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An Agchem Innovator

Small by global standards, Japanese agrochemical firms are prolific inventors

by Jean-François Tremblay
November 10, 2014 | A version of this story appeared in Volume 92, Issue 45

A woman in a hat throws a pesticide packet into a rice paddy.
Credit: Mitsui Chemicals
Mitsui Chemicals and other Japanese companies have developed a toss-in herbicide formulation for rice paddies.

Part-time rice farmers in Japan can treat their paddies with herbicide on their way to the office in the morning. All they have to do is toss in a packet the size of a tea bag that dissolves and protects the whole paddy. The technology was developed by Japanese companies that grasped that most of their country’s rice growers aren’t full-time farmers.


In recent years, Japanese firms have struck several crop protection active ingredient licensing deals with foreign firms

May 2010 Meiji Seika Pharma grants global rights to BASF for an insecticide that controls piercing and sucking insects. BASF expects market launch in 2015.

March 2012 Kumiai Chemical and FMC agree to codevelop an herbicide discovered by Kumiai and its partner, Ihara Chemical.

July 2013 Meiji licenses to Dow AgroSciences a new fungicide that can be used on cereal grains, vegetables, fruits, and flowers.

June 2014 Mitsui Chemicals licenses to BASF a new insecticide that controls bugs on soybeans, cotton, rice, and a variety of vegetables.

August 2014 Mitsui and Hokusan license to Verdesian technology for suppressing mycotoxin contamination in barley and wheat.

In the field of malaria control, Sumitomo Chemical came up with an equally elegant and practical tool. Fifteen years ago, the Japanese firm was the first company to develop a low-cost insecticide-impregnated mosquito net endorsed by the World Health Organization. Featuring a lightweight polyethylene mesh, the nets are effective for at least five years. Nowadays, as many as 800 million people use them, the firm says.

Dwarfed by their competitors abroad, Japanese pesticide companies punch above their weight when it comes to innovation. Drawing strength from an attractive market where farmers are relatively insensitive to price, Japan’s agrochemical producers over the years have come up with a large number of new active ingredients that they have been selling mostly to Japanese ­farmers.

Now, the industry is turning its attention outward. Often in collaboration with larger foreign firms, Japanese companies are developing compounds that are being used on a wide range of crops worldwide.

Japan is an intensively farmed country that is one of the world’s largest markets for agrochemicals. In 2013, the business in Japan was worth more than $3 billion, or 5% of the world’s total, according to Joy Consulting, a Japanese firm that helps foreign crop protection companies register their products in Japan. Rice accounts for 40% of the Japanese agchem market.

And in terms of new active ingredient registrations, Japanese companies are masters of their own domain. From 2011 to October 2014, 26 of the 41 new compounds registered in Japan were developed domestically, according to data from Joy.

Japan is attractive to suppliers of advanced crop protection technologies, be they Japanese or foreign, explains Leandro Martins, the Tokyo-based director of BASF’s crop protection business in Japan and South Korea.

“Farmers in Japan are interested in the very best technology, and the price is secondary,” he says. Local farmers strive to grow tasty and visually attractive produce. Japan, Martins notes, successfully exports high-priced apples to China, a country where the fruit is far cheaper. Japanese farmers are also interested in laborsaving technologies because many farmers are old and the younger ones often farm only part-time.

For major companies such as BASF, boosting their presence in Japan is a priority. Martins expects that BASF will have launched 10 new crop protection formulations in Japan by the end of this year.

But Japanese agricultural chemical firms are less positive about Japan and are attempting to develop their presence abroad. “Japan is a high-value market, and this serves as an incentive to discovery in the agrochemical sector,” says Takeshi Kakimoto, general manager of corporate planning at Mitsui Chemicals Agro. “But it may not always be an attractive market,” he cautions. Japan is in the midst of regional trade negotiations that could wreak havoc in its agricultural sector if food trade is liberalized.

The Japanese industry’s desire to expand internationally is being met with much interest by the world’s crop protection giants. For instance, in June, BASF licensed from Mitsui the global rights to a novel insecticide that can be used on a wide range of crops. In 2013, Dow AgroSciences acquired the global rights, except for Japan, South Korea, and some other Asian countries, to a fungicide jointly invented with Meiji Seika Pharma. Every few months, it seems, one Japanese company or another announces that it is licensing a new active ingredient to a foreign firm.

Despite the flurry of recent activity, this success on the international stage did not happen overnight. It was about 15 years ago that Mitsui made the decision to shift its R&D focus away from Japan and onto the global market, Kakimoto explains. It takes 10 to 15 years to develop new active ingredients from scratch, he notes, and in recent years Mitsui has licensed several compounds to major international players.

Although Mitsui still records more than two-thirds of its agrochemical sales in Japan, the company has made it a priority to expand internationally. The chief executive officer of Mitsui is keen to see the international expansion of the company’s agrochemical business.

The long-term plan for larger players such as Mitsui and Sumitomo is to develop their own sales channels around the world. In the meantime, teaming up with foreign partners serves as a stopgap.

