PhoenixBio leads pharmaceutical innovation with cutting-edge mice models

We would like to start by getting your take on a comparative analysis between the United States and Japan as centers for drug development. Japan is known for having a very strong regulatory framework, advanced healthcare infrastructure, and very strict pricing regulations, making it difficult to be profitable. In contrast, the United States has a very strong innovation ecosystem and high healthcare expenditure, but at times suffers from the challenges of being overly competitive with strong, established players. Could you explain to us what you consider the key differences between the United States and Japan for the sake of drug discovery and development?

Before we begin, I'd like to mention that PhoenixBio is a contract research organization (CRO), not a medical company. While I may not be able to offer specific insights on regulatory difficulties, it's worth noting that there are significant distinctions between clinical and non-clinical aspects in the medicine development market. Clinical development involves the process of testing medicine, and the regulations vary depending on the country. However, our products have been extensively used in non-clinical development, particularly during the early stages, which has minimized the impact of regulations on our operations.

The laboratory holds paramount importance for pharmaceutical companies, as it provides an additional budget from the government and access to a talented pool of researchers. State-of-the-art tools and facilities play a crucial role in the development process. Considering these factors, I believe the Japanese environment for development and research is relatively less dynamic and efficient compared to that of Europe or America.

Allow me to share an anecdote from my experience working on a hepatitis C project in 1990. During that time, I was part of a team, and we realized that the competitiveness of the Japanese industry was weaker than that of the US. Unfortunately, we couldn't win the competition as the US counterparts were able to use the essential tools faster, leading to a delay of 3 months in our progress. This example highlights that besides regulations, a nation's overall capacity and capability play a crucial role in determining success in the field of research and development, and this observation remains relevant to this day.

Before you talked about the differences between clinical and non-clinical applications, and because many applications for your mice are in the later stages of development, thus you have more flexibility in non-clinical trials. We saw in our research four or five main applications for which your products are used; viral hepatitis, non-alcoholic fatty liver, gene-based therapeutics, and transplantation. Is there a particular application that you think has the most promise or that your products can assist in making serious breakthroughs?

The most significant aspect of our mice is their possession of human liver cells, making them highly effective in combatting hepatitis and nonalcoholic steatohepatitis (“NASH” which is recently renamed as “MASH”). Initially, our primary focus was on drug metabolism and pharmacokinetics (DMPK) and liver toxicity. However, we also needed to consider the market demand. While the DMPK market is relatively small, hepatitis represents a substantial market with promising opportunities. Furthermore, research on NASH holds potential for further growth.

When discussing gene-based therapeutics, we encounter two types. Firstly, there are cases where the genes themselves serve as medicine. Secondly, certain treatments target specific genes for therapeutic purposes. The pivotal aspect is ensuring normal functioning human genes. In our research, we have successfully developed animals with human organs that possess normally functioning human genes. As a researcher, this enables you to gauge the potential impact of treatments on the human body, given the utilization of authentic human genes within our mice.

While the industry may use the term "humanized mouse" for animals with a few human genes, our mice stand apart with nearly 90% of their livers comprised of human liver cells. This significant proportion of human liver cells distinguishes our product from others, and we take pride in being the only company with such a unique offering.

Your company has basically created the global standard for these types of mice, and that figure of almost 90% human liver cells is an incredible one. PhoenixBio has been around for a little more than 20 years now, and I imagine this 90% wasn’t an overnight achievement. Can you walk us through the development history, and what are some of the key milestones or breakthroughs that happened at PhoenixBio in order to be able to achieve this global standard of mice?

Around 20 years ago, we achieved a significant milestone by replacing the organ with human cells, reaching a high success rate. However, to meet the requirements of pharmaceutical companies for proper testing, we had to provide them with a consistent batch of 20-30 animals with unified quality. This led us to establish a facility capable of producing around 4000 mice annually, which involved substantial investments in both infrastructure and skilled manpower.

The uncertainty surrounding the potential market demand made us apprehensive about the venture. Nevertheless, we proceeded with the development of our chimeric PXB-mice, which have proven to be invaluable in predicting human body responses and assessing the efficacy of new medications that have not yet reached the market. Consequently, our mice are primarily used for testing drugs under development.

At PhoenixBio, our focus lies in collaborating with companies engaged in pioneering drug research, which often includes European and US-based pharmaceutical firms. From the early stages of our company, we recognized that the majority, if not all, of our clients would be international rather than domestic.

Domestically, we do have a number of highly acclaimed researchers and institutes. When those researchers write papers we suggest them to US institutes as a way to promote our products, and this practice started in 2008.

