Taiwan’s Biotechnology Industry

Taiwan’s Biotechnology Industry
With the IT industry increasingly moving to China, the biotechnology industry has been cited as a potential driver for the next stage of Taiwan's economic evolution. Yet while its credentials are strong, it should not be expected that the Research & Development (R&D) heavy industry to start making positive figures in GDP accounts anytime soon.
However, there is potential for society with the biotechnology industry. For example, in the development of cheaper medicines and food sources that benefit continents, biotechnology could perhaps outstrip even IT in changing the way the world works.
Biotechnology also holds interest for more than simply the altruistic-minded, as it is an industry that has demonstrated a potential to make people very wealthy. Taking the United States as an example, the period between 1993 and 2001 demonstrated biotechnology revenues leap from US$8.1 billion to US$25 billion, according to the Biotechnology Industry Association.[i] And there is little reason to think that this trend will slow any time soon.
Thus there is not much to question as to why the biotechnology world has lately attracted so much attention in Taiwan. With the early drivers of Taiwan's "second economic miracle" in the IT industry rapidly relocating to low-cost China, the search for a high value-added replacement has been intense.[ii] Given the numbers, biotechnology is a very attractive choice; as stated by Dr Chien-Jen Chen of Academia Sinica “Since 1995, the biotechnology industry has been recognized as one of the most important industries in Taiwan. It was regarded as one of the ‘rising star’ industries in the 6-year ‘Two Trillions, Two Stars’ national development plan in 2002.”[iii]
Admittedly, Taiwan is no giant in the field just yet: according to Industrial Development Bureau figures, "emerging biotech industry" exports measured just NT$14 billion (US$400 million) in 2000.[iv] The projections for 2020 are higher at NT$500 billion (US$16.65 billion),[v] but this too is nothing compared to IT exports of NT$1.869 trillion (US$53.4 billion) during 2000.[vi]
However, one should not dismiss Taiwan's biotechnological potential based on the current situation, as it is clear that the real rewards will appear perhaps in a decade or a two. As Chang Tse-Wen, former president of the Development Center for Biotechnology (DCB), pointed out: "The U.S. has done biotechnology for 20 years [without profit]. The value is the potential for revenue, not the revenue per se."[vii]
Taiwan’s biotechnology companies make everything from new medicines to microchips that can be used in medical diagnosis and research, and Taiwan itself possesses a wide range of strategic advantages in the industry.[viii] These include existing expertise in high technology that is easily transferred to biotechnology, a prime strategic location, highly modern research facilities, abundant capital and a highly educated workforce.[ix] Alongside these advantages, there is substantial support of the industry from the Taiwanese government: “The government places great emphasis on the promotion of the sector” President Ma has said.[x] “It is also one of the six main emerging industries targeted for promotion,” he added.[xi] According to the president, enhancing the R&D capabilities of Taiwan’s medical biotechnology industry is an important goal.
Therefore, understanding Taiwan's potential at the present time is a bit like putting together a puzzle some would say. Many key pieces are already on the board. Taiwanese companies, research institutes and government agencies, for example, have a proven track record of partnering successfully with foreign firms, an essential prerequisite in an industry as global as biotechnology.[xii] Then there is the adequate supply in Taiwan of skilled scientific workers, increasingly strong government backing, mounds of private investment capital, and geographic and cultural proximity to the massive China market.
However, as the puzzle analogy would dictate, to take its final shape, all pieces need to fit together, which is never as easy as it looks on the box.
Creating a New Model & Focus
There are many out there who think that Taiwan's best chances in the biotechnology industry is to follow the same model that gave it a global standing in the IT industry. This model is indeed an appealing idea: Instead of making notebooks on an OEM contract for Compaq, for example, a Taiwanese biotechnology company could do outsourcing for foreign drug companies.[xiii]
However, it seems that this previous model falls short of Taiwan's present needs. Firstly, Taiwan no longer has such cheap land and labour, and the Taiwanese domestic market is small.[xiv] Even when it comes to manufacturing medical devices, neighboring countries in Southeast Asia or even China would soon enough overshadow Taiwan's competitive advantage in low production costs.
