TOKYO – Japan's Nitto Denko Corp., which produces everything from electronics to chemicals, will spin off a small biopharmaceutical unit on April 1. Kageshi Maruyama, who will become president of the new company, told BioWorld Today that the decision was made to establish Nitto Biopharma Inc. to allow the company to operate in the market with more flexibility.

And rather than being based in Japan, the firm will open a new R&D facility in San Diego, where more than 1,100 life sciences companies operate.

"This is not just about optimization," Maruyama said. "The new lab will be a special purpose vehicle for the future, conducting an increasing number of experiments and perhaps teaming up with other pharmaceutical companies. So we need flexibility, which led us to believe creating a subsidiary was the best option. Therefore, we formed Nitto Biopharma Inc. In July we will be fully up and running."

Maruyama, who currently spends about half his time in San Diego each month, said that the environment there was perfect for Nitto Biopharma to grow.

"We chose the area because there is a lot of chance for cooperation and co-development with other companies," Maruyama explained. "The Scripps Health system also operates in the area; there are a lot more chances for experiments and research in the southern part of California than there are in the north."

Currently, Nitto Denko's biopharmaceutical operation in the U.S. takes place at Nitto Denko's Oceanside facility in Northern California.

Japanese biopharmaceutical operations for Nitto Denko are focused on Sapporo, in the country's northern Hokkaido Prefecture.

"We are working with Hokkaido University in Sapporo with government support," Maruyama said. "The Japanese lab has been very stable since we launched last May. But we decided to move into the U.S. to a place with a better layout, improved functionality and more efficiency."

Drugs in the pipeline for Nitto include ND-L02-s0201, which targets fibrosis of the liver and uses siRNA technology. The U.S. FDA has given the drug candidate fast track status. The company is also working on technology that can target specific cells for cancer. According to Maruyama, drugs could reach the market by 2020.

"From then, there will be a lot of new products getting to the market," Maruyama said. "We will be using siRNA as well as RNAi for the drugs. Sapporo and San Diego will be working on these drugs together."

In terms of rolling out the drugs, Nitto Biopharma is eying FDA approval first, then Europe and Japan will come later.

"Of course, we also want to get into China," Maruyama said. "With places such as India and Africa though, the drugs would have to sell too cheaply so it is difficult to see us getting into those markets anytime soon."

JAPAN'S LACK OF INFRASTRUCTURE STALLS PROGRESS

At home, Maruyama is confident that the biopharmaceutical market will grow. He said that although there has always been demand for medicines, there has not been the infrastructure in place for Japanese companies to gain early momentum until recently. A set of economic policies to boost Japan's flaccid economy, known as Abenomics (after President Shinzo Abe), has led to measures that encourage the life sciences.

"Since the advent of Abenomics, the life sciences have seen an increase in the number of ventures, which can gain government support," Maruyama said. "So from now, I am [expecting] the entire industry to get more vibrant. Abenomics has been a big help, assisting ventures to get off of the ground. There is also support from organizations such as the FDA. In both countries, support has been great."

Like many companies in Japan, however, Nitto Biopharma for now has to wait for development to realize the hoped-for growth. Generics, which are being encouraged by the government, are eating away at profits for many companies.

"Things are going to get tough for more general drugs as generics continue to grow," Maruyama said. "But we are aiming for high-quality medicines that improve lives and have never been seen before. The price of these is unlikely to be impacted too much by the government's efforts."

Parent company Nitto Denko, headquartered in the city of Osaka, had paid-in capital of ¥26.7 billion (US$230 million) and a consolidated staff of 27,214. In fiscal 2014, which ended March 31, 2015, it had net sales of ¥852.2 billion and net income of ¥78 billion.

Nitto Biopharma will be located on Science Center Drive in San Diego as of June 1.