Asia is experiencing a surge of bioentrepreneurship—the result of a heady combination of political will regionally and powerful industry drivers globally. As a consequence, there has been a proliferation in the number of biotechnology start-ups all over Asia (see Table 1). These numbers have accelerated quickly, particularly in the last 18-24 months.

Table 1 Estimated number of biotechnology-related ventures in selected Asia-Pacific countries
Full size table

Asian governments see the need to develop knowledge industries and are thus driving numerous initiatives to build and provide incentives for this nascent industry. Government funding in the form of grants, benefits, incentives and tax breaks is a prominent feature throughout Asia. Infrastructure and clusters are beginning to emerge, and plans are underway to build a biotechnology industry in almost every Asian country. Singapore, Taiwan, Korea and Australia are leading the way, but China could soon be a power as well, once intellectual property (IP) rights enforcement is addressed by its accession to the World Trade Organization (WTO). India has similar domestic IP concerns.

The surge in the development of Asian biotechnology is also aided by global opportunities and events. A major driver is the technology of the 'post-genomic era', where new information available from genes provides an impetus for developing new and improved methods in drug discovery. Asian companies are already beginning to investigate targets specific to Asian populations and are exploring the region's natural biodiversity to discover new molecules. The need by big pharmaceutical companies to fill their own depleted pipelines is helping to drive this process. Whereas previous alliances with global multinational corporations have almost exclusively been for distribution and market access, Asian companies are increasingly collaborating in research and development (R&D) deals with large drug companies.

Other macro factors are also in Asia's favor, notably an increasing population and the persistence of unmet medical needs, such as diseases of the cardiovascular and central nervous systems.

There are potential pitfalls, however. One is a lack of scientists and scientific business managers. In the United States, many successful biotech firms rely on research institutions as their initial source of IP. Asia's most notable research comes from Taiwan, China and India, but relatively speaking, the region still lacks a strong research base compared with the United States and Europe. Gross expenditure on R&D is still low, and the traditional education systems in Asia have been slow to foster creative and innovative thinking. Short-term strategies undertaken to bridge this gap include importing foreign talent (for example, to Singapore) or encouraging the return of citizens working overseas (for example, to China and Taiwan).

The other critical drawback is the shortage of private venture capital (VC) and skills to efficiently allocate early-stage capital. In the United States, the venture capital community has had a critical role in entrepreneurship. This crucial part of the value chain needs to be addressed for the Asian biotech industry to thrive.

China and Hong Kong

Growing entrepreneurism in the world's largest marketplace.

China first began developing its biotechnology industry in the mid-1980s as a key driver for its future economic and social development, and stepped up its growth in the 1990s. The government identified three main areas in which to play an active part: (i) strengthening support to basic research; (ii) adopting favorable policies and necessary conditions for technology innovation, transfer and industrialization (including a stable macro-economy, a healthy financing system, an educated labor force and a competitive market environment); and (iii) improving the system of innovation by integrating government and industry efforts. Policies that have been implemented include setting up high-tech incubators for biotechnology, developing favorable taxation policies for biotechnology development, supporting small and medium-sized enterprises (SMEs) in the biotech sector and encouraging VC investment and technology transfer.

Government funding for R&D has been increasing continuously during the past 20 years. The Torch Program was established in 1988 under the Ministry of Science and Technology to help commercialize China's new technologies. Conglomerates such as Cheng Kong and New World Development have explored business opportunities in the biotech industry through funding and collaboration with universities and institutions. Chinese scientists, particularly in agricultural biotech research, can seek funding from nonprofit channels such as the Asian Development Bank, United Nations, World Bank and Rockefeller Foundation, among others. Hong Kong also has three government funds to support local biotech efforts: the Innovation & Technology Fund, the Applied Research Fund and the University Grant Committee/Research Grants Council.

In 1986, the China New Technology Venture Capital Company launched China's VC industry. Today there are over 200 VC companies in the country, with RMB40.5 billion (US$4.8 billion) in capital. Most of the capital is from government-related agencies, however, with investment in biotechnology at about 8.5% (68 projects, ranking biotechnology in the top 5 of 18 sectors as defined by China's VC Yearbook 2002). In terms of public capital markets, China's main stock market is not currently supporting high-tech start-ups, although it is working on a high-tech board on the Shenzhen Stock Exchange. Hong Kong has the Growth Enterprise Market (GEM), a Nasdaq-style board that includes biotech start-ups.

