Terrie's Take 839 -- Trust Not Lawsuits Will Build Nutraceuticals Market, ebiz news from Japan

Terrie's Take terrie at mailman.japaninc.com
Mon Feb 22 10:38:08 JST 2016

* * * * * * * * TERRIE'S TAKE - BY TERRIE LLOYD * * * * * *
A weekly roundup of news & information from Terrie Lloyd, a long-term 
technology and media entrepreneur living in Japan. 

General Edition Sunday, February 21, 2016, Issue No. 839

- What's New -- Trust Not Lawsuits Will Build Nutraceuticals Market
- News -- Trade surplus sustainable? Probably not.
- Upcoming Events
- Corrections/Feedback -- Marcus Yip Hospital Fund update
- Travel Picks -- Early cherry blossoms in Kanagawa, Tofu excellence in 
- News Credits

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Japanese companies are nothing if not secretive about successful B2B 
products and processes, especially in the emerging field of 
nutraceuticals. Back in 2010 in Terrie's Take 557 we wrote about one 
supplements powerhouse, Kaneka, a large pharmaceuticals and chemicals 
company that owns the global market for a highly bio-available form of 
CoQ10 called Ubiquinol. You may recall from that newsletter 
(http://bit.ly/1QayT0c) that in a 2008 trial of cardiac patients with 
late stage congestive heart failure, after 3 months of taking 
therapeutic doses of Ubiquinol the patients on average experienced a 24% 
to 50% increase in heart blood flow. Further, of those patients with 
life expectations of less than 6 months, all survived longer.

As mentioned, Japanese companies are typically very secretive, and 
Kaneka's Ubiquinol business is no exception. The company says almost 
nothing about this segment in its Annual Reports, unhelpfully burying 
the earnings in with medical devices, under the heading Life Sciences. 
That division is making about US$500m a year and is growing about 10% 
annually, with contributions from Ubiquinol being hinted at being a 
major part of that growth.

Instead, the best source of information on Kaneka's progress in the 
CoQ10 market has been legal announcements made by both the company and 
its competitors as it tries to fend off new products in the market. 
Kaneka has a particularly persistent copycat nemesis called Zhejiang 
Medicine Co. Ltd. (ZMC), which in 2010 showed up in the US market with a 
similar product to the Japanese firm's oxidized CoQ10 (not the more 
potent reduced form, which is Ubiquinol) and in 2011 after receiving a 
patent, Kaneka sued ZMC. Unfortunately Kaneka can't have done its 
homework properly, and in 2012 ZMC proved in Germany that its process 
was different. From 2013 through 2015 the two companies remained locked 
in legal combat in the USA, and just recently, in November 2015, ZMC 
finally prevailed. As a result, today, ZMC is today the world's largest 
manufacturer of CoQ10. In 2014 Kaneka spent about US$12m in litigation.

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[...Article continues]

While the Chinese company showed grit in facing down Kaneka, we can't 
say the same for another competitor of Kaneka's, which did retreat from 
the CoQ10 market after being challenged. That company was surprisingly 
another Japanese firm, called Mitsubishi Gas Chemical (MGC). With a name 
like that, you'd think that MGC made plastics and gases, and you'd be 
right. However, also like Kaneka, MGC has found itself a lucrative niche 
in the nutraceuticals market. MGC originally entered the U.S. CoQ10 
market in the 1990's and appeared confident when Kaneka first sued them 
in 2011. We think they probably would have prevailed, and we were 
puzzled when they decided to fold and leave the market in 2013.

However, in the subsequent 2 years, the reason for their strategic 
withdrawal has become obvious -- commercial commonsense. Rather than 
trying to defend against a litigious Kaneka in what has anyway become a 
commodity market for CoQ10, MGC decided to focus instead on a new 
product that in 2013 they won a Best Science award for, called BioPQQ 
(pyrroloquinoline quinone). While the global market for CoQ10 is worth 
about US$500m currently (and will double in the next 5 years), the 
global market for anti-aging products overall is a much bigger US$130bn. 
MGC obviously sees great potential for BioPQQ, which is undergoing 
clinical studies and for which MGC has already received a New Dietary 
Ingredient (NDI) approval from the all-powerful U.S. Food & Drug 
Administration (FDA).

BioPQQ has shown very promising lab results in improving the number and 
function of the body cells (mitochondria) and protecting mitochondria 
from damage. In fact, BioPQQ could displace resveratrol as the leading 
anti-aging compound. Readers may know that resveratrol was first 
isolated from Japanese Knotweed by a fermentation process by a Japanese 
scientist in 1939, but for which, again, the biggest supplier in the 
world is now a Chinese company.

