize within two years, in an ideal situation."

Acucela now has the option to sign on a separate European partner or possibly continue on to commercialization alone. Says Kubota: "We don't need an amazingly large sales force."

The developer has raised $40 million from Tokyo-based SBI Investment, says Dr. Kubota. Acucela has about 30 staffers and Kubota isn't planning any major expansion anytime soon.

"We will grow a bit," he says, but not much. "I'm not interested in just expanding the organization," says Kubota, who prefers to keep the burn rate as low as possible.

"We don't necessarily care if we go public or stay private," he adds. "We want to build a fully functional biotech company with sales and marketing - a specialty pharmaceutical company."

And he expects to gain more support from his Japanese connections to push down that path.

"Japanese investors are in for the long term," he adds. "The philosophy of a Japanese company is a very different perspective, which is fortunate for us. It's helped us build self sufficiency."

Japanese companies have long been noted for their aversion to risk. "But I think Japanese pharma is becoming more and more aggressive," says Kubota. "You need to be patient in building relationships. That will pay off in the end."

It's already paid off for Acucela.