Perhaps the surest sign of the growth of China's biotech industry is the change in entrepreneurial attitude within the academic community. The government has developed centers such as the Beida Biotechnology Park, Hangzhou Biotechnology Park, Zhongguancun Science Park and Hong Kong Science Park to foster the growth of start-ups with technology spun out of universities as well as scientists returning from overseas to set up their companies using offshore capital. There are more than 400 universities, research institutes and companies and a total of over 20,000 scientists and researchers involved in biotechnology in China and Hong Kong.

The main challenges to the successful establishment of a thriving biotechnology industry in China include access to venture capital—especially for the long-term gestation period required for start-ups—and an educated workforce. There is a great need for Chinese scientists to be trained in business management skills. Finally, there is the question of IP rights. China expects to fine-tune its patent laws and enforcement if granted entry to the WTO. By strengthening the rights of patent holders, it hopes to spark innovative research and attract more foreign investment needed for commercialization.

Japan

Rapid industry growth overcomes a late start.

The biotechnology industry in Japan is dominated by large conglomerates that have established their own biotech divisions. Fermentation giants Takara Shuzo and Kyowa Hakko Kogyo are the country's leading suppliers of reagents for DNA research, restriction enzymes and biochips. Big pharmaceutical companies such as Takeda Chemicals and Chugai Pharmaceuticals are also biotech 'product' companies, actively pursuing genome research to find cures for Alzheimer disease, cancer and diabetes, among others.

However, Japan has struggled to establish an entrepreneurship culture like that driving the US dominance in biotechnology. For example, until 1999 it was illegal for a university employee to work in a commercial enterprise. Even though the Japanese government has recognized the importance of biotechnology research since the 1980s, investment in university research by industry was almost nonexistent.

In 1998, universities were finally allowed to establish technology licensing organizations (TLOs). The Center for Advanced Science and Technology Incubation (CASTI) at the University of Tokyo was the first TLO in Japan. Membership fees are used to pay the cost of patent applications and the salaries of CASTI personnel. CASTI member companies are able to obtain the contents of patents within 14 days of release, as well as having priority rights for negotiations. TLOs are now important in bridging the gap between companies and researchers. Currently, 16 universities have established TLOs.

Apart from regulatory hurdles, financing has also been a problem until recently. Japanese VCs once saw their role as bringing a small company with a promising technology forward and into the stock market. They were reluctant to back seed and start-up ventures before the technology and infrastructure were fully in place. This scenario began to change as the government realized that Japan was falling behind the United States and Europe in the biotechnology revolution. Financial support now comes from the Ministry of Science and Technology Agency, Ministry of Education, Ministry of Welfare, Ministry of Agriculture and Ministry of International Trade and Industry. In total, Japan spent ¥82 billion on biotechnology industry development in 2001 and ¥120 billion in 2002, an increase of 50%.

Local governments are also increasing their efforts to attract high-tech start-ups to regional science parks, offering low-cost space and tax breaks. One example is the Kazusa Akademia Park. Already the home of the Kazusa DNA Research Institute since 1994 and of Mitsubishi Tokyo Pharmaceutical since 1998, the park has opened three more developments—the Kazusa Incubation Center, Creation Core Kazusa and Biological Resource Center—to encourage the establishment of new businesses.

Finally, in 1999 the Tokyo Stock Exchange launched a new section called 'Mothers' (market of high-growth and emerging stocks), which is targeted at start-ups. Financial performance requirements for companies listed on Mothers are more lenient, and VCs can now access companies at an early stage of development and provide their investors with more diversified investment products. As a result, more than 140 biotech companies are now active, up from only 60 companies two years ago.

Korea

Government and industry funding spurs bioentrepreneurs.

A number of government policies have been set up to support and develop the Korean biotechnology industry, such as the Five-Year Plan for Science & Technology Innovation, enacted in 1997, and the Creative Research Initiative program. Of particular importance are two initiatives: Biotechnology 2000 and the 21st Frontier R&D program. Biotechnology 2000 aims to bring Korean biotechnology to the same level as the world's leading industrialized countries by 2010. Begun in 1994, the program coordinates the activities of seven government ministries, led by the Ministry of Science & Technology, by stimulating and funding basic research. Total commitments are around US$15 billion. The 21st Frontier R&D program, started in 1999, is a decade-long initiative to identify and develop selected areas of competitiveness. It will support a total of 20 projects in areas ranging from functional genomics to plant biodiversity. Total R&D spending in science and technology is increasing steadily as a result of these initiatives, rising from 3.6% (US$3 billion) of the overall budget in 1998 to 4.7% (US$3.8 billion) in 2002.

