Amy Tan
SINGAPORE: China could well become Asia's brightest biotechnology star but
the region first needs to develop its venture capitalists' market to support the
fledgling industry, the Singapore arm of SG Securities said.
"China has got very significant potential," group research head Dr
Foo Fatt Kah told Reuters in an interview after the brokerage launched its
inaugural Asian Biotechnology report spanning China, India, South Korea,
Singapore and Taiwan.
China's huge base of scientists versus other Asian countries was augmented by
government programs to woo overseas talent to the mainland, Foo said. Its 1.3
billion people were also a magnet for global healthcare companies seeking a
slice of the pie.
"The great thing about a massive market is that the foreign companies
want access to this market. China will attract alliances from foreign
companies," Foo said. Alliances in manufacturing and marketing already
exist but Foo expects the nature of the tie-ups to shift to basic stage research
as China pays more attention to intellectual property rights after its recent
entry into the World Trade Organization.
But intellectual property rights remain a key stumbling block to China's
biotechnology industry in the immediate future. "In China, where there is
no intellectual property rights enforcement, products go in and a hundred
competitors try and copy the product and that pushes prices down," Foo
said. "Without good pricing, research and development investment is going
to be very difficult."
India, with its huge population and low intellectual property rights
infrastructure, faced the same problem of depressed prices, Foo said. "The
integrity of the intellectual property infrastructure -- that is the first step
towards better pricing," he said.
Government funding
Foo said hard data on the number of start-ups, the amount of venture capital
invested and funds allocated by governments were difficult to come by. But he
saw the commitment of Asian governments to funding early stage biotechnology
projects as encouraging in itself.
"The involvement of government in early stages is clearly very positive
and required, but in the longer term there must be a mechanism by which publicly
funded science projects are transmitted to the private sector," Foo said.
Taiwan has strong support for intellectual property rights, good infrastructure
and a well-developed market for venture capitalists (VCs) but sorely lacked
mechanisms to commercialize publicly funded research, he said.
Government-funded Taiwanese scientists also could not run private
biotechnology firms, further impeding the growth of biotech spin-offs from the
public sector, Foo said.
Strong capital markets were crucial to support fledgling start-ups after they
had left the arms of government funding. "The capital markets must exist.
The VCs play a very critical role in the whole process," Foo said.
"Asia needs to ratchet up its skills in biotech VCs. The VCs are not only a
supplier of capital, they supply management expertise."
Singapore and Taiwan were the two Asian countries with the highest
biotechnology VC skill sets and the most developed stock markets for the sector
at the moment, Foo said. Taiwanese VCs and the Singapore government were also
the two most active biotech investors in the region.
"I see these two markets as attracting the vast majority of listings in
the next two to three years," Foo said. The rest of Asia still has some way
to go. "It is very long term and requires a lot of capital
investment," Foo said. "The whole financial services industry has to
grow alongside the biotech industry, from the VCs right up to the investment
banks."