Biotech Trends in Asia

The biotech industry is booming in Asia. So what are the trends that you need to know in order to compete in this industry? These are my thoughts which I have given to a group of people during a biotech business conference recently in the Biopolis, Singapore.

Contributed by BL

Today, I was honoured to be invited to the BioBiz 2006, a conference organized by NUS students together with the support of Harvard Club. The conference was very well organized, and to me, it presented the kind of standard that one would see in Cambridge, MIT and Stanford. I was speaking as a panellist on the biotech trends in Asia. I have decided to place my thoughts on the biotech scene in Asia here for our readers.

To illustrate the trends in Asia for biotechnology as a whole and leaving the healthcare markets to the other panellists, I am going to build my presentation on strictly three words: hotspot, capital and credibility.

1. hotspot: I will share with you a short anecdote of mine. Recently, I was at a European BioBusiness Conference, sitting with many prominent entrepreneurs, industry leaders and venture capitalists. One quarter of the conference centered on topics on emerging technologies in US markets, and the rest of them on biotech markets in Asia. A lot of discussion was on China and India and till the end of the conference, someone brought up the following point, “Are we so obsessed with Asia and US biotech markets that we totally forgot to discuss our own European markets?” As you can see from this anecdote, Asia is now the hotspot for biotechnology entrepreneurship activities, whether it is for start-ups and multi-national companies. To give you some sense of numbers, the total growth based on public companies alone is US 2B last year, which is 36% increase from its previous year based on a study done by Ernst and Young and the new figures will be out in the coming month for 2004-2005.

Three key factors contribute to the notion of hotspot – low wages, high clinical trials for tapping into genetic variations across the world population and low production costs. Let me elaborate this further using the two giants of Asia, China and India. Both countries are constantly churning the biotech labour force. Just to give you an idea. Let’s estimate from NUS and NTU engineering and science, we churn out about 1000 life science graduates per year. Take that number and increase by 3 orders of magnitude. Both China and India churn out at least 2 million life science graduates (600,000 doctors). They are both strong grounds for manufacturing markets and they share different strengths leveraging on their core competencies. For the case of China, it is traditional Chinese medicine (which holds 25% of the domestic market, where biotech is only 7%, and 50% of the whole market is dominated by manufacturing) and India, the strong IT market. Both are strong emerging economies but they share common weaknesses, and I will highlight the one that is crucial to the development of innovation, which is intellectual property. Both China and India has strengthened their IP laws to be compliant with the Agreement on Trade related aspects of Intellectual Property Rights (TRIPS).

2. capital. Most Asian governments are currently playing the role of the venture capitalists. The Asian governments have set a couple of long term goals for their countries: for example, let’s start from the home, Singapore wants to increase biomedical manufacturing output to S$25B by 2015, where they pledged 13.75B for the next 5 years. Taiwan has pledged US$0.5B from 1996 to 2005 for startups and will seek to provide another US$2.9 billion to biotech venture capital industry while Malaysia has set aside RM310M for biotech commercialization. It is important to see where their objectives lie, particularly for startups. Taiwan and Malaysia are focussed a lot on early stage companies (for example, Malaysia has about 1/3 argobio companies), while Singapore remains, to my opinion closer to the series B companies. (The best indication comes from the recent GEM 2005, published by NUS Entrepreneurship Centre, the chances of local startup being funded for series A is virtually less than 5%)

3. Credibility. As the Asian markets have been projected to grow significantly, I foresee that the next few years, the professionalism and sophistication of the biotech industry will also improve, i.e. there are better trained biotech venture capitalists, business angels and serial entrepreneurs. Once the markets are saturated, innovation will be the next stage that will take Asia into direct competition with the US and European markets. My belief is that credibility will become important to put the entire Asia against top US and European markets.

Let me use the recent South Korea stem cell scandal to demonstrate how the academic circle can affect the country’s entire market. For those who know, Hwang Woo Suk, a stem cell biologist who has successfully clone the dog, has fabricated data for human embryonic stem cells research. While a lot of us are left wondering why he did that, granted he has already gained international reputation with his previous feats. The impact on the South Korean markets was immense. Immediately in last Decemeber, stock value crashed even for companies whose business is not directly related to stem cells for example, Macrogen, that provide tools and services for genomic research has its stock value dropped drastically. Most firms lost between a fifth and a half of their value in December alone. The discrimination inherited from this scandal has weakened the South Korea biotech industry in this year, as the government has already started scaling down their funds for biotechnology startups.

My message is clear. To look at trends in Asia, you need to understand three things: you need to know why it is a hotspot and how to exploit it to your advantage, how you can gain capital and lastly the credibility to execute and be part of the biotech industry.

References:
1.Ernst and Young Biotechnology Report “Beyond Borders 2005”

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