Korea has a number of the conditions that could eventually drive success in the industry, including a highly trained labor force, a high level of entrepreneurism, rapidly developing capital markets, a good education system and a keen emphasis on technology industries. However, the lack of key scientific personnel with specific areas of expertise within the sector, and of sufficient commercialization success stories deriving from the country's own research efforts, may dampen international investor confidence in the short term.

In addition, the drug-pricing environment in Korea is not conducive to an industry based on domestic research, owing to recent reform measures to cut costs. In late 2000, the government implemented a policy of separating the prescription and dispensing of drugs. More recently, the Ministry of Health and Welfare stated that it would be implementing a system of reference pricing for prescription drugs. This would mean that an upper limit would be set for government reimbursement for drugs, with the patient having to contribute any remaining amounts. This is likely to lead to a reduction in the use of high-priced innovative drugs and encourage the use of cheaper generic versions. The proposal has sparked a conflict with multinational drug companies, with Novartis recently stating that Korean patients will be denied access to its innovative therapy for chronic myeloid leukemia, Gleevec, if its price was not met.

Despite being a member of the WTO, Korea is not fully compliant with TRIPS and has no regulatory provisions to adopt the obligations. A number of patent infringement and data protection cases have been brought to court by foreign multinationals, but these have not been resolved successfully. The absence of a central body governing safety, efficacy and patent rights is a major reason for this. There is no link between the Korean Food and Drug Administration and the Korean International Patent Office.

The difference in entrepreneurial activity across Asia is striking, and Korea is notable for having a remarkably high level of entrepreneurism as measured by the prevalence of new firms. In fact, it has the highest number of entrepreneurs per unit of population in Asia and one of the highest in the world. This prolific activity is deeply imbedded in a strong culture of entrepreneurship. It is difficult to determine the number of biotechnology companies operating in Korea today, as estimates vary widely. This is a result of the uneven interpretation of the term 'biotechnology'—the Korea Research Institute in Bioscience and Biotechnology (KRIBB) estimates that there are 600 such firms in existence. But it does appear that, as a result of government initiatives and opportunities arising from the mapping of the human genome, the number of start-ups took a huge step upward in 2000.

The development of the biotech industry in Korea is presently skewed towards the public sector through government-sponsored research organizations and universities. Universities employ around 75% of all scientific PhDs, but see less than 10% of total R&D investment—which compares with the Organisation for Economic Co-operation and Development (OECD) average of 18%. However, this public-private emphasis may shift in the future, with more private money now becoming available.

The venture capital industry has experienced a huge boom in the last few years as a result of government stimulus (through tax incentives and low-interest loans) and strong interest in the KOSDAQ index (Korea's second board). According to the Korean Venture Capital Association, there are currently some 148 VC firms in Korea today—more than double the number registered a year ago. Total amounts available for venture investments are in the region of US$8.5 billion. A number of chaebols (conglomerates), such as the LG Group, SK Group and Samsung, have also set up their own VC funds to either support their own pharmaceutical activities or to widen their networks. Currently, however, most of the companies receiving these funds are offshore, owing to a lack of suitable domestic opportunities. Nonetheless, the chaebol involvement will provide a useful source of incubation for domestic start-ups and, ultimately, spin-offs.

India

Fast-growing, but hampered by patent uncertainty and price controls.

Biotechnology is one of India's fastest-growing industries. There are several government agencies that fund and support biotechnology, but the Department of Biotechnology (DBT), which was set up in 1986, remains the nodal agency that is solely dedicated to the sector. It regulates all biotechnology work in India and assists various institutions and organizations by funding research projects and issuing regulatory guidelines.

Government support for the industry is evidenced by a number of different avenues. At the central level, the government provides funds to the DBT, which in turn funds various institutes. At the state level, it provides fiscal and other incentives to promote the industry in areas such as Andhra Pradesh, Tamil Nadu, Kerala, Madhya Pradesh, Orissa and Karnataka. Privately funded projects in India are still relatively rare—banks are still the major source of financing, and VC flows account for less than 20% of the total funding requirements in biotechnology.

The biotech industry today is still in its infancy compared with the mainstream and well-developed pharmaceutical industry. Estimates of market size vary, but measured by domestic sales of biomedical products it is around US$120 million, compared with US$3.5 billion in domestic pharmaceutical sales. However, this is likely to grow at 25-30% over the next few years with the introduction of new products. There are reportedly some 170 biotech companies in India (Biotech Consortium India Ltd. Report, 2001), half of which are agricultural-based. The rest are split equally among medical science and environmental companies.