Former President Chang of DCB stated (and others from research institutes, investment firms, and government offices insisted with him) that Taiwan must shift away from its traditional focus on manufacturing, which represents very little of a biotechnology product's value. "R&D is where the money is," said Chang.[xv]
There is a fast track to R&D and perhaps to Taiwan’s delight, it runs along the backbone of Taiwan's economy: small and medium-sized enterprises (SMEs).[xvi] "Taiwan's biotechnological future will not depend on big pharmaceuticals," Chang said, “but on small firms in specialized parts of the global industry: ‘Chinese are very good at finding niches.’"[xvii]
A crucial advantage of SMEs is their bargaining power with foreign, primarily U.S. counterparts, of similar size. Most large companies have Asian offices set up and are bound to protect their territory, but small U.S. firms are far less likely to be concerned about Asian distribution and marketing rights for their products. According to Chang, these companies are interested in "getting off the ground", and Taiwan firms have the capital and technological support to make it happen.[xviii] In return, the Taiwan firms get keys to intellectual property rights.[xix]
Howard Lee, president and CEO of China Development Industrial Bank's (CDIB) Biotech USA Investment Co. Ltd., agrees with this sentiment. He says Taiwanese firms need to find overseas partners of their own size. "They need Asian partners, they need money, they need a global image".[xx] Such links are especially crucial, says Chang, since the United States is home to most of the important inventions in the biotechnology industry.[xxi] Naturally, bigger corporations still have a role to play in Taiwan's biotech industry. Chang says that as the IT industry matures, its leaders will be looking for new opportunities with greater potential. "They have to diversify into biotech in order to grow," he says. Taiwan's IT industry captains will also bring to biotech other strengths, such as technological know-how and marketing skills.
However, according to Elizabeth Green Sah, a managing director of Primasia Bio-Ventures Limited, a lack of financial support has forced many small companies to neglect their long-term research for short-term projects that bring in quick, survival cash. This is where Taiwan's challenges really start to loom larger.
Evaluating Biotechnology
It is not surprising that average citizens do not know much about biotechnology, however, if the same can be said of investors in the field, this becomes worrying. According to Eddy Hsieh, CEO of DigitalGene Biosciences, venture capitalists with a scientific background are almost always schooled in biology, whereas electronic engineering and optical electronics also play big roles in biotechnology. The inability of the venture capitalists to properly evaluate the technology on offer means they look for "star" companies that look good on the surface, he says: "If you are a ‘Tom Cruise' you can make it to superstardom; if not, you can't get venture capital." Moreover, the company's management and marketing skills are often overlooked: "They just look at how many researchers are from Harvard or Cambridge, at how many Ph.Ds you have."[xxii]
Unfortunately, this results in small companies being forced to rely on connections for support. People back them not because they know the technology, but because they know the person behind the innovation. For its part, since taking office in May 2008, President Ma said he has prioritized the implementation of regulatory easing so the nation can become a global powerhouse in the sector.[xxiii] Ma said in 2012, the government increased public-private investment in the industry to NT$39.5 billion (US$1.31 billion), helping generate annual revenues of NT$263 billion and reflecting growth of 9.45 percent year on year.[xxiv]
To be fair, the lack of biotech expertise is not a Taiwan-specific problem. Terry Cooke, American Institute in Taiwan's commercial section chief, uses the car industry for perspective on the global situation. "With cars, you have half a dozen companies and thousands of analysts," he says. "It's the reverse in biotech: thousands of companies and few analysts."[xxv]
Management
Greater than the concern over a scarcity of biotechnological analysts in Taiwan, is the fear that there are not enough good scientists to be found. Although a global problem, Taiwan seems to be better off than many; In 2003, Taiwan was ranked as the 18th on the number of major scientific theses and dissertations presented with 40% of them on Biotechnology; and in 2007 almost 10 000 students were Life Science graduates.[xxvi]
Thus there seems to be plenty of devoted, high-quality scientists alongside advanced equipment and facilities. However, according to Chang, “[in regards to Taiwan's wealth of mid-level technicians]…They are not good enough to lead and formulate products, but they can implement."[xxvii]
Taiwan also has quite a bit of world-renowned U.S.-trained Taiwanese returnees, including Nobel laureate and Academia Sinica head Lee Yuen-Tseh, and Sunney Chan.[xxviii] Though, even with many well educated, bright young scientists and much capital, biotechnology will not be possible without commercial leaders. With the many discussions taking place, it seems the real human resource problem facing Taiwan lies in management. "Companies say there is not a problem finding scientists, but they need CEOs, businesspeople," says CDIB’s Lee.[xxix]
As in IT, the right links must also be established between academic organizations, government offices, and private companies. Getting professors involved in companies as managers, researchers, and investors, and encouraging schools and research institutes to spin off businesses is important, as such measures will naturally lead to greater cooperation among the industry's key players.[xxx] As these links are strengthened, what is also needed is to balance the drive for improved coordination with the need for regulation.
