Naoki Okamura, the CEO of Astellas Pharma, and his senior leadership team were in South San Francisco on Wednesday to mark the opening of the company’s West Coast Innovation Center, a gleaming $90 million, state-of-the-art building that co-locates several of the company’s operations strewn over the Bay Area in one location.

“Our gene therapy organization is the biggest resident in this building,” declared Chief Scientific Officer Yoshitsugu Shitaka, to the audience.

And that was reflected in the choice of speakers that Astellas featured in the roughly 1-hour program that included executives like Morten Sogaard, president and division head of gene therapy research and Carolyn Sasse, vice president and development head of Astellas Cell and Gene Therapy. In other words, Astellas is doubling down on its efforts in cell and therapies even knowing that there will be setbacks. And indeed there have been.

Later, in a wide-ranging interview, part one of which appears below, Okamura, who has worked at Astellas for 38 years, addressed not only the challenge of gene therapy but also drug pricing, AI and the company’s join venture with a competitor. The Q&A below has been slightly edited for length and clarity.

MedCity News: What was the motivation behind the joint venture with Takeda and Sumitomo Mitsui,  What are your goals?

Okamura: I think Japanese academia has excellent innovation but unlike in the U.S. where you have the complete ecosystem from academic institutions to startups, to biotech to pharma, we miss one part of that ecosystem, which is the incubator.

So we are teaming up with Takeda and Sumitomo Bank to really fill that gap for the Japanese academic centers. We have so many partnerships with other pharma and biotechs, but this is a kind of joint effort with Takeda to fill that gap in the healthcare ecosystem in Japan. We are working together to help academia to come to the industrial level of science and technology.  

We are providing some in kind support for them because they have the science, they have the technology, but they have no knowledge about how you bring that to the level of industrial success. So we provide in-kind support in IP for example, in regulatory guidance to get registered for review.

MedCity News: But why work with a competitor to do this?

Okamura: Yes, we are competing, but as leading companies in Japan, as Japan-based companies. we decided that we should jointly embrace the innovation coming from Japan.  

I’m curious about what you said regarding the missing element being the incubator. Even within the US, Silicon Valley stands out for its ability to take risks. Do you have that in Japan?

It’s a great question. I think Japanese society is becoming more open to risk-taking compared to decades ago. But still, there are differences in the level of risk-taking.

In order to become innovative, you have to take intelligent risks. You need to be bold, you have to learn from failure, fail fast and learn fast. I’m not going to say all Japanese companies are taking intelligent risks, but there is a kind of signal that people have realized that they have to take risks in order to be innovative.

MedCity News: Now I’m not a biopharma reporter, but I do want to talk in general about cell and gene therapy, which is a tricky market as I understand.

Okamura: Tricky. What do you mean by that?

MedCity News: Tricky in the sense that it’s, as your head of gene therapy implied, [at the event Wednesday] that there’s no guarantee of success.

Okamura: No, of course not.

MedCity News: I understand that there have been some challenges that you’ve faced in this market. I’m thinking of the deal you had with Adaptimmune in hearing loss that you had to suspend and there’s the clinical trial where patients died that is currently on hold. It seems like you are doubling down on cell and gene therapy even though you’ve had these challenges. So, what kind of returns are you looking for that help you take the bet even though the current returns have not been that great.

Yes, so thank you for clarifying the question. If you think of the small molecule – the chemical things – we have a long history of discovery, development, manufacturing going through the regulatory path for small molecules. Probably most of us have a playbook to be successful in that. If you look at cell and gene therapy, there’s no playbook yet. Not only for U.S. industry but for the regulatory agencies. They don’t even have a playbook. So, it is in a kind of very embryonic stage from the technology standpoint. Therefore, it needs more risk-taking. But on the other hand, we firmly believe that cell and gene therapies are going to be the key modality for healthcare in the future, because it is not simply about improving the symptoms of the patients, but there’s also a potential to cure the disease. So maybe it’s not coming in a year or maybe in five years, but we still believe that we have to take that risk to really develop and evolve the cell and gene therapies for the future of healthcare.

MedCity News: What about the trial that has been suspended? Are you going to restart it?