Generally speaking, the level of entrepreneurship in India is relatively high. Measured by the prevalence of new firms, or the percentage of people working in their own firms, India shows a level of entrepreneurship greater than that observed in countries such as France, Germany and Israel, and similar to that of Australia. In the biotech sector, however, a lack of critical mass in venture capital funding may hamper the development of emerging companies. A recent survey by the Confederation of Indian Industry (CII) concluded that promoting VC investment is one of the biggest challenges facing the sector today.

The main players in Indian biotechnology are Shantha Biotechnics, Wockhardt, Panacea, Bharat Biotech, Dr. Reddy's and Cadila Pharma. These companies have products on the market and vibrant development pipelines. All claim to have developed the necessary expertise to clone a variety of genes and to undertake both basic and applied research. Initially, many companies started pursuing common generic-related product strategies, and as a result, the product range across companies is quite similar. For example, many companies focused initially on hepatitis B vaccine and insulin, for both of which there is a large domestic market. Other products such as erythropoietin, interferons, streptokinase and other vaccines are also being pursued. Recently, however, a few companies have begun taking a research-based approach ahead of changes in the intellectual property landscape in 2005. A good example is Shantha Biotechnics, which now has new, preclinical monoclonal antibody candidates.

India's focus in the next few years, as evidenced by the country's tenth Five Year Plan (2002-2007), will be in genomics, proteomics, informatics and structural biology. It has already developed strong core competencies in the areas of fermentation and information technology; however, R&D efforts are being hampered by two key factors, patent protection and drug pricing.

India's current patent laws recognize only process patents, not (fully) product patents. This loophole has spawned a reverse-engineering pharmaceutical industry where Indian companies have developed skills to produce patented drugs using different processes. Thus, the core competency of India's R&D is in synthetic organic chemistry and process development. The patent situation could certainly change by 2005, as India will have to implement changes to its existing patent laws to recognize product patents and be fully compliant with TRIPS.

It is illustrative to examine the impact of a weak system of IP protection. Multinational corporations have either avoided India or maintained only a minimal presence needed for market access. Some multinationals have set up wholly owned subsidiaries, but use them either for sourcing products for global requirements or to introduce products into the domestic market. In fact, Aventis and Novartis have either discontinued or substantially reduced their R&D activities. There has also been an exodus of big pharmaceutical companies from India.

'Brain drain' has also been a problem for India, as its most talented scientists move to countries where incentives for innovation exist. The Organization of Pharmaceutical Producers of India (OPPI) estimates that more than 15% of all scientists working in pharmaceutical R&D in the United States are of Indian origin. Indian drug companies have very few alliances with foreign firms—in stark contrast to their counterparts in information technology, who can find the best partners in their industry because India recognizes intellectual property rights on software. In the post-genomic era, many multinationals have established collaborative high-throughput screening programs with major universities and institutes elsewhere in Asia. Indian universities have found this difficult largely because of the country's stand on IP rights.

Finally, drug prices are controlled in India, although the span of control has gradually been reduced since 1979. The Drug Prices Control Order (DPCO) was last revised in 1995, and price controls currently cover 40% of the total market. This is likely to be further reduced to 25% ahead of 2005. This control and the resultant low-pricing environment have discouraged research investment in India. The R&D expenditure of the Indian industry in the year 2000 stood at 2% of sales, compared with the 18.5% of their US counterparts. However, the imminent changes to the system have spurred a number of companies, such as DRL and Ranbaxy, to spend much more, between 4% and 7% of sales, as they prepare for a post-2005 scenario.

Australia

Strong science and a ready market spell success.

In Australia, biotechnology research covers a broad spectrum of areas including medical devices, biomedicine, agricultural biotech and diagnostics. The government is instrumental in promoting the industry; its National Biotech Strategy provides direction and educates the public about biotechnology ventures and products. The government has also been active in providing grants for new biotech ventures. One such initiative is the Biotechnology Innovation Fund (BIF), which addresses the critical funding gap between the research and commercial development stage (the pre-seed stage) and aims to foster a large number of new Australian biotechnology companies by part-funding proof-of-concept activities. BIF is a three-year, merit-based, competitive grant program, limited to a maximum of A$250,000. Grants are offered on a dollar-for-dollar basis, with the remaining funds coming from within the company or another financial source such as state governments or private investors. In first-round funding for the year 2001, 31 companies were offered grants totaling A$6.9 million. The successful grants were for projects in new technology areas including bioinformatics, cell fusion, gene technology, cell and tissue culture, protein engineering, genomics and advanced uses of microorganisms and enzymes. The program is attracting scores of new biotech ventures. The second round of the BIF program in 2001 saw an additional 57 applications, with a potential total project value of A$12 million.

