11 January 18 The Business Times by XQ LIN
IN the field of life sciences, Singapore has now gained an outsized standing in the global scientific community despite the country's relatively small size. However, this standing has yet to translate into expected downstream value-capture for the economy, especially in the startup/SME segment. This is in spite of the budding emergence of promising homegrown life science companies with a few success stories and a healthy number of out-licences of Singapore-owned IP.
With the rise of China, Singapore's role as an unrivalled Asian hub is changing rapidly. Many multinationals will choose to locate their Asian headquarters in one of the Chinese metropolises. While Singapore can continue to count on being the economic capital of South-east Asia, developing a homegrown ecosystem of life science SMEs/startups, some of which can eventually become competitive players on the global stage, should feature on the national agenda.
The life sciences industry is highly globalised, evergreen and knowledge-intensive and impacts humanity on a broad scale. Though consolidation is occurring within some segments of the industry, many opportunities for disruption still exist, allowing startups and SMEs to thrive, especially those that aim to address unmet needs.
A globally ageing population, combined with increasing affluence, and with it, a prevalence of chronic diseases, result in untenable cost burdens to healthcare systems. While most of these diseases continue to be the subject of incremental innovations, many unmet medical needs - including a plethora of as yet untreatable debilitating and fatal diseases - still exist. These are enormous problems with huge societal and personal impact, which will pay great dividends for businesses that bring technological solutions to bear, including Singaporean enterprises.
To further develop a homegrown life sciences industry that is globally competitive, an updated industrial roadmap is needed. To identify the niches that Singapore companies can fill and potentially develop into the next billion-dollar enterprise, we should consider the broader landscape spanning categories such as drugs, devices, diagnostics, life science tools and healthcare IT; the dynamics of major healthcare systems such as the US and China; and the nature of large and emerging enterprises in both of these markets.
Such an industrial roadmap could also shape Singapore's investment strategy and specifically its grant policies towards publicly-funded life sciences R&D. This will help sharpen Singapore's focus on generating relevant IPs which can be licensed to homegrown life science startups and SMEs for further development and commercialisation, leading to the development of leading global companies anchored here.
HEALTHCARE MARKETS IN FOCUS FOR SINGAPORE
The US healthcare market is the world's biggest. While the medical devices and diagnostics industries have struggled with reimbursement, the US market significantly rewards pharmaceutical innovations, even if some of these novel therapeutic drugs treat rare diseases that may benefit only fewer than tens of thousands of patients a year.
The Chinese market is the fastest growing large healthcare market globally. As Chinese patients are used to paying out-of-pocket for innovative treatments and diagnostics, innovative medical devices and diagnostics face less reimbursement challenges in the Chinese market. China now has the most dynamic SME and startup life sciences sector in Asia, benefitting from a large and fast-growing domestic market and supported by a wide availability of debt and equity instruments, including venture capital (VC).
Despite being mainly fast followers, Chinese life science companies are rapidly developing into innovators, narrowing the technological gap with their regional counterparts from Japan, South Korea and Singapore. With one of the fastest growing middle-class populations in the world, Asean could also be an interesting market for Singaporean life science enterprises from a patient affordability and access standpoint. However, the Asean markets are highly heterogenous with different levels of economic development, regulatory and reimbursement frameworks. Hence, they are unlikely to be a low-hanging fruit for organic development of the next billion-dollar Singaporean life science company.
KEY INDUSTRY DEVELOPMENTS
Under the Research, Innovation and Enterprise (RIE) 2015 plan, the Singapore government earmarked S$16.1 billion to continue support of research, innovation and enterprise activities, of which S$3.7 billion is channelled towards enhancing existing biomedical R&D infrastructure. This has now risen to S$19 billion for RIE2020, in which health and biomedical sciences has been identified as one of the four main strategic technology domains.
Similarly, several proof-of-concept grant schemes, such as those previously available from A*Star and more recently the National Research Foundation, were made available to local life science companies seeking to develop innovative products, including biotherapeutics. However, the challenges and lack of success stories from Singapore's early investments in biotechnology firms and novel drug assets have contributed to a sense of foreboding that has etched itself into the institutional psyche.
This has resulted in the current policy for supporting medical devices and diagnostics startups as opposed to biotechs. However, an analysis of current VC investments, exits and market trends reveals that investments in biotech, while perceived as riskier, generate higher returns than investments in medical devices and diagnostics.
Plausible reasons for this include frequent exits for large public companies before product regulatory approval, typically after achieving human proof of concept or up to Phase II trials, whereas development of medical devices and diagnostics typically require some commercial traction before exit. To aid in the successful development of a successful domestic biotech industry, re-evaluating and consideration of additional supportive policies would be of paramount importance.