MGC is not disclosing the value of its PQQ market, but obviously it is 
big enough that the company has set out to try to protect it. Instead of 
trying litigate as Kaneka has done, MGC has chosen two alternative 
routes. The first has been to appeal to the FDA on the basis that its 
competitors are selling synthetic forms of PQQ which do not carry FDA 
NDI approval. This is reasonable, given that the FDA is supposed to 
quality-control what we put in our bodies. In 2015, MGC along with two 
other Japanese supplements manufacturers had a congressman from Texas 
write an open letter to the FDA complaining about that body's apparent 
lack of interest in curbing cheap knock-offs from China. In fact, one of 
the other manufacturers, Fuji Health Science, tested a competitor's 
synthetic astaxanthin product and found it to contain 24,000 ppm of 
chloroform, well over the maximum 60 ppm allowed for this solvent.

The other point of defense by MGC, and the one that we think will 
ultimately win the market, is the fact that MGC's product and its 
patents are for the natural fermented version of PQQ (hence the name 
BioPQQ), whereas while competitors' cheaper products are supposedly 
bio-identical, they are also synthetic. For the millions of people who 
take supplements as a means of avoiding lifestyle diseases and 
conventional medicine, the concepts of "natural", "holistic", and 
"organic" are more than just words. They represent a middle-class 
philosophy where an informed consumer has a choice to avoid ingesting 
synthetic materials and yet still be able to take advantage of human 
knowledge and improve and extend the quality of one's life.

The "Made in Japan" image of quality and authenticity is an incredibly 
powerful message that we frequently see the big supplements companies in 
the USA repeat in their marketing messages. While litigation is 
understandable, Kaneka and other players would do well to watch MGC's 
tactics, remembering that in the end you can never kill the copycats. 
Rather, it's better to compete through innovation and trust.

...The information janitors/


+++ NEWS

- Vanilla Air extends reach via Taiwan
- Trade surplus sustainable? Probably not.
- Riken scientists regenerate pituitary gland cells
- Economy shrinks by 1.4%
- GPIF won't do direct stock investments after all

=> Vanilla Air extends reach via Taiwan

In a surprisingly entrepreneurial move for a Japanese airline, ANA's LCC 
spin-off, Vanilla Air, has announced that it will use Taipei, Taiwan, as 
a hub for flights to elsewhere in Asia. The airline has 8 Airbus A320 
aircraft that can only fly 4 hours one way - thus locking it into 
servicing Japan and North Asia only. But with severe competition in this 
region, Vanilla Air's managers came up with the smart idea of setting up 
a second base in Taiwan, thus bringing Singapore, Thailand, Vietnam and 
a number of other populous countries within reach without having to 
invest in long-range aircraft. Thus, they can now bridge Japanese 
passengers to SE Asia via a short changeover in Taipei. ***Ed: No word 
yet of when the new services are starting, but so long as the layover in 
Taipei is less than 2-3 hours, this idea could work pretty well.** 
(Source: TT commentary from Asia.nikkei.com Feb 18, 2016)


=> Trade surplus sustainable? Probably not.

The Financial Times reports that Japan's trade surplus hit its highest 
level in four years in January, with JPY119bn more exports than imports. 
While this would normally be cause for celebration, the FT points out 
that the surplus is the result of a confluence of factors, such as 
vastly cheaper oil on the imports ledger, the recent increase in the yen 
yet to show up in export costs, and a delayed impact from the general 
slowdown in China and any knock-on effect on other export customers. 
***Ed: We believe that the world never had the full recession it should 
have had in 2008, and many economies have been living on borrowed time 
ever since. This fact is playing on the minds of a lot of skittish 
investors. That means high volatility and short-term mindsets -- which 
at very least will impact commercial investment and keep companies 
sitting on their cash piles.** (Source: TT commentary from ft.com, Feb 
18, 2016)


=> Riken scientists regenerate pituitary gland cells

As writer Rowan Hooper at the Japan Times points out, scientists at 
Riken have just achieved something remarkable by regenerating excised 
pituitary glands in mice, using human stem cells. The mice were 
specially bred to have high tolerance (i.e., low rejection) of foreign 
transplanted cells, and after insertion of human stem cells they lived 
three times longer than mice without a gland. For now the experiment 
involves placing the newly grown glands near the kidneys, not the brain 
since transplanting the gland into its proper place is too difficult for 
now, so further surgical technical development is necessary. ***Ed: 
While this is clearly still just an experiment, nonetheless, the Riken 
team have managed to successfully rebuild part of the brain -- which 
offers huge hope for the future of accident and disease victims the 
world over.** (Source: TT commentary from japantimes.co.jp, Feb 20, 2016)