Another government initiative toward venture business in high technology is Commercializing Emerging Technologies (COMET), established in 1999 to provide management support to enable individuals, early-growth firms and spin-off companies from public sector research institutions to manage biotechnology innovation and its commercialization. The Government initially allocated A$30 million to COMET. Owing to high demand and the program's success, an additional A$40 million has been provided. COMET provides financial assistance for the establishment of management teams, market research, intellectual property strategies and realistic and achievable business plans, and also allows applicants to participate in existing management development programs offered by the private sector or other institutions.

These awards have been crucial in accelerating the commercialization of biotech research in Australia. Overseas private investors interested in Australian biotech have matched Australian government capital with their private equity capital at every stage of company development.

Australia's main advantage as compared with its Asia-Pacific neighbors, besides its possession of a well-established R&D and financial infrastructure, may be the strong local demand for biotech products and services. Local demand is regarded as a vital ingredient by investors so that their portfolio companies are less dependent on global demand, which can be uncertain and more competitive.

Taiwan

Committed to building Taiwanese biotechnology.

The Taiwan government has taken several concrete steps to promote the biotechnology and pharmaceutical industries, including strengthening basic research and commercializing the results, supporting biotech companies in introducing technologies to international markets, formulating suitable laws for all categories of biotech products, promoting a system of international mutual accreditation to open up international markets, and promoting large-scale investment. The Executive Yuan (Congress) has also formed a Development Fund with two programs to provide capital to the biotech industry. The first program will invest up to US$579 million over the period from 1998 to 2005 in start-ups, expansion projects by large biotech companies, and venture capital companies focused on the industry. The second program combines both government and private investment. Its objective is to provide US$2.9 billion in capital for VC companies, to improve the current investment environment and develop VC investment enterprises. The Development Fund is responsible for 30% of the capital, while the private sector provides the remaining 70%.

Investment in R&D grew by 29% in 2001 and 46% in 2002. R&D in biotechnology accounted for 29% of the total national R&D budget in 2002, demonstrating the government's substantial commitment. The majority of basic research is carried out at universities and at the Academia Sinica, and is supported by the Academia Sinica, the National Science Council and the Ministry of Education. Mid-stage research is supported by the Council of Agriculture, Ministry of Economic Affairs, Department of Health, Atomic Energy Council and Ministry of National Defense. This research has developed technologies related to gene cloning, protein expression, diagnostics and therapeutics.

All technologies developed are candidates for transfer to private industry for commercialization. There are six nonprofit R&D organizations in Taiwan, all of which are financed by government funding to conduct various R&D projects in biotechnology. For example, Nobel Prize winner Yuan T. Lee established the Genomic Research Center at the Academia Sinica in 2001, where research will be conducted relating to human diseases, drug discovery, Chinese herbal medicine and transgenic plants and animals.

With the growth of the industry, many colleges are beginning to provide biotechnology-related courses for MBA students, and undergraduate and graduate students in the life sciences are entering business school. The Department of Industrial Technology provides a six-month training course for life scientists in investment evaluation, technology transfer and IP rights. The Biotechnology Association, a nonprofit organization, provides educational programs in biotechnology for domestic entrepreneurs on weekends. Many entrepreneurs from the information technology industry or traditional industries attend these courses to learn about the new field of biotechnology.

The major entities in Taiwan that invest in the biotech and pharmaceutical industries are China Development Industrial Bank, Industrial Bank of Taiwan, Chaio-Tung Bank, Hotung Group, President Life Sciences Co. Ltd., Cheng-Xin Technology Development Corp. and Sunsino Ventures Group. The accumulated total investment in the biotech industry is around US$300 million, with 23% invested in local companies and 77% invested in overseas companies.

Looking to the future, the 'Action Plan for the Biotechnology Industry,' issued by the Executive Yuan, aims for 25% annual growth in revenues from the year 2001 onward, US$4.3 billion in accumulated investment over the five-year period ending in 2006, and more than 500 active biotech companies by 2011. International collaboration is essential for success, and integration of mutual interests and available resources between Taiwan and the global biotechnology community is key in achieving this goal.

Singapore

Singapore's drive shows healthy signs of growth.

Nowhere is the term 'long-term commitment' more ingrained than in the tiny island state of Singapore, where industries such as chemicals, electronics and engineering have been masterminded from the ground up and remain firmly planted as the country's key economic engines. To encourage the formation of new ventures and attract scientific talent to expand the biotechnology industry, Singapore has gone beyond simply building its robust base of multinationals. Partnerships between industry and local research institutes, hospitals and universities are encouraged to spur innovation among local researchers and to help foreign companies secure a foothold in Asia using Singapore as a gateway.

