J@pan Inc -- Not So Generic Mice

Japanese companies venture into the transgenic mouse trade.
by By Bonnie Lee La Madeleine

The breeding and distribution of transgenic mice, mice with deliberately and artificially altered genetic backgrounds, is a business with a steep learning curve, high entry costs, and high risk. A business opportunity? Absolutely not, say most.

Inbred mice have been an invaluable resource for cancer and diabetes research for nearly a century. Easy to breed, house and ship, these mice are almost generic research tools.

In contrast, transgenic mice, created to shed light on the mechanism of a gene or the path of a disease at the cellular or molecular level, are less simple. Removing a gene from or inserting a gene into a mouse embryo's DNA creates a new mouse strain. Studies of the behavior, development, and physical properties of this new mouse give insight into the gene's role within the systems being studied. Some newly established mouse strains can model a disease with such accuracy that different groups of researchers want them. Some are willing to pay between $100 and $500 for two mice, more if they want a pair they may breed. The National Institutes of Health, a part of the US Department of Health and Human Services, just paid two biotech companies $10 million for 250 strains of mice. That works out to $40,000 per strain.

When such "star" transgenic mice appear, they have as much financial as knowledge value. The "Harvard Mouse," developed and patented in the mid-1980s, is an early and notorious example of how these designer mice can be co-opted by industrial interests. Yet, when business eyes these star mice, problems more practical than patenting issues arise. How to identify profitable strains and market them are just two. The labor needed to develop, analyze and understand the value of these mice for research and drug development is highly specialized. Yet, a few companies in Japan are undaunted. Charles River Japan, IBL Japan, and Transgenic Inc. are cutting paths into this industry in various ways, each betting that the market for designer mice has yet to be exploited.

Tinkering with DNA
Two developments in the early eighties, less than twenty years before the mouse genome had been fully sequenced, sharply increased the demand for the lab mouse in all sectors. First, mice could be used to produce antibodies that would become crucial in research and diagnosis. While any animal can be used to generate antibodies, most commonly used are mice and rats. They are simple to keep, with limited housing and feed demands, short life spans and reproductive cycles.

The other development was more significant. Introducing artificial mutations into mice enhanced the value of plain generic inbreeds as subjects for study. Researchers now had mammalian species close enough to humans to answer some long-standing questions: How does an embryo develop, how do cells die, what determines a stem cell's final destination and role, what differences emerge from genetic variation, and how do mutations lead to disease? These new designer mice were a potential means to find answers to these questions. The answers would enable treatments for diseases.
Researchers began to manipulate gene expression by rearranging mouse DNA, removing parts of it, or inserting human DNA into the animal's own genetic material. Slowly new strains appeared with claims that they were viable animal models of diseases like Alzheimer's and arthritis, models for longevity and aging, and models to study learning and memory. Yet, before the mouse genome was sequenced, most of this work was based on previous observations.

For mutations alone are not sufficient for a transgenic to be a good model: the right site on the chromosome needs to be targeted as does the right promoter, the genetic code that enables the newly inserted DNA's genetic activity. When the complete mouse genome was published in 2002, made-to-order mice became possible and commercial interests were piqued.

Models for business?
In 1988, Harvard patented its cancer mouse model, nicknamed the "Harvard Mouse." This triggered debate about patenting living creations. If genetically modified animals could be patented, can DNA also be owned? Mice are living creatures, and most occur naturally, so how could they also be intellectual property? But these concerns were quickly dismissed as research institutes and universities rushed to patent and license their transgenic creations. Seeing opportunities in drug development, companies like Oriental Yeast in Japan purchased the licenses for designer mice. These companies soon faced some hard realities.

"Breeding inbred mice is easy," says Shinya Abe, business development officer of IBL Japan, a Gifu-based biotech company, "but successfully breeding and maintaining transgenic strains is challenging." The learning curve is sharp for anyone attempting to branch into this business. IBL Japan is a respected manufacturer of antibodies. The privately held company, which places a strong emphasis on R&D, entered the Japanese mouse distribution market in 2004 to discover new antibodies. (Laws make international distribution complicated. Hence, most mouse manufacturers make strategic partnerships with local companies. At the same time this increases access to star mice made locally. IBL Japan and US-based Taconic are partners in the same way Charles River Japan is with Charles River Laboratories.) Any mouse strain that proves commercially viable is able to support both of IBL's businesses.

