Kazu Umeda, Representative Partner of SIIF Impact Capital, Inc. explaining J-Pharma’s Theory of Change
“SIIFIC Wellness Fund,” jointly managed by SIIF Impact Capital, Inc. (SIIFIC) and Japan Social Innovation and Investment Foundation (SIIF), targets system transformation to bring out wellness equity. We’re delighted to announce our maiden investment in J-Pharma Co., Ltd. But how did we choose J-Pharma from nearly 2,000 candidates? Let’s deep dive.
Selecting the Investment Based on Four Themes
Kazu: The SIIFIC Wellness Fund, through its Theory of Change (ToC), envisions the ultimate goal of achieving “Wellness Equity.” We identified two leverage points: “Improving Wellness Literacy” and “Enhancing Social Capital.” Based on these, we’ve outlined four investment themes:
- Safe and reliable products and services that become the default standard for healthcare (bring about behavioral change on the supply side)
- Products and services that encourage active pursuits of activities, choices and lifestyles that lead to a state of holistic health (bring about behavioral change on the demand side)
- Products and services that connect individuals in a flexible and independent way
- Startups with potential to create jobs locally and foster vibrant living environments.
Our primary criteria for shortlisting investment candidates were alignment with these themes and meeting our propietary “SEEDS” definition, which encompasses “Idea,” “Science,” and “Needs.” This process narrowed down our initial list from around 2,000 companies to about 80. After further review and interviews, only a few underwent thorough our vigorous due diligence (DD), leading us to choose J-Pharma.
J-Pharma’s Pioneering Cancer Treatment
Kazu: J-Pharma is developing drugs for what is for now an incurable disease. Their research began with the 1998 discovery of the “LAT1 amino acid transporter” by its founder, Professor Endo. This transporter is abundant in cancer cells and crucial for their nutrition and growth. J-Pharma is the only biotech globally developing LAT1 inhibitors.
When LAT1’s function is suppressed, cancer cells cannot access nutrition, leading to their death. Importantly, this treatment is mild and doesn’t adversely affect healthy cells, making it potentially beneficial for advanced cancer patients.
Root Causes for Challenges in Cancer Treatment
Kazu: For J-Pharma’s impact DD, we initiated with a systems-thinking approach to understand the root causes of challenges in cancer treatment. After months of discussion and iterations, we visualized the intricacies through a casual loop diagram.
Impact Beyond the Therapeutic benefits
Nanako: While individual impact analysis using logic models is standard among Japanese impact investors, a comprehensive system analysis remains yet to be accomplished. We tried creating a casual loop diagram inspired by global pioneers in the field.
Nanako: I’m not a scientist but through this DD process, I’ve gained profound insights into current state of cancer treatment. We aim for system transformation. Beyond the therapeutic benefits, J-Pharma also focuses on improving patients’ holistic health. This switch from a purely “medical paradigm” to a “wellness paradigm” might indeed be a system transformation. For instance, rather than just focusing on the response rate of cancer, the emphasis on improving QOL and overall life satisfaction offers a new perspective.
Kazu: Indeed, we’re not merely about investing for impact but also about constantly innovating and sharing our findings. The significance of impact investing in drug development is profound. Typically, the impact of drug development remains constrained to its therapeutic effects. By actively sharing our findings globally, we can reshape these perceptions.
Reiri: J-Pharma has a significant history since its inception in 2005. The recent discussions around the casual loop diagram based on system analysis provided an opportunity to realign and share the founder, Dr. Endo’s vision.
Nanako: Thanks to Dr. Endo and J-Pharma’s management feedback, we could refine our casual loop diagram. This tool sparked interest from other traditional venture capitalists as well.
Kazu: We received multiple inquiries and comments like “Can you share us the insights?”, “It was truly enlightening.” This tool may also be beneficial for explaining to global institutional investors who are not familiar with Japan’s cancer treatment arena or healthcare system.
Reiri: System thinking brings forward several quantifiable points and can portray complex causal relationships. Another feature of impact DD is the consideration of “Negative Impact ,” that may be caused by our investment which usually gets overlooked in linear logic models but can be exploited in casual loop diagrams.
Shifting From Medical to Wellness Paradigm
Nanako: Our ultimate goal is to bring about system transformation, emphasizing the messages and values of innovative drugs. It’s not just about therapeutic outcomes but focusing on the entirety of a patient’s life. Shifting from a “medical paradigm” to a “wellness paradigm” could be the real system transformation.
Reiri: For us, it’s crucial not just to invest for impact but also to innovate methods, tackle challenges and communicate our insights.
Kazu: In my previous fund, I wasn’t familiar with impact assessment. However, recognizing its necessity led me to collaborate with SIIF, pioneering impact investing in Japan. VC investment and impact investment are not entirely distinct. The current investment process shows that VC’s DD combined with impact DD can reveal a startup’s essence within the overall system. I believe this approach will become a future investment standard.
Stay tuned for more insights into our bold pursuit of wellness equity through the transformative power of impact investing.
For Japanese Blog please goto SIIF Note
”ウェルネス領域でシステムチェンジを起こすインパクト投資を。「SIIFICウェルネスファンド」の挑戦”