TT-839 -- Trust, Not Lawsuits Will Build Nutraceuticals Market, ebiz news from Japan

An Insider's comments on Japan's high tech business world
* * * * * * * * 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
( 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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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 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, 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, 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, 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, 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 has 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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