RaQualia's New Spin on the Startup

Dec 01, 2011

In most cultures, fire and water serve as emblems of destruction. But in the distinctive Japanese mindset, harnessing these two unpredictable elements of the natural order can also seed a stronger, more rooted revival.

Atsushi Nagahisa
This is the guiding premise behind RaQualia Pharma, a rising Japan-based venture whose corporate logo taps the latent energies of the sun and sea to highlight a new approach to product development in the local life sciences. Primed by the spectacular flameout of industry's biggest recent development failure—Pfizer's torcetrapib—and positioning itself as a game-changing alternative to Japan's "lost decade" of parched growth, the RaQualia business model finds virtue in adversity. Simply put, failure is the stimulus for radical changes in how the research enterprise initiates and executes its mission. President and CEO Atsushi Nagahisa calls it his "stealth advantage" against the competition, noting that, besides being commercially viable as a source of high-value treatments, RaQualia wants to become the alternative to Big Pharma's blinded and bloated path to drug development.

The strategy is also geared to making RaQualia exceptional in the eyes of investors and the larger policy community. The company wants to stand out as an innovator in the process of invention, committed to building a distinct global model from Asia of customized product development geared to the region's unmet medical needs. The message from management is, "Think big." RaQualia is not just another small-cap enterprise struggling to build a product portfolio with other peoples' funds. The additive element is the pressure its very presence places on the conventional wisdom that Japan lacks an entrepreneurial culture, where new ideas fail because the only choice is between the "salary man" culture of bureaucratic malaise or the "samurai code" of winner take all. RaQualia is carving out a third way focused on teamwork, trust, and partnered collaboration to achieve a level of R&D productivity that exceeds what has been possible in Japanese life sciences to date.

Whether it works or not, the RaQualia model poses a subtle challenge to its industry peers—and to Japanese industrial policy writ large. The question is whether Japan's best days as a pace-setter in medicines innovation are behind it. Or is RaQualia a breakthrough precedent that must be allowed to succeed?

The Phoenix Portfolio

From a purely commercial standpoint, RaQualia carries the advantage of a running start. Established in 2008, the company began as a spinoff from the decision of Pfizer to shut down its R&D facility in Nagoya. Richly endowed with a staff of more than 400 scientists, the Nagoya operation stood out as a symbol of foreign investor commitment to Japan and at the time was on the cusp of delivering its first global first-in-class medicine, under Pfizer's veterinary franchise. What sealed its fate was the fallout from the collapse of the company's top development target, torcetrapib, a next-generation statin replacement for the $11 billion global blockbuster Lipitor.

As the on-site head of Nagoya, Nagahisa became a point man for a wave of domestic criticism about the merits of the decision, which came only weeks after top Pfizer management had told local officials that the company planned to increase its investments in Nagoya as one of three global hubs for research. "Pfizer is here to stay" was the ironic PR message before the torcetrapib trial's bolt from the blue.

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