Singapore is rapidly building its human capital pool to meet the growing needs of the biomedical science industry. Public scientific awareness campaigns and educational programs will expand the local talent pool.

The development of industry falls under two government agencies: the Biomedical Science Group of the Singapore Economic Development Board (EDB), which plans and initiates industrial development, and the Biomedical Research Council of the Agency for Science, Technology and Research (A*STAR), which funds and supports public research initiatives and promotes public awareness of science and technology. Companies setting up R&D, manufacturing or regional headquarter activities in Singapore can seek tax and financial incentive support from EDB's Biomedical Sciences Group.

A*STAR's Biomedical Research Council oversees and funds five research institutes—the Bioinformatics Institute, Bioprocessing Technology Centre, Genome Institute of Singapore, Institute of Bioengineering & Nanotechnology and Institute of Molecular & Cell Biology—that focus on research in basic, applied and clinical areas that are economically relevant to the advancement of the industry. Together with scholarships for young talents to pursue local or overseas biomedical research studies at the undergraduate up to Ph.D. and postdoctoral levels, A*STAR has committed over US$800 million in funding to the biomedical sector. In addition, A*STAR formed Exploit Technologies in 2001 to ensure effective technology transfer and commercialization of IP from the research institutes.

Singapore's commitment to the success of biomedical sciences is perhaps best reflected in the Biopolis—a 2-million-square-foot R&D complex that will house key research institutes and private research organizations. This dedicated biomedical research park seeks to be a focal point for both public- and private-sector researchers to interact and exchange ideas. The seven linked buildings of the Biopolis are slated to begin operating in mid 2003 and will incorporate facilities specifically tailored for biomedical companies, including laboratory and office space, incubators to nurture start-up companies, animal handling facilities, laboratory support services and lifestyle amenities.

Excellent infrastructure, a skilled workforce and strong IP policies have attracted many leading pharmaceutical companies to Singapore. Companies with state-of-the-art global manufacturing activities include Aventis, GlaxoSmithKline, Merck, Pfizer, Schering Plough, Wyeth, BD, Baxter and Siemens. On the research side, Novartis and Eli Lilly set up their corporate R&D centers in 2002 to focus on tropical diseases and systems biology research, respectively. Chugai, together with Mitsui and the Central Institute for Experimental Animals of Japan, recently formed PharmaLogicals Research, a joint-venture drug discovery company focusing on Asian diseases.

There has also been significant growth since 2000 in the number of international biotech companies investing in Singapore, including Viacell, Proligo and pSiMedica.

Singapore is also an attractive location from which to conduct and manage regional clinical development activities. Beneficial factors include its multiethnic population, well-developed clinical and regulatory infrastructure and strict adherence to international clinical standards. Companies work closely with local hospitals and contract research organizations (CROs), such as Quintiles and Covance, to conduct early- to late-stage trials in Singapore and in the region.

Singapore has been quick to recognize the need to encourage innovation and enterprise development for a sustainable biotechnology industry. EDB's US$600 million Biomedical Sciences Investment Fund (BMSIF) has a lead role in investing in selective overseas companies and forming strategic, locally based joint ventures. The fund led to the establishment of MerLion Pharmaceuticals, a drug discovery company that recently secured its first round of US$13.5 million in private equity financing with reputable international VC groups—no small feat given the current investment climate—and ES Cell International, a joint venture among Singapore, Australia and Israel that specializes in embryonic stem cell research.

Besides the BMSIF, private VC groups such as JAFCO, 3i, Temasek Capital, UOB Ventures, BioVeda and Walden International are also actively involved in biotech investments. By virtue of their well-established regional financial and logistics networks, these funds have an instrumental, value-added role to investee companies that wish to establish an Asian presence. There is also increasing interest for incubators to provide a breeding space for bioentrepreneurs in Singapore. One such example is the establishment in 2002 of BioVenture Centre, a joint venture between Becton Dickinson and Johns Hopkins Singapore.

The government has also encouraged the growth of new local enterprises through programs such as the Biomedical Sciences Innovate 'N Create Scheme (BMS INC), launched in 2002. Companies that qualify receive up to ~US$1.1 million as seed capital toward the execution of their business plans. As expected, the scheme has attracted keen interest from universities and research institutes and has successfully spun off its first two companies, Attogenix and Promatrix, from Nanyang Technological University and Johns Hopkins Singapore, respectively. Seed funding for start-up companies is also available through a matching fund called Start-up Enterprise Development Scheme (SEEDS). These funding efforts have helped propel Singapore toward becoming an international hub for bioentrepreneurs to start new ventures and for investors and 'angels' to seed new ideas.