Okamura: Yes, with regard to the AT132 program for X-linked myotubular myopathy – it is a truly devastating disease and most of the time the patients cannot live long. So we are trying to really change, make a difference in the lives of those patients when we saw good efficacy. But, of course it has to have the — what’s the right word — appropriate benefit, risk balance. And because we faced the death of three boys, we suspended.

MedCity News: Three or was it four patients who passed away?

Okamura: Three and then another one comes a month later. So we suspended and we tried to figure out what are the causes of those. Of course we had very regular dialogue with our regulatory agencies. We are getting closer to resuming the clinical trials now. So one of the thing is that it’s easy to say this is the transgene, this is the missing gene, and you put it in a kind of capsid and you give that capsid to the patients. It sounds very easy, but it is not that easy to really create the fully-filled capsid with the full length of the transgene and for example, that kind of technology breakthrough has to go with it. Otherwise the empty capsid may just simply go into the body but doesn’t work as a treatment. So for example, those are technical challenges we are trying to address and once it is successfully addressed, we probably can restart.

MedCity News: Even besides creating the therapy and running a successful, safe clinical trial, there’s the issue of manufacturing and supply chain within cell and gene therapy that is challenging. How do you address that?

Okamura: Yeah, so again, in small molecule, we have a kind of playbook of how to manufacture very effectively and efficiently. The small modules, once the product gets to a mature stage, then we use contract manufacturing organization to manufacture products – so it’s just simply technology transfer and then they can manufacture. Monoclonal antibody has come to a little bit similar stage of technical progress. So sometimes the simple monoclonal antibody is manufactured by contract manufacturing organization, but for cell and genes, there are no CMOs who we can ask to manufacture our products for us.

MedCity News: What about Catalent? Isn’t that a contract manufacturer that can do this?

Okamura: Yes, there are some candidates, but we’ve decided to do it ourselves.

For example, we have a GMP manufacturing facility even for commercial products in the Greater Boston area for gene therapy. There’s another still under construction but still running, in Sanford, North Carolina. So, I think for clinical trial purposes, those two manufacturing facilities can drive the cell and gene therapy manufacturing for ourselves.  

Okamura: And they’re up and running?

Okamura: Up and running. And actually it attracts the interest of other companies because we have the manufacturing capability. Some startups are coming to us to see whether we can partner with them. So it is not simply providing clinical trial material for our clinical trials, but that manufacturing capability can really enforce the kind of ecosystem for cell gene therapy. So I think of course it costs us, it takes time, but eventually cell and gene therapy pays off.

MedCity News: Moving on just a little bit, as CEO, you always have to look at the portfolio of your products. Your top-selling product is losing patent protection in three years from now. What is your plan to replace that revenue?

Okamura: Thank you for the question. Xtandi prostate cancer drug. $5 billion sales globally.

So it’s not easy. But under the corporate strategic plan called CSP 2021, we are planning to really develop the strategic grants to replace the revenue as well as the profit of the Xtandi. At the time of the loss of exclusivity, for example, Padcev, which is a urothelial cancer drug, it is getting to the $1 billion revenue in 2024,2025. We acquired Iveric Bio last year and Izervay is quickly in taking off and even though we have challenges ahead, we have the Veozah , which is the vasomotor symptoms drug for menopausal women. We have the zolbetuximab, which is the  anti-claudin 18.2 (CLDN18.2) monoclonal antibody for gastric cancer. We are waiting for NDA in the United States. So a few will sort of try to take over Xtandi.

And then there are our primary areas of focus, which we start from biology. We identify the modality to address that biology and then we try to figure out who is the best patient population to benefit from this combination. Once the triangle is there, we can create multiple projects from those triangles. And we have four primary areas of focus. We call this triangle primary focus oncology targeted protein degradation, whose initial indication is for oncology gene therapy and cell and gene therapy for ophthalmology diseases.

So we replaced the Xtandi with strategic brands. And then on top of that, those primary focuses are producing the projects for the future growth.

MedCity News: Let’s talk drug pricing, which as you know is a hot topic in the United States. So as you know, it’s under litigation now, but Biden passed the IRA through which Medicare can negotiate 10 drugs. I don’t think any of the drugs affect Astellas.

Okamura: No.

