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It is not every day that an Aussie minnow lands a deal with a Japanese whale. When Fujifilm took a 9% equity stake in Cynata Therapeutics Ltd (ASX: CYP), it was a major lift for the regenerative medicine company, positioning Cynata to benefit not only from Fujifilm’s resources but also more broadly from current economic strategy within Japan. Prime Minister of Japan, Shinzō Abe, has committed to building leadership around a new generation of regenerative medicine products involving human cells and tissues and Cynata is now perfectly positioned to take advantage of this in the world’s second largest market for healthcare products.
Previously, Japan’s macroeconomic initiatives drove Japanese leadership for years in other industries such as the automotive and semiconductor industries. Cynata is now part of Japanese policy decisions that reflect the enormous medical and economic importance of stem cells in Japan.
For those unfamiliar with the recent deal, Fujifilm took a A$3.97 million strategic equity stake in Cynata in January 2017. The parties agreed to collaborate on the further development and commercialisation of Cynata’s lead Cymerus™ therapeutic MSC product CYP-001 for graft-versus-host disease (GvHD). Additionally, the deal included potential future upfront and milestone payments in excess of A$60 million and double-digit royalties on Cynata’s CYP-001 product net sales. Fujifilm will fund development of CYP-001 beyond the current Phase 1 program.
Importance of Cellular Medicine within Japan
Over the past several years, Japan has accelerated its position as a hub for regenerative medicine research, largely driven by support from Prime Minister Shinzo Abe who has identified regenerative medicine and cellular therapy as key to the Japan’s strategy to drive economic growth and to reduce Japan’s spiraling health care costs. The Prime Minister has encouraged a growing range of collaborations between private industry and academic partners through an innovative legal framework approved last fall.
He has also initiated campaigns to drive technological advances in drugs and devices by connecting private companies with public funding sources. The result has been to drive progress in both basic and applied research involving induced pluripotent stem cells (iPS cells) and related stem cell technologies.
Most importantly for Cynata Therapeutics, Japan’s Education Ministry said it is planning to spend 110 billion yen ($1.13 billion) on induced pluripotent stem cell (IPSC) research during the next 10 years, and the Japanese parliament has been discussing bills that would “speed the approval process and ensure the safety of such treatments.”
Cynata Attracts Fujifilm Investment with Two World Firsts
There are several reasons why Fujifilm was attracted to Cynata Therapeutics. First, Cynata has achieved two world firsts by developing technology to enable the mass-production of therapeutic grade stems cells and receiving approval to commence an iPSC-derived allogeneic MSC clinical trial (patient recruitment has opened). Cynata’s clinical trial pertains to the treatment of GvHD (Graft vs. Host Disease) in bone marrow transplant patients.
With a market cap of U.S. $22B, Fujifilm is undoubtedly the global behemoth within the regenerative medicine space. With its balance sheet, Fujifilm can have its choice of industry partners. Therefore, Fujifilm’s investment in Cynata Therapeutics indicates both the technical power and commercial potential of Cynata’s CymerusTM platform technology, which utilizes induced pluripotent stem cells (iPSCs) originating from an adult donor as the starting material for generating mesenchymoangioblasts (MCAs), which are subsequently differentiated into mesenchymal stem cells (MSCs).
Because Cynata’s Cymerus™ technology uses iPSCs as source material, it can produce MSCs in nearly limitless quantities, which eliminates the logistic, economic and regulatory challenges associated with relying onmultiple new stem cell donors to support its manufacturing demands. Instead, it can manufacture MSCs in unlimited quantities, in uniform batches, from a single donor, and at low cost, a feat which has never been achieved before in history.
Cynata is highly attractive as a strategic partner to Fujifilm for numerous reasons including, but not limited to, the following:
1. In April 2015, Fujifilm acquired Cellular Dynamics International (CDI) for US$307M. CDI has some of the same inventors as Cynata and originates from the university of University of Wisconsin-Madison, through the Wisconsin Alumni Research Foundation (WARF), as well. WARF helps steward the cycle of research, discovery, commercialization and investment for the University of Wisconsin-Madison.
2. Cynata has a license from CDI for their iPSCs to use as the starting material to produce therapeutic grade MSCs. In 2012, Professor Shinya Yamanaka was awarded the Nobel Prize for the discovery that mature cells can be reprogrammed to become pluripotent (iPSCs).
3. The commercial application of Cynata’s stem cells is intrinsic to Fujifilm’s regenerative industry global positioning. Fujifilm appears set to control the global supply of therapeutic grade stem cells either as a wholesale supplier to other therapeutic companies or as a supplier of therapies.
Furthermore, Cynata is the only company in the world that can mass-produce therapeutic mesenchymal stem cells deriving from a single donor at a consistent quality and affordable cost, and Cynata has collected strong data in multiple pre-clinical studies for the treatment of asthma, heart attack, GvHD (Graft vs. Host Disease) and critical limb ischemia (CLI).
Finally, Cynata is currently valued at around one tenth (1/10th) of the acquisition price of CDI by Fujifilm and operates in a regenerative medicine market that is expected to grow to US$120B by 2030. With these metrics, it represents an attractive investment area for major biopharmaceutical companies, particularly Japanese companies, like Astellas and Fujifilm.
Fujifilm’s Global Dominance within Regenerative Medicine
Without question, Fujifjilm is positioning itself to dominate the regenerative medicine industry, both within Japan and globally. By taking a 9% equity stake in Cynata, Fujifilm has made the Australian stem cell company an important part of its narrative. Cynata has also become a part of the larger Japanese movement propelled by Prime Minister Abe to pursue regenerative medicine products as part of its economic strategy.
Fundamentally, Cynata Therapeutics is now in a much stronger position than at any time in its history. It has sufficient cash to drive value generation for shareholders. It has a committed corporate partner which has already shown it abilities with M&A deal-making. It has solid data around its unique CymerusTM technology. It has a clinical trial that is about to launch, and it is benefiting from powerful global forces. Undoubtedly, 2017 will be an exciting year for all company stakeholders, including investors, management, partners, and patients.
 Dvorak, K. (2014). Japan Makes Advance on Stem-Cell Therapy [Online]. Available at: http://online.wsj.com/news/articles/SB10001424127887323689204578571363010820642. Web. 21 March. 20157.