PXB-mouse

How has your policy or initiative to connect with these overseas clients changed over the years? I imagine that these days you are not going directly to hand papers to professors and researchers. How do you go about creating these connections and partnerships in overseas markets, and critically, are you actively seeking new clients or partnerships overseas?

With a subsidiary in New York City, our fundamental approach remains unchanged. As previously mentioned, our focus is well-defined, with gene-based therapeutics, viral hepatitis, and NASH being our primary targets. Each of these areas has its own academic community, and we actively participate in relevant academic sessions, engaging with researchers and introducing our products. As a result, some researchers express interest in our offerings during these interactions.

A difficult topic I’m sure you come across often is bioethics. Animal experimentation is a hot topic, especially in Western markets. We know from research that besides the PXB-mice you also have a PXB-cell business. This new product is a substrate of material where you can grow and cultivate cells. Do you ever envision a future where cultured cells like these could totally eliminate the need for actual live animal testing?

Currently, there is a noticeable trend toward reducing the number of animals used in testing. However, it seems unlikely that we will completely eliminate the need for animal testing. It's essential to consider the alternative perspective and ask, "Would it be acceptable to forgo animal testing and directly introduce substances into human bodies?" Nevertheless, such an approach carries significant risks. Ensuring the safety and effectiveness of medicines requires thorough validation, which is difficult to achieve without animal testing.

What motivated you to expand beyond just mice and start providing PXB-cells on their own?

Certainly, our driving motivation lies in the belief that reducing the number of animals used in testing is essential. When approaching customers, we emphasize that they can achieve comparable results by using just 3 of our mice instead of hundreds of animals. Our mice offer greater efficiency and potentially lead to higher accuracy projections in their research.

While there are discussions about the possibility of a complete ban on animal testing due to this trend, it is crucial to recognize that ensuring safety remains a challenging aspect. Striking the right balance between ethical concerns and the need for safety verification is a complex endeavor.

The other big market you’ve mentioned today is Europe, which from our understanding you don’t actually have a physical presence in at the moment. How do you plan on developing the European market, and beyond that even, what are the next steps for the international development of PhoenixBio?

Our next target markets are Europe and China, but due to the perceived risk in China, we won't enter that market directly. Instead, we plan to approach the Chinese market through an agency. In contrast, our presence in Europe is already well-established, with a significant number of reputable clients from industry and academia. This has led us to believe that establishing a new office in Europe may not be necessary at this stage. Our strong clientele in Europe primarily consists of countries like France, Belgium, the Netherlands, and England. Although these countries are often grouped together as the EU, they each have distinct characteristics and requirements. Hence, setting up an office in one location wouldn't necessarily allow us to efficiently manage business operations for all of them.

Hiroshima facilities

Clean room

Breeding room

PXB-mouse liver

PXB-cells

Microphotograph of PXB-cells

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What would you say is the focus of your international strategy? Would it be finding a partner for the Chinese market, finding new clients in the US, or finding new clients? Where are you putting your emphasis or focus?

I have two approaches. Firstly, our company has partnerships with several CROs that use our mice and have extensive experience in animal testing. We collaborate closely with them, and they have actively reached out to the Chinese and European markets on our behalf. However, it is worth mentioning that the sales forces of these CROs haven't met our initial expectations, resulting in limited success with communications to Europe and China. Instead, most of our sales come directly from clients who contact us, and then we refer them to our CRO partners for handling. This decision to involve CROs is due to our in-house testing institute operating at full capacity currently.

Regarding our second approach, we are considering partnering with life science vendor companies rather than CROs, although we haven't implemented this strategy yet. The idea is that by collaborating with dedicated sales companies, we can benefit from their expertise in sales tactics. In response to your question about how we find clients, these two approaches form the core of our current strategy. While in the past, we targeted specific individuals or firms, we now aim to reach a wider range of entities interested in utilizing our products.

Imagine that we come back in 4 years' time and have this interview all over again. What are your goals for the next 4 years? If you were to pitch your company to a potential investor during that time period, how would you do so?

We may be categorized as a biotech startup, but at our core, we are primarily a manufacturing company, and our main product happens to be mice. Our business model is simple: the more mice we produce, the more we sell. With our production capacity now operating at full capacity, our next step is to increase mouse production further, but this expansion requires finding new customers to purchase these mice. Our growth strategy is founded on the basic principle of producing more to sell more.

In addition to our New York City office, we also have a presence in Canada. While our capacity there is currently smaller compared to our Japanese facilities, we are exploring the possibility of expanding our production lines in Canada to better serve our extensive client base in the US market. This strategic move would enable us to cater more efficiently to our US customers by capitalizing on the proximity and accessibility of our Canadian operations.