KOBE, Japan -- When the city of Kobe was devastated by an earthquake in 1995, few imagined a thriving biomedical industry emerging from the rubble.

But the Kobe Biomedical Innovation Cluster, which marks its 20th anniversary on Friday, has grown to attract 350 institutions and companies, ranging from promising startups to multinational health care companies, including Germany's Bayer. After $4 billion in public investments, it is now the largest biotech center in Japan, employing 9,400 people.

Providing state-of-the-art health care facilities, the cluster was chosen in 2014 as the location for the world's first clinical study of iPS cells, or induced pluripotent stem cells, when they were used in a retinal transplant procedure, a huge milestone for regenerative medicine.

Built on an artificial island, the cluster was central to the port city's revitalization. Its governing body is led by Tasuku Honjo, winner of this year's Nobel Prize in physiology or medicine for his discovery of a protein that has proved effective in cancer treatment.

Having successfully established itself within Japan's biomedical industry, the aim now is to become globally competitive.

Kobe Biomedical Innovation Cluster, designed three years after the earthquake that devastated the city, has grown to become the largest of such centers in Japan. (Photo courtesy of the city of Kobe)

"We are very fortunate to have a base in Kobe, the mecca of regenerative medicine," said Shungo Adachi, COO of Myoridge, a startup working to develop cardiac muscle cells from iPS cells.

Myoridge was founded by a researcher at Kyoto University in 2016. Having invented a protein-free production process, the company aims to reduce the cost of creating cardiac cells that can be transplanted into patients with serious heart disease. 

It also provides cells to meet increasing demand from pharmaceutical companies for use in clinical trials.

Impressed by the company's technology, German pharmaceutical giant Bayer invited Myoridge to set up operations at CoLaborator Kobe, a research laboratory for startups it opened in June.

Myoridge retains its core research base in the university and uses its newly opened lab to develop cells for regenerative medicine procedures, and to find partners with the technology to differentiate and preserve them.

This is Bayer's fifth such facility and the first in Asia, providing young life science companies with fully equipped rental laboratory space, as well as access to its wealth of expertise.

"Kobe gathers research centers, universities, hospitals and companies in one island. The geographic proximity is very helpful to deepen your community and develop innovation," said Shunichi Takahashi, head of the Open Innovation Center at Bayer in Japan.

According to the company, joint research has proved successful with nearly half of the startups at its CoLaborator centers -- the others are in cities including San Francisco and Berlin.

Nearly 40 startups have set up operations at the Kobe Biomedical Innovation Cluster, accounting for over 10% of all companies using the center. The city government plans to open a 5,000-sq. meter rental laboratory in 2020 to promote exchange between up-and-coming companies and established players.

"Agglomerations bring agglomerations: This is the cycle we aim to create from Kobe," said Mayor Kizo Hisamoto. "It is very forward-looking that Bayer, a foreign company of that scale, has such strong expectations from Kobe. It is time for our cluster to take a leap toward Asia and the rest of the world."

The cluster was designed three years after the 6.9-magnitude earthquake, which resulted in more than 6,400 fatalities. "We shouldn't bring back the situation as it was before the earthquake," said a city official.

City executives decided to put industries such as biomedical science at the forefront of reconstruction efforts, after the earthquake put paid to plans for a 200-hectare amusement park on the city's Port Island.

The city launched the project under the guidance of Hiroo Imura, then the director of Kobe City Medical Center General Hospital and a former president of Kyoto University.

The project team brought together the heads of the medical departments of Osaka and Kobe Universities, as well as observers from the government. It started from zero but the team was "well balanced, with people from various backgrounds," said one of the participants.

According to Adachi, the concentration of research activity in advanced medical technology is the core strength of the cluster.

"Japan is currently seeing a rise in the number of advanced regenerative medicine projects nationwide," said Masayo Takahashi, an ophthalmologist at the Riken Center for Developmental Biology in the city, "but I believe we can create a successful model regarding ophthalmology here in Kobe."

Takahashi carried out the landmark procedure in 2014 when she took retinal cells derived from iPS cells and successfully transplanted them into a woman suffering from a disease that blurs central vision.

In December 2017, she oversaw the opening of the Kobe Eye Center, which provides services ranging from research into eye disease, to treatment and rehabilitation. "Such synergies can be an example for medical institutions in other regions as well," she said.

The cluster was chosen in 2014 as the location for the world's first clinical study of iPS cells, when they were used in a retinal transplant procedure. (Photo by Shoya Okinaga)

The success of the cluster has also had a knock-on effect for other companies in the city. Kawasaki Heavy Industries, one of the largest Kobe-based manufacturers, and Sysmex, a local testing and diagnosis equipment maker, in 2013 set up Medicaroid, a joint venture focusing on medical robotics.

If all goes to plan, the company will next year begin selling a cheaper alternative to the da Vinci Surgical System of U.S.-based Intuitive Surgicals, which currently dominates the global market for advanced surgical robots. The da Vinci system costs up to $2.5 million, not including maintenance fees.

Access to medical facilities has been key to the company's development. Kobe City Medical Center General Hospital and Kobe University's International Clinical Cancer Research Center are both within a minute's walk from its headquarters.

"I was able to observe over 100 surgical procedures," said Medicaroid President Yasuhiko Hashimoto. "Being so close to medical facilities means we can hear the needs of doctors and nurses, and this is what we need to improve our product development."

The center has now entered its next phase of development. "The first was to bring together related companies, now the test will be to create innovation," said Yoshimasa Katoh, a professor at the University of Hyogo specializing in regional economic policy.

Global competition in biomedicine has intensified, and many cities globally are trying to attract the sector. The Boston area, traditionally a manufacturing hub, has welcomed biotech companies Biogen and Sanofi Genzyme. Taiwan has seen a rise in the number of medical device startups, while the Singaporean government has provided considerable support to attract multinational pharmaceutical companies.

One issue for Kobe, despite the corporate backing its cluster has received, is the difficulty in attracting human resources. "Competent researchers with an international mindset tend to gravitate toward in Tokyo," according to an employee at a foreign company.

The Foundation for Biomedical Research and Innovation at Kobe, the core body for coordination of the center, admits this is a challenge for future growth. Katoh says now a greater focus is needed on recruitment "to attract researchers outside Kobe for its further development.”