Singapore has made excellent progress toward its goal of becoming a global hub for biomedical sciences in Asia. A potent combination of strong government commitment, a pro-business environment and a fast-growing pool of international research talent ensures that Singapore is on track to making its biomedical ambition a reality.

Malaysia

Government funds and science parks nurture biotechnology.

With a third of its economy still dependent on agriculture and natural resources, Malaysia has recognized that biotechnology will enhance the productivity of this sector while creating new opportunities for the emergence of new industrial sectors such as healthcare and pharmaceuticals. The importance of biotechnology is clearly visible when national agriculture-based research institutions such as the Malaysian Palm Oil Board, Malaysian Rubber Development Board and Malaysian Agriculture Research Development Institute have reoriented their research toward biotechnology by developing the necessary human resources and technology acquisition programs. These efforts will ensure that Malaysia retains its global prominence in the oil palm, rubber, cocoa and timber industries.

To capitalize on the new opportunities offered by biotechnology, especially in human healthcare, the Ministry of Science, Technology and the Environment established the National Biotechnology Directorate (NBD) in 1995. The NBD's goals include strengthening research capability and capacity in biotechnology, commercializing government-funded biotech research and facilitating the development of biotechnology-based industry.

Despite having a vibrant research community, Malaysia has lagged behind the international community in terms of translating research into new patents and companies. Among the factors contributing to the poor commercialization rate was the lack of co-located inventors and effective entrepreneurial strategies. As a solution, the BioValley project was initiated. Designed to increase the development of biotech IP and to foster the formation of new companies, BioValley will be located within Malaysia's Multimedia Super Corridor, which encompasses the Kuala Lumpur City Center, Putrajaya and the Kuala Lumpur International Airport.

At the core of the BioValley will be three institutes: the Institute for Genomics and Molecular Biology, the Institute for Agro Biotechnology and the Institute for Pharmaceutical and Nutraceutical Biotechnology. Approved under the current Eighth Malaysia Plan, the institutes will exploit the economic potential presented by the biotech sector by incubating innovative research, training scientists and supporting nascent biotechnology companies. They will also establish ties with Malaysian universities. The BioValley will enhance the work of the institutes by creating a critical mass of commercial activity to support innovation and by providing the necessary infrastructure for new business creation and development. The development of the BioValley is expected to generate over 30,000 new jobs through the creation of 250 new biotech-related companies.

In addition to the BioValley, there are a number of other incubators aimed at nurturing biotech innovations for commercialization. The Malaysian Technology Development Corporation operates a biotech incubator jointly with the Universiti Kebangsaan Malaysia in Bangi, Selangor and Technology Park. Malaysia also has its Bio-City initiative, a cluster of facilities for R&D, product development and commercialization of biotech-related companies. Bio-City will focus on food and feed production, biodiversity prospecting, alternative medicine, pharmaceuticals and nutraceuticals and genetic engineering.

The Malaysian government has established a number of grants aimed at translating research to commercialization. The Intensification of Research in Priority Areas (IRPA) is currently the biggest research fund, and the NBD also manages a research fund dedicated to biotechnology. Under the Eighth Malaysia Plan, IRPA has an allocation of RM1 billion, RM310 million of which is earmarked for the commercialization of biotech and other projects through the Industrial Grant Scheme (IGS) and Commercialization of Research and Development Fund (CRDF).

So far, the NBD has registered about 62 biotech companies in Malaysia, of which more than one-third are agbiotech companies and one-quarter are pharmaceutical and nutraceutical companies. For the industry to continue growing, the ideas and knowledge generated at the R&D phase must be quickly translated into products and services for the marketplace. However, in Malaysia venture capital is still in its infancy. There are about 36 VC firms registered with Bank Negara Malaysia (BNM), with a total fund of about RM2 billion as of 2001. That year, VCs invested about RM109 million in 42 companies, of which only RM3.2 million went to biotechnology.

To spur further investment in biotechnology and other high-growth areas, Malaysia Venture Capital Management Berhad (MAVCAP) was established in 2001 to manage a government fund of RM500 million. In the biotech sector, MAVCAP focuses its efforts on activities that will capitalize on the potential of the country's biodiversity and upgrade productivity within the agriculture sector. MAVCAP also seeks commercial opportunities in human therapeutics and diagnostics. MAVCAP has invested RM56.4 million in four biotech companies so far, which represents a quantum leap in total VC investment in the sector. However, to realize the full potential of biotechnology, significant financial input must continue to be channeled into the sector to increase commercial activities and generate wealth.