FILLING IN THE GAPS: EARLY-STAGE DRUG DISCOVERY
Since the decoding of the human genome, we have been living in an age of unprecedented biological discovery, and many of these insights can be translated into novel therapeutics addressing unmet medical needs. Notwithstanding unpredictable failures such as late-stage therapeutic targets for Parkinson's and Alzheimer's disease, startups can enjoy a level playing ground versus big pharma in drug discovery and development. Compounding this is the partial retreat of big pharma from direct early-stage drug discovery and development, which has increasingly been outsourced to VC-funded startups with recent successful exits. Given Singapore's relative strengths in terms of human resource, IP development and growing VC capital access, the republic is well-positioned to capitalise on this market gap for early-stage drug discovery.
STRATEGIC THERAPEUTIC NICHES
It might be too prescriptive to define specific therapeutic areas of focus. However, as Singapore does not have the benefit of a large domestic market and is geographically distant from established life science industrial hubs, it would be more prudent for it to focus its resources on an export-based model for niche therapeutic areas with a global critical mass.
PATENTABLE CLINICAL DIAGNOSTICS
Singapore industrial policy should also continue to support domestic medical device and diagnostic enterprises. However, policies should be further refined and tailored towards enterprises that will be competitive in major markets where reimbursement hurdles are lower such as China, or technologies that have the potential to demonstrate a significant value to the payor in the US and thus access to reimbursement.
Collecting samples needed for such work is very expensive in the US. Singapore companies could leverage on local and regional hospitals to assemble large curated sample banks at a fraction of the cost. Caucasian samples are also accessible from Australia which provides generous R&D incentives at both state and federal levels.
As such, patent protection of such novel diagnostic content can be achieved and become a potential play for Singapore companies in the diagnostics industry. Despite the recent changes in the patentability of diagnostics methods in the US, there are clear pathways that Singapore can navigate to achieve success in patent protection.
SPEED TO MARKET: LIFE-SCIENCE TOOLS
Another segment in which Singapore could develop homegrown, globally competitive enterprises is life sciences tools. Multinational life sciences tools companies have a significant manufacturing footprint in Singapore. Life sciences tools do not have to undergo clinical trials and regulatory approval, resulting in faster time to market. Some life sciences tools eventually transition to becoming diagnostic platforms. However, there are few life sciences tools segments that can give rise to billion dollar companies. This is also a segment which is somewhat under-invested in by VCs in the US and EU markets.
HEALTHCARE ICT: A MISFIT FOR EXPORT?
Combining the rapid-growth triumvirate of an IT-savvy nation, digital innovation as a national development strategy and the recent influx of private equity and venture capital funding available for information and communications technologies (ICT) opportunities, it is no wonder that several healthcare ICT/digital health companies and startups have established themselves in Singapore.
However, such companies typically do not fit with the "deep-tech" mould that the government currently advocates. Without IP protection and with a limited domestic market, Singapore companies would be limited in protecting themselves from competition when exporting and adapting such solutions to large markets such as the US, China and Europe. Furthermore, such businesses aim to address specific pain points that are relevant within a particular healthcare system.
Therefore, a solution developed to address the pain points within the Singapore healthcare system may not translate to the Chinese or US healthcare systems. Thus, such business models can be harder to defend against competition and are also harder to scale across borders into large global markets without substantial "glocalisation" of the underlying product or service. In the foreseeable future, it is unlikely that such locally developed companies can become the next billion-dollar businesses from Singapore.
However, there may be exceptions to this, such as digital health companies which have proprietary hardware and/or business models which efficiently address different stakeholders' needs and create network effects.
BIO-ENTREPRENEURS AS CREATORS & CULTIVATORS IN SINGAPORE
There is also the pressing challenge of how to cultivate more "bio-entrepreneurs" who can form and lead multi-disciplinary teams to translate cutting-edge scientific discoveries into actual products. In this regard, Singapore has numerous young scientific talents who can be cultivated. However, a bottom-up approach should be taken to develop and nurture this talent. Esco Ventures has hired and provided training on technology scouting and venture creation to young and promising post-doctoral researchers within the life science "deep-tech" space.
In summary, Singapore desires more value-capture from its investments in public life sciences R&D. A globally competitive domestic life sciences industry can be one of the drivers of Singapore's economic growth for the next few decades. An updated industrial roadmap is needed to chart the course of the budding life sciences industry. At the same time, that would be no substitute still for involvement from the private sector, especially early-stage life science VCs driving venture creation and bringing both technologies and multi-disciplinary talents together to address unmet medical needs.
- The author is group president and CEO of the Esco group, a Singapore-based life sciences company.
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