CALCUTTA, India, April 14 (UPI) -- Asia's biotechnology industry is on the fast track as investors are pouring in billions of dollars, but industry analysts worry an emerging high-failure rate for companies could signal the region is playing a risky game it cannot afford.
India is experiencing a proliferation of start-up biotech companies, all of which hope to follow the path of the country's largest and most successful biotech establishment, Biocon Ltd., which had a successful $1.2 billion IPO last year.
India is far from alone, however, as investors in Singapore, Malaysia and even Taiwan, wooed by the optimistic future of breakthrough sectors such as genetic engineering, are developing biotech centers.
There are about a dozen well-known biotech companies, but about 300 others are trying to become the next Biocon. The Indian government hopes the sector will fuel the next business boom, following information tech.
Malaysia also is pushing ahead with developing a biotech sector. In May 2003 the country, after three years of planning and $26 million in investments, launched it first biotech hub called BioValley. The government hopes that a decade from now BioValley will generate $10 billion to $12 billion in revenues from 150 to 200 companies. The government also is contributing $26 million over the next three years to help spur biotech growth.
The Singapore government has pinned its biotech hopes on Biopolis, a biomedical and life-sciences initiative begun last October. Officials project that revenue from Biopolis will grow to $11.7 billion by 2010.
More than 90 companies manufacture pharmaceutical and biotech products in Singapore. International Data Corp., a market research company, reported that the government there plans to have 15 world-class life-sciences companies established by the end of this year, constituting a regional center for clinical trials and drug development.
India, Singapore and Malaysia's biotech efforts might look puny, however, to what Taiwan has envisioned.
Four years ago, the Taiwanese government unveiled a plan to invest up to $5 billion to shore up its fledging biomedical and biotech industries. That goal has been scaled back, however, as the government now is emphasizing funding research at the university level and helping researchers secure patents.
Hong Kong, too, has pursued the biotech sector, but industry sources said like Taiwan, its efforts to attract top scientists and researchers from around the world have met with lukewarm response.
Even as these Asian countries have set their biotech sights high, analysts are concerned such capital-intensive activity brings with it many risks and they question if Asia is headed down the same path as the United States, which suffered substantial biotech losses during the 1990s.
"Biotechnology may yet turn into an engine of economic growth and cure deadly diseases," a Wall Street Journal editorial said in May 2004, "But it's hard to argue that it's a good investment. Not only has the biotech industry yielded negative financial returns for decades, it generally digs its hole deeper every year."
In the United States, which currently leads the world in this technology, losses generally have increased over the years, except for 2003, when they were less.
In 1991, net losses at 194 U.S. biotech companies then listed publicly amounted to $900 million. In 2003, 314 public companies recorded losses of $3.2 billion, better than the $9.4 billion loss in 2002 when merger- and restructuring-related accounting charges made losses unusually large.
Villoo Patell, an Indian biotech expert at Avesthagen in Bangalore, said the risks for India and Asia are even greater than in the United States.
"They stem from the very stage of setting up a biotech company, which would need about $2 million at the start up," Patell said. "Another $10 million would be required at the early stage to get the research going. After that, there is a chance that the product might fail."
That could be fatal for an entrepreneur as venture capital and financial institutions likely would not back a previous failed enterprise.
"We're unforgiving, unlike in the U.S. where you could find someone to fund your project on the belief that you won't commit the same mistakes again," Patell said.
In many ways, Asia remains particularly vulnerable because of where it is in the biotech industry development process.
The biotech committee for the industry lobby, the Federation of Indian Chambers of Commerce and Industry, points to other risks plaguing biotech ventures in India and elsewhere in Asia.
The FICCI said its own recent report concluded that government financing is important to boost growth, but it is not readily available in developing countries such as India and Malaysia.
"This then forces most biotech companies to spend large amounts of money on research and development for several years in advance of earning any sales revenue," the FICCI report said. "Consequently, most of them accumulate a fair amount of losses ... before they can convert research into substantial commercial activity."
Another biotech shortcoming is it often takes years or decades to develop products to the point where they achieve commercial success, so some might never see the light of day.
Low success rates and long development periods, as well as the time needed to secure regulatory approvals, mean biotechnology companies need to invest significant amounts of time and resources up front.
Global experts said Asian governments such as Singapore, India and Malaysia may be making a mistake in assuming biotech could be replicated like the information-technology sector. Much of the IT boom was created by relatively inexpensive catalysts, such as the personal computer and the Internet. Biotech, on the other hand, often requires expensive equipment and most biotech products apply to much narrower sections of a country's population.
It does appear, however, that Asia is not giving up on biotech and still is optimistic the benefits of such revolutionary technology still is much greater than are the risks.
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