Thailand

A growing industry based in agriculture.

Strategically situated in the middle of Asia, Thailand is an emerging center of biotechnology R&D. Contributing factors to its growth include government commitment, infrastructure, rich natural resources, and manpower. The main research funding organizations include the National Center for Genetic Engineering and Biotechnology (BIOTEC), National Research Council of Thailand, and Thailand Research Fund, and active research is being carried out at the Departments of Agriculture, Fisheries, Livestock Development, and Medical Sciences, the Royal Forest Department, Chulabhorn Research Institute, Thailand Institute of Scientific and Technological Research, and BIOTEC. Thailand has more than 400 biotechnology researchers conducting around 100 projects.

As agriculture is the basis of the economy, agbiotech is the most developed and practiced technology, with goals of improving crop quality and increasing output. Current research has focused on producing high-quality rice that is more resistant to diseases and produces higher yields. Also, in aquaculture, biotechnology is used to develop testing methods to prevent epidemic diseases in prawn domestication, improve breeds to meet the market demand, and create breeding stock for farming.

In medical science and the public health sector, Thai physicians and medical researchers are highly capable and can be regarded as one of the country's strong points. Thailand is encouraging the application of biotechnology in the manufacturing sector, while considering the social implications and impacts on quality of life in commercializing these medical products. Medical products that are now being developed and have commercial potential include clinical test kits for amphetamines, tuberculosis, cholera, and melioidosis; vaccines for dengue hemorrhagic fever and leptospirosis; and anti-malarial and anti-tuberculosis drugs.

Thailand has woken up to the opportunity for developing its biotech industry and has begun to launch serious initiatives. As the market for biotech products continues to expand, many organizations are helping to stimulate the industry in Thailand by providing consultancy services to industry, conducting contract research, and promoting the commercialization of research results. BIOTEC, for example, has undertaken a number of commercial ventures with overseas companies and has taken the lead in setting up a number of joint ventures with the Thai private sector.

In the past, the development of bioindustries in Thailand has been impeded by a lack of confidence in biotechnology among private investors. With burgeoning opportunities for biotech products in Thailand, however, various forms of financial support are now available, including VC and low-interest loans. The government has contributed several initiatives, such as the National Science and Technology Development Agency (NSTDA)'s Company Directed Technology Development Program, Innovation Development Fund, and NSTDA Investment Center, and the Invigoration Thai Business Program of the Department of Industrial Promotion. At the same time, private financiers have become increasingly interested in investing in biotechnology. For example, Small Industry Finance Corp. (SIFC) offers loans for small industries.

Venture capitalists are vital to the growth of bio-industries in Thailand, playing a critical role in the development of knowledge as information producers who can provide detailed assessment of the quality of investment plans and address information problems through screening, contracting, and monitoring. The growth of VC firms in Thailand is of relatively recent origin. Nevertheless, funds for SMEs are now available in many finance establishments, including One Asset Management Ltd. and Vnet Capital Co. Ltd. In addition, the Ministry of Commerce recently announced that certain forms of intellectual property, for example trade secrets, can be used as bank loan guarantees. This will offer an opportunity for start-ups with intellectual property to secure financial resources.

For many developing countries, strong and effective IP protection is a motivating force to invest in biotechnology, in particular medical biotechnology. As a WTO member country, Thailand has improved its IP regimes. IP protection for biotechnology exists in various legal forms, such as plant variety protection, patents, and trade secrets.

After the recent economic turmoil in Asia, SMEs now account for a growing proportion of the manufacturing sector in Thailand. Especially during the last decade, the sector's fastest growing members have been new technology-based firms (NTBFs) in areas such as information technology and biotechnology. There are at least 150 Thai biotech companies, but no exact figure on start-ups. Newer companies established to use technology developed by local researchers include INNOVA Biotechnology Co. Ltd., Thai Dairy Development Co. Ltd., and Shrimp Culture Research and Development Co. Ltd.

Bioentrepreneurship is a very new concept in Thailand, in particular among scientists and researchers. At present, there is no specific educational program for bioentrepreneurs. However, some institutes have offered business training courses: the Institute for Small and Medium Enterprises Development offers series of business training courses and advice, and many universities, including Chulalongkorn University and Thammasart University, offer MBA or equivalent courses. In addition, the NSTDA is launching an Innovation Management Course for Executives.