Fluency in both Hebrew and Japanese, including idiom and slang is a rare thing. Triangle Technologies VP Yoshinori Oikawa has this talent. He and his parents lived in Israel for several years when he was a boy. After completing biotechnology studies in Japan, his professor recommended he continue his studies abroad. This was the opportunity to return to Israel, where he met and married a local lass.

He also met Triangle Technologies president & CEO Dr. Daniel J. Isenberg, joining the company in 1992. For the record, Isenberg says, “We had an incredible opportunity to promote Israeli high-tech in Japan.”

Oikawa estimates that Triangle has been responsible for 80 Israeli-Japanese deals, worth an estimated $400-500 million, partly as Israeli exports to Japan and partly as Japanese investment in Israel. Triangle is now pushing biotechnology, healthcare and medical devices. This is not new; both Oridion (SWX:ORIDN) and Given Imaging (Nasdaq: GIVN) are active in Japan, but times are changing.

The Japanese market began opening up to Israeli companies only in the past 12-18 months. Israeli had not previously been thought of as a medical giant in Japan, and Israeli companies were not ready, in terms of size, to deliver products there. Now, the Japanese market is ready to accept Israeli medical products, and this is where we come into the picture,” says Oikawa.

“Globes”: Are you mediators?

Oikawa: “No. I believe other people are also capable of picking up the phone and make an introduction. Anyone can do that. Our aim is to create the business itself. We are a party in the relationship, finding partners, presenting opportunities, advising how to enter the market and at what price. In the communications market, it is possible to throw out a figure and hope it will be accepted. In the healthcare market, strategy has to be balanced with medical reimbursement.

“An Israeli cannot set up a branch in Japan and sell directly, as in the US. Even if the product is amazing, without technical and sales support, it simply won’t be accepted. I know about US and European companies that tried and failed, despite having great products. It’s important to know how to launch and price a product and to obtain the necessary permits. We work as an out-sourcer, but that doesn’t mean 'rely on the guys and it’ll all work out'. It means being a part of the company team.”

Japan’s population is 126 million and the world’s second largest economy after the US. Its healthcare market is also the world’s second largest, also after the US. Oikawa says, “Unlike Europe, Japan is a homogenous market, and its doctors have a similar perspective. Japan is the equivalent of all Europe.”

Historically, Japan has been weak in biotechnology. The industry and public health ministries have declared the life sciences as a national goal, as was earlier done with IT, which means that state funding is available. However, grants are awarded only to Japanese companies, or foreign companies, including Israeli, with a Japanese branch.

Oikawa urges, “Israeli biomedical and healthcare companies should understand that the time has come to look at the Japanese market. It’s simply too big and too important to be considered as ‘rest of the world’. Japan isn’t ‘the rest of the world’. It also pays better. The price of medical equipment and treatments to the user and marketer is 2-4 times the price in the US. While prices may go down in the future, they will still be double.”

Why is it so expensive?

“There are several reasons. First, companies need a higher margin. Market entry isn’t automatic. Japan’s Pharmaceutical and Medical Safety Bureau demands prior approval of the US Food and Drug Administration, and the state also requires various premiums. Second, in contrast to other markets, this sector in Japan has a great many small and medium-sized manufacturers and importers, and relatively few large companies. This means that marketing takes longer, is more primitive and requires more middlemen before reaching the final customer, the hospital. This both raises the price and offers higher marginal profits for the manufacturer. Third, is that unlike the US, maintenance is not separately priced in Japan; it is included in the original price. Medical products are, however, not taxed at all.”

There is also the matter of Japanese business culture. While it is not necessary to partake in traditional tea ceremonies, business loyalties tend to be quite strong.

On the subject of taxes, Oikawa has little good news: “There are no national priority A areas in Japan [as there are in Israel -- Ed.]. Corporate taxes are high, slightly higher than in Israel. However, if the branch is wholly-owned, it controls costs and revenues, and can therefore plan the taxes. These issues can be solved.”

Oikawa claims that regulation is improving as far as marketing permits from Japan’s Ministry of Health, Labor and Welfare is concerned. “Getting permits used to be an agonizing process. Things are easier now, with greater openness and an attempt to be more like the US. Negotiations have also begun with the US and EU to standardize marketing permits. It won’t happen overnight, but the will is there,” he says.

Which companies will make it in Japan?

“Companies with technology or products that solve real problems. That’s a generality of course, but the intention is things will real added value.”

As in any industry, in healthcare added value means technical solutions that lower costs or help patients, such as non or minimally-invasive treatments, imaging, non-invasive monitoring, telemedicine, homecare and gadgets like specialized beds. Japanese companies such as Toshiba and Olympus are actually strong in the imaging and monitoring fields, but are weak in medical surgical and implant equipment. 80-85% of pacemakers are imported, for example.

Geriatric nursing and treatment is a major problem, as Japan’s population is aging faster than in other developed countries, and its birthrate is less than 1 child per family, while life-expectancy continues to rise. By 2025, a quarter of the Japanese will be over 60.

Interestingly, prenatal infant and mothercare are important markets. Given the low birthrate and the high cost of child care , the Japanese will do anything for their children's health. This is where gynecology, prenatal care and genetic testing enter the picture.

What about biopharmaceuticals?

“All the buzzwords that work in the West also work in Japan: drug release, genetic engineering, genomics, proteomics, etc. The Japanese aren’t special; they have the same needs as everyone else, and they have money.

“I believe there is a window of opportunity that will one day close for homecare and telemedicine. The state is currently supporting these fields that may end in two years.”

Oikawa gives an example of an Israeli company that had - and lost - its business opportunity. “Japan was the source of most of its revenue in its first years. We began working, conducted clinical trials, but at some point they decided to withdraw. They were facing financial problems and decided to suspend activity in that particular field. In retrospect, it was a mistake. A Japanese concern took their groundwork and is now becoming a market leader in the field. The Israeli company is still in the business, but they could have done much better. They could have become the industry standard. But there's no use crying over spilt milk.”