“We actively seek partners for international registration,” says Masahiko Hirano, general manager of crop protection business planning at Sumitomo. “We may reap more profit by selling directly, but we license when we can’t.”

Sumitomo, he adds, has direct sales channels in about 20 countries, a list that includes major agricultural players such as Australia, Brazil, France, and the U.S. But in many parts of the world, the firm needs to complement its sales network by relying on others.

Credit: Newscom
Japanese agrochemical producers are keen to expand into foreign markets such as Brazil, a major agricultural player.
Cropduster spraying rice paddy at Jari Forestal, Brazil.
Credit: Newscom
Japanese agrochemical producers are keen to expand into foreign markets such as Brazil, a major agricultural player.

Similarly, until it expands its own network, Mitsui can directly distribute its own products only in Asia and some Latin American countries, Kakimoto acknowledges. “When you develop a product for global distribution, you face significant costs in terms of toxicology studies and registrations,” he says. “It may be too much for us to bear alone.” The cost of developing and registering a new active ingredient in all major markets can add up to as much as $200 million, he notes.

Collaboration between Western and Japanese firms can take many forms, according to BASF’s Martins. The German giant is the international distributor of agrochemicals made by several Japanese firms, notably Meiji and Kureha. “Even when Japanese companies are major players in Japan, they may lack expertise for registering their products abroad,” he says.

Western companies can also apply their marketing know-how to repurpose compounds developed in Japan. “At a company like BASF, we can analyze how to combine several compounds—which could be from different companies—in order to provide the farmer with a solution,” Martins explains, noting that combining two active ingredients for a new application normally requires a new registration. Using its broad view of the agchem market, BASF could conceivably launch in several countries a new product consisting of a BASF active ingredient and a Japanese ­compound.

Japanese firms turn to BASF and other Western companies because they are much larger and have much greater reach. In its latest fiscal year, Syngenta, the world’s largest player, recorded sales of more than $14.5 billion. Sumitomo, Japan’s largest player, had agrochemical sales of $3.3 billion. Unlike in the West, mergers and acquisitions are uncommon in Japan. The country boasts seven or eight companies engaging in crop protection R&D, about the same number as in all Western countries combined, Martins notes.

The difference in size means that the R&D resources of Western and Japanese companies are mismatched. For instance, Bayer CropScience has about 4,700 researchers worldwide. Sumitomo has a few hundred in its crop protection business. Mitsui has about 150. Meiji has even fewer.

And yet, despite the meager resources they can deploy, Japanese companies have surprisingly ambitious R&D goals. “With their superior distribution network, large multinational companies are able to successfully launch products that are minor modifications of existing ones,” says Kiyoshi Arai, board director with responsibility for R&D at Mitsui. “But for us, in order to successfully compete with multinationals, we need to come up with brand-new compounds or with brand-new modes of action.”

Meiji has a particularly small number of researchers. Veterinary and agrochemical scientists are a minority of the staff in the company’s central laboratory, where pharmaceutical research predominates. Altogether, the central lab employs 200 researchers. Meiji is a subsidiary of Meiji Holdings, Japan’s largest supplier of dairy goods and a major producer of chocolates.

“When visiting our labs, our international partners are surprised that we’re able to operate effectively with such limited resources,” says Kazuhiko Oyama, manager of international licensing for agricultural and veterinary products at Meiji Seika.  “And compared with our international partners, our lab equipment is poor as well.”

In recent years, Meiji has licensed two compounds, one to BASF and the other to Dow. It is also in talks with other companies about licensing deals. The results suggest that the few dozen people conducting agrochemical R&D at the company are highly effective.

Oyama’s position in licensing was created in 2009 when Meiji first realized that its discoveries might have international appeal. Although he was previously a researcher, he can’t pinpoint what makes Meiji scientists productive. The company, he notes, considers fermentation to be its core technology, and as a result, the main research focus in agrochemicals is on fermented natural products.

Beyond that, Oyama speculates that large Western companies’ reliance on automated research tools could be a disadvantage. “Big companies use high-throughput screeners and automatic detectors that allow them to generate a lot of data,” he says. “But they might miss some important observations, such as insect symptoms as they become paralyzed.” With fewer material and human resources to draw from, Meiji’s researchers, by default, have to depend more on their individual talent and ingenuity, he reckons.

Given the encouraging results generated by its R&D efforts, Meiji might be expected to hire more researchers. But this is not the case. Oyama says his company’s directors aren’t convinced that increasing headcount in the research department would boost innovation. More scientists don’t mean more R&D breakthroughs, the licensing manager says. “Our managers believe that small is beautiful.”

In any case, Meiji and its Japanese counterparts seem to have plenty of innovative capability when it comes to inventing new active ingredients. The priority instead for these companies is to widen their distribution channels and adapt for the rest of the world products that were developed for Japan’s farmers.

A pair of graphics shows that Japanese agchem firms are smaller in terms of sales than major international firms, but still dominate in terms of registered products in Japan.


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