Regulating Too Much?
The frustration companies feel when dealing with Taiwan's bureaucracy can be overwhelming. "It is absolutely entrenched," says Elizabeth Green Sah. "It is the only thing keeping Taiwan from being a world-class biotech center."[xxxi]
Sah is not alone in holding this view. Executives from multinational companies in medical devices and pharmaceuticals, two industries expected to drive biotechnology, have long-standing gripes with Taiwan's regulators. Just two of their pet peeves: requirements that they provide information on drugs asked for nowhere else in the world, and a drug reimbursement fee system that they claim takes away incentives for innovation.[xxxii] Though regulation is necessary, too much of it can inhibit innovation.
Fortunately, things seem much more positive in terms of this problem with President Ma’s government. The industry is one that the government is focusing on as an emerging market to promote.[xxxiii]
At present, 27 biotechnology companies are listed or OTC traded.[xxxiv] Of course, there is a long way to go, but Taiwan is on the right track.

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[i] "Cover Story: Taiwan's Biotech Clock is Ticking...." - AmCham. .
[ii] Ibid.
[iii] "Biotechnology in Taiwan." AsiaBioTech. .
[iv] "Cover Story: Taiwan's Biotech Clock is Ticking...." - AmCham. .
[v] "Ma praises Taiwan’s medical biotech industry." taiwantoday.tw. 11 Feb. 2014. .
[vi] "Cover Story: Taiwan's Biotech Clock is Ticking...." - AmCham. .
[vii] Ibid.
[viii] Ibid.
[ix] Pi, Yolanda. "Taiwan Biotech Industry Hits Production Value of US$8 Bil in 2011, More than Double 2002 Figure." Taiwan Excellence. 3 Dec. 2012. .
[x] "Ma praises Taiwan’s medical biotech industry." taiwantoday.tw. 11 Feb. 2014. .
[xi] Ibid.
[xii] "Cover Story: Taiwan's Biotech Clock is Ticking...." - AmCham. .
[xiii] Ibid.
[xiv] Ibid.
[xv] Ibid.
[xvi] Ibid.
[xvii] Ibid.
[xviii] Ibid.
[xix] Ibid.
[xx] Ibid.
[xxi] Ibid.
[xxii] Ibid.
[xxiii] "Ma praises Taiwan’s medical biotech industry." taiwantoday.tw. 11 Feb. 2014. .
[xxiv] Ibid.
[xxv] "Cover Story: Taiwan's Biotech Clock is Ticking...." - AmCham. .
[xxvi] Sun, Julie. "The Biotechnology Industry in Taiwan ." BioTaiwan. .
[xxvii] Cover Story: Taiwan's Biotech Clock is Ticking...." - AmCham. .
[xxviii] Ibid.
[xxix] Ibid.
[xxx] Ibid.
[xxxi] Ibid.
[xxxii] Ibid.

[xxxiii] "Ma praises Taiwan’s medical biotech industry." taiwantoday.tw. 11 Feb. 2014. .
[xxxiv] Sun, Julie. "The Biotechnology Industry in Taiwan ." BioTaiwan. .