MedCity News: But assuming the pharma companies and the pharma lobby fail in the litigation — and they’ve already had a couple of losses, but it hasn’t gone all the way to the Supreme Court — how do you plan for this situation because if 10 drugs can be negotiated today, there is no saying what might happen in the future.

Okamura: Of course I cannot predict but, and I am a bit disappointed that the U.S. is taking that direction of controlling the price of the pharmaceutical products. But we are regulated industry and we have to follow the law, the rules, and we know how to do it. If I go back to Japan, drug prices keep falling

MedCity News: That’s good for people, right?

Okamura: Yes and no because in the short term it benefits because the price goes down. But that will actually [be a disincentive for] innovators to be in the marketplace because there’s no guarantee that even if technically, scientifically a drug is successful, it may not be successful as a business because of the price regulation.

MedCity News: I hear you and I don’t disagree with you to a certain extent, but it just seems unfair. The U.S. taxpayer essentially underwrites drug innovation in the United States and then the rest of the world benefits.

Okamura: I hear you. But at the same time, for example, we are coming to the U.S., investing in the U.S., acquiring or partnering with US companies. So it’s not simply U.S. taxpayers are supporting innovation and then we and other countries are freeloading. I don’t think so, but I hear you, and the most important message that I would like to deliver here today to you is we are a firm believer that the pricing should reflect the value that a product brings to the patient. So if there is a good benefit-risk balance for the product, then it should not have low pricing. I think that is not a fair treatment of the product. There are different ways of measuring the value that a product is bringing to the patients. There should be a healthy dialogue among different stakeholders like academic researchers, regulators, payers, patients. And we’re increasingly involving patient and patient advocacy groups into the development state so that we can understand what is the best value that we can deliver to patient populations.

MedCity News: And that is the million dollar question. How do you measure value? I’m curious about whether Astellas has thought about entering into risk-based contracts with payers. Are there any products that you’re taking risk on?

Okamura: I’m sorry. I’m not an expert in the U.S. commercial business. Of course there’s a team of negotiating with all the payers and probably if there is a good product to take that path, we are always very open-minded about the alternative way to support patients and payers. So I don’t have any specific example of being discussed about those.

MedCity News: So, right now it would be fair to say there aren’t any at-risk products, but you are open to it in the future?

Okamura: Yes.

Within Astellas, how are you intelligently applying AI? Where do you think it will have the most value?

Okamura: Generative AI maybe changing the way we work. For example, it could release our human resources so that we can really focus them to the very creative, innovative things that only the human can do. That’s that general way of describing how we apply AI. We are using AI for the drug discovery. That’s a good example of how we apply the AI technology for the small molecule. A medicinal chemist designed the molecule. He or she synthesized that molecule, tested it in the tubes, analyzed the results. That goes back to the redesign of the next round of the molecules. Of course, AI can help design the molecule — we have in our research facility, we have the robots and they can synthesize the compounds, design compounds, of course they can run the test in the tubes and of course AI can analyze the results. Then they offer alternative structure for design the next rounds of the compounds. So it’s a kind of closed loop without human hands. So it goes 24/7. From the concept to decision for any small molecule -that process usually takes 12 months or so. We would reduce the time probably 85%.

MedCity News: Wow. And that has already happened or you’re still experimenting?

Okamura: It happened.

MedCity News: Oh wow. 85%. Now you can make the drugs cheaper. Your development time costs are going down, right?

Okamura (laughs out loud): You go to that topic again.

MedCity News: But generative AI —at least what’s available publicly like chatGPT — is rife with errors, right? When you are doing such important work that affects patients’ lives, how do you make sure your data is accurate and your AI engine is accurate?

Okamura: That’s why we appointed new chief digital and transformation officer this April. Yes, you’re correct that we have to have the right data set to go into that and the proper learning process to really develop the AI for specific purposes. So we have to have a very careful approach to that. But on the other hand, unless you start using it, you never learn what they can do. So you probably have to have the trial and error but [applications can be] not directly linked to the patient safety or patient lives. We get used to how to use AI and then we can expand and scale its application to other parts of our business. So that’s the way.

Part 2 of MedCity News’ interview with Okamura will appear next week.

Featured Photo: Bulat Silvia, Getty Images