From IBL Japan's efforts to breed strains from labs in Japan, Abe realizes that transgenic breeding requires a significant amount of skill. Oriental Yeast, after struggling unsuccessfully for three years to produce colonies of transgenic strains, has turned away from mouse manufacturing. Charles River, despite years of experience in maintaining inbred strains, also struggled to reproduce transgenic strains for distribution. This company went to Jackson Laboratory, in Bar Harbor, Maine, for training, and in exchange distributes Jackson strains to nonprofit laboratories at cost. Charles River Japan is now distributing these strains in Japan. IBL and Charles River cater to both academic and industrial markets. IBL has only just embarked in this trade, however, having established their mouse facility in April 2005.

Transgenic Inc. was among the first bio-ventures to emerge from academia in Japan. Kumamoto University gave birth to Transgenic, capitalizing on its technique for generating novel mouse strains in 2001. It uses a gene-trap method to generate random mutations in embryonic stem cells of mice. After phenotyping the mice, the embryos are frozen - unless a client asks for more detailed studies on the strain.

Transgenic is now generating a library of two thousand novel knockout mice that could be used in drug targeting. According to Suguru Miyaji, its General Manager, the company has established nearly 750 new strains since 2002. Six hundred belong to Transgenic, which has licensed 150 to Charles River Japan for distribution. This revenue source should help to offset annual operating costs of more 14 million yen.

Unlike the other two companies, Transgenic neither maintains live strains (embryos are cyro-preserved) nor works with academia. Transgenic is not a mouse distributor, but a service provider. Customers can purchase information about the strains generated. To supplement this activity, the company has tied up with two pharmaceutical companies to increase its drug development contributions using the mouse resources it has developed. The two companies paid Transgenic a total of nearly 10 billion yen for first, exclusive rights to the mice generated.

Transgenic became a public corporation in 2003 and reported gross earnings of 570 million yen in 2005. Its case is interesting. Miyaji repeatedly stressed that their business model is exactly that of Lexicon Genetics Inc., a US-based company that uses gene-trap-vector targeting to produce 5,000 strains of mice. These two companies have no disease focus; they simply cast a wide net in hopes of capturing a prize. However, they compete directly with research laboratories that are developing transgenic animals using less random methods.

Laboratories like Jackson and RIKEN distribute transgenic mice to whomever asks. It is most likely for this reason that Lexicon Genetics was forced to revise its business model. It has made an alliance with Takeda, and now, according to the web page, they are using their "proprietary gene knockout technology to systematically discover the physiological and behavioral functions of genes to identify potential drug targets." No mention of novel mouse strains can be found on the web site. If Transgenic is following the same model, one has to wonder why designer mice lack income potential.

The market is worldwide, but distribution must be local, according to Abe at IBL Japan, which with Taconic, a US-based manufacturer of inbred mice, has formed a bidirectional partnership to distribute strains within Japan and North America. IBL has also designed its facilities so that it grows as its resources grow. It has space for four barrack-type buildings, each with a capacity for 15,000 mice. When the first is near capacity, construction on the second will begin.

But there are risks. "The market is wide open right now, but to acquire profitable resources we may one day compete with Charles River Japan," admits Abe. Still, the prospect of competition does not faze him. "We have the same strains as Jackson and Charles River Japan, but we have a better record for supplying mice quickly and with less risk to customers in Japan." And, at least for the next ten years, Abe sees a strong market.

The threats? Rats are preferred by many labs because of their larger size and recognized behavioral traits, two things that make them better able to show the symptoms and progression of a disease. However, housing and feeding mice is substantially cheaper. A cage that holds five mice costs 50 yen per day. Food is included, but the cost of distilled water and air are distributed between users at nonprofit facilities. A minimum of twenty cages is required to sustain a colony for basic research rather than drug testing. This figure does not include cages for the colony of controls and other mice strains.

Charles River Japan opted for the easy way - importing and distributing transgenic mice strains. Transgenic, too, looked abroad, adopting the business model of Lexicon Genetics. IBL's approach as to seek an international partner. At the same time, its approach is commercially viable with increased value to its original business. Star strains are saleable, and still support its search for potential new antibodies.

Driven by a need to reduce costs, Japanese researchers may develop a protocol for mouse study that helps the mouse maintain its prime place in designer animal research. "The goal is to develop an efficient means for breeding and maintaining these animals," Abe adds. If this happens, the learning curve investment will have been worth it. JI