RaQualia's New Spin on the Startup - Pharmaceutical Executive

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RaQualia's New Spin on the Startup


Pharmaceutical Executive


Signposts of Success

And what are those metrics?

First, to produce two new development compounds per year, a target that so far has largely been met.

Second , to establish strong partnerships in multiple markets: RaQualia has inked some 400 collaborations over the past three years in 17 countries. Earlier this year, the company scored a significant breakthrough with another Big Pharma, joining Eli Lilly in a multiyear collaboration that will explore ion channel chemistry as a springboard for the synthesis of new molecules and ultimately new medicines. "Prospects are obviously long-term, but it's a vindication of our model, as Lilly decided it could pursue this target faster and at lower cost if they did it with us," Nagahisa says.

Third , securing an adequate capital base to root the company's independence and finance future expansion. Progress toward this metric was secured in July, when RaQualia successfully floated a 4 million-share IPO, earning a payout of just under $80 million that will keep the company solvent for at least the next three years.

This is vital, as for now the company relies entirely on licensing, milestone, and royalty income to underwrite its operating costs; it has not commercialized a product for sale on its own. But the fact the company now trades publicly on the JASDAQ growth market exchange in Osaka puts it on a surer footing than many other startups in a high-risk business.

Nagahisa expressed confidence in RaQualia's portfolio, as evidenced by the successful share offering in July: "We are very excited about the response to our public launch," he said. A pair of EP4 receptor antagonists, RQ-7 and RQ-8, are the most exciting early-stage compounds, with established proof of concept for osteoarthritis pain (RQ-7). Additional proof of concept testing on other indications for both compounds is "ready to start," according to Saidel.

No Guarantees

Still, most of RaQualia's product offerings must confront a crowded therapeutic field—and face significant pricing pressures, as the small-molecule, primary-care delivery model is mauled by payers. Partnerships geared to overcoming these hurdles are critical to softening the burden. So Nagahisa points to a new alliance with a prominent, diversified, and fast-growing Korean company, CJ CheilJedang, to license its in-house drug candidates, an acid pump antagonist (APA) and a 5-HT4 partial agonist, for gastrointestinal reflux disorder (GERD) and other gastrointestinal diseases. The deal capitalizes on CJ Cheil-Jedang's size, market clout, and resources to drive the manufacture and promotion of this novel therapy to a potentially wide market in Korea, as well as eventually in China, Taiwan, India, and Southeast Asia—the other countries where RaQualia has transferred marketing rights.

In return, RaQualia will continue to build value for the two compounds by conducting studies in the US and Europe. For example, clinical studies using APA have been shown to improve the standard of care within the PPI class, including better patient response at first dosing, improved efficacy when taken at nighttime, and tolerance on an empty stomach, without common side effects. RaQualia is interested in exploring similar deals in China, as well as other countries in Asia and the developing world.

RaQualia's organization is a visible experiment that challenges the notion of Japanese reticence toward an entrepreneurial class. But there's not a lot of risk involved, and that won't tickle the fancy of some analysts and investors. "The pipeline agents RaQualia possesses are either a rank below first-in-class in their respective spaces, like ziprasidone, or very small product franchises in geographies outside Japan, like Eraxis," says Raghuram Selvaraju, senior VP and senior biotechnology analyst at Morgan Joseph TriArtisan. "I don't believe that these drugs are likely to become blockbuster franchises in the Japanese market," where drug approvals are slow and regulators are focused on increasing generic drug utilization. Even so, the company's commitment to quality and steady, continuous development may clear the path for innovation. Ultimately the market will decide.


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