=> Economy shrinks by 1.4%

Even as Japan's exporters are enjoying a record trade surplus, one has 
to remember that overseas trade is actually at a two-year low point and 
in any case only counts for about 17% of Japan's GDP. Meanwhile the rest 
of the nation is suffering and proof that reflating the economy through 
Abenomics may not being working has come in the form of a 2015 Q4 
contraction that annualized is around minus 1.4%. The biggest cause of 
the quarterly fall was domestic spending, which was down 0.8% between 
October and December. ***Ed: How long will it take for Abe to realize 
that bulk of the Japanese working public are captive to their employers, 
and couldn't spend much more even if they wanted to? Instead, he needs 
to undertake far-reaching policies to kill off zombie companies 
(especially non-exporters) and unleash capital investment into new 
start-ups and in restructuring run-down firms. Unfortunately, as we have 
seen with Sharp, the will to change is just not there, and so the 
captain and the crew look like they will go down with the ship 
together.** (Source: TT commentary from theguardian.com, Feb 15, 2016)


=> GPIF won't do direct stock investments after all

After being surprised that the world's largest pension fund, the 
government's own GPIF, would be allowed to invest in Japanese listed 
firms, it now appears that the government has come to its senses and has 
reversed its position. So now the GPIF will NOT be making direct 
investments. As we mentioned several weeks ago when we first hear the 
news, we expressed concern over how the billions the GPIF controls would 
cause undue influence in the stock market and lead to stock 
manipulation. ***Ed: Well, that is all now history. Smart move by the 
LDP.** (Source: TT commentary from the-japan-news.com, Feb 16, 2016)


NOTE: Broken links
Some online news sources remove their articles after just a few days of 
posting them, thus breaking our links -- we apologize for the inconvenience.



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=> We received several emails from readers about our announcement of the 
Marcus Yip fund, asking if the fund was genuine. The answer is that yes 
it is, and unfortunately Marcus is suffering from terminal brain cancer. 
What is amazing is the generosity of those who know him. Within two 
short weeks the fund hsa surged well past the original target and is now 
sitting at US$44,000. We are hoping that the fund can reach US$100,000, 
which would certainly help Marcus with hospital bills, and his family 
with some security in the days ahead.




=> Miura Peninsula Cherry Blossoms, Kanagawa-ken
Kawazu Zakura - the 'early bird' cherry trees

They are here, that is the first of the 2016 cherry blossoms! 
Kawazu-zakura, are the first to bloom, usually about a month before the 
regular cherry trees. In the Tokyo area they are mainly found on the 
Miura Peninsula. My partner, Miwa, looked at the next 10 day forecast, 
and with the exception of today the 21st, it will be cloudy with some 
rain. We rose early to beat the crowds and caught the Keikyu Kurihama 
train from Yokohama station to Miura-kaigan (Miura Beach), about a 
45-minute ride.

There are several Kawazu festivals on the peninsula, with the biggest 
taking place at none other than Kawazu with over 8000 trees. We chose 
Miura-kaigan with 1000 trees, due to the short distance from our home. 
As you leave the train station there is a map showing where the Kawazus 
are located, however, if you go on a weekend like we did a map will not 
be necessary -- just follow the crowd! There were hundreds of other 
people who had the same early bird plan as we did.


=> It's ALL about tofu at Tousuiro, Kyoto
Celebrating bean curd

As many purely vegetarian and vegan restaurants don't focus on Japanese 
cuisine alone, it can be a challenge to find a place that caters to 
vegetarian guests who want to experience traditional Japanese food. A 
well-known staple in vegetarian dishes is tofu, made from soy milk. Tofu 
gets a bad reputation of being bland and boring among non-vegetarians. 
In the wonderful city of Kyoto, though, one restaurant's "mission" is to 
convince you of the bean curd's versatility. That restaurant is Tousuiro.

Tousuiro operates two branches in Kyoto, one in Gion and one in 
Kiyamachi street. While the restaurant in Gion is located in a charming 
old machiya townhouse, the one in Kiyamachi (between train stations 
Sanjo and Kyotoshiyakusho-Mae north of Pontocho alley) features a 
terrace over the Kamogawa. Dining on tatami mats under the stars, guests 
can enjoy great views over the river. (And if you're really, really not 
fond of tofu, you can find several restaurants nearby with equally 
charming terraces.)

Tousuiro's focus on tofu (chilled, boiled, fried, grilled, sweet, 
savory, in ice-cream form and more) makes it easy to accommodate a 
vegetarian or vegan diet, even though the menu is not strictly vegetarian.




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Written by: Terrie Lloyd (terrie.lloyd at japaninc.com)

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