Local biotech firms predict slow growth

The Taiwan government is touting biotechnology as the next economic miracle, but investors are not necessarily reaching for their checkbooks.

In May this year President Chen Shui-bian (陳水扁) pledged NT$52 billion in government support over the next five years for the development on the nation's biotechnology industry. The government hopes that private investment will be double that figure over the same period.

"It is probably very difficult right now given the present economic climate and the state of the stock market. For the biotech industry there is no short-term and no short cut," said Willie Lin (林衛理), vice president in charge of a US$250-million biotechnology investment fund at The China Development Industrial Bank (中華開發工業銀行). A fifth of the fund is invested in Taiwan (around NT$1.7 billion).

More needs to be done, Lin pointed out. "For [a successful]biotechnology [enterprise], you must have a lot of basic research, a lot of government investment. The Taiwan government has increased the amount for basic research by 10 percent each year, but compared to the big pharmaceutical companies, it is still not enough," he said.

Taiwan's biotechnology industry will not follow the same route as the information technology (IT) industry, which rose from nothing 30 years ago to now become the third largest in the world after the US and Japan, market watchers said.

"Biotechnology and IT are very different models. IT was not a knowledge-based industry [in Taiwan]. It was built on the back of OEM," said David Silver, director of Biotecheast.com, a Web site that promotes Taiwan's biotechnology and pharmaceutical industries.

Biotechnology is not for those looking for the quick buck, Silver said, but this may be its greatest advantage. "A lot of venture capitalists who in the past put their money in IT are looking at investing in something not at the whim of the US import/export market," Silver said. These investors would be happy to look at a "recession-proof" industry such as biotechnology, he said.

Researchers agree. "The Taiwan biotechnology industry cannot expect the same success in terms of size and speed as the IT industry," said Johnsee Lee (李鍾熙), general director of the Biomedical Engineering Center at the Industrial Technology Research Institute (ITRI, 工研院). "It will be slower to begin with and will last longer. Everyone gets old and needs medical attention," he added.

He echoed comments from Silver and CDIB's Lin that Taiwan should concentrate at first on the areas where it is strong. "The first area Taiwan will grow rapidly is in devices as it can use its strengths in the high-tech industries. Sixty to 70 percent of [Taiwan's] biotechnology companies are device companies," he said.

However, Johnsee Lee warned about a lack of entrepreneurial experience. "There are plenty of people trained in biology and technology. Taiwan has a shortage of people who know science and business," he said.

This does not seem to be hampering the growth of the industry, at least in terms of the number of players. "We see hundreds of companies coming up," said Matthew Lee (李敏碩), deputy manager of Cheng Xin Technology Development Corp (誠信開發), a venture capital company with around NT$4 billion in capital. "We have invested NT$1.3 billion so far [in biotechnology] and have another NT$0.7 billion in our pockets to invest," he added.