Drug firm faces uphill battle with new venture

The failure of Standard Chemical & Pharmaceutical to attract local local investment in setting up a joint venture epitomizes the difficulties facing Taiwan's pharmaceutical industry.

Standard Chemical has been trying to raise NT$3 billion to set up a joint venture since August, with the hope of pooling the resources of domestic pharmaceutical companies -- but with limited success.

In August, Fan Chin-tsai (范進財), chairman of Standard Chemical, said Taiwan's pharmaceutical companies are too small and need to work together in order to compete with other multinational firms. Standard Chemical is the third-largest local pharmaceutical firm in terms of sales.

A new venture, called Ad Pharm, would help local companies enter the US market by providing consulting services and marketing channels, according to Fan. Currently, most of the products made by local pharmaceutical firms are sold domestically.

The new venture would also focus on the development of control release system drugs and herbal medicines. Control release system drugs are those that gradually release their dosage over a 24 hour period or longer. Patients therefore do not have to take their medicine more than once a day.

But since August, Standard has been able to line up only one investor, Purzer Pharmaceutical (瑞安), in addition to an investment by Standard's subsidiary, Syn-Tech Chemical & Pharmaceutical (生泰).

Purzer will invest NT$40 million, and Syn-Tech NT$20 million, over a three year period.

That leaves Standard Chemical with a grand total so far of just NT$250 million for the venture, including its own contribution.

Industry sources say there is a lack of confidence in Standard Chemical's venture and that is why other local companies are unwilling to invest in it.

"The new venture does not have any patented technology or management team," said an industry source who asked to remain anonymous.

Though Standard Chemical has claimed that the US-based control-release drug manufacturer Sage will join the venture, Sage does not own any patented technology.

Industry sources have also questioned the huge size of the total investment required for the new venture.

"To set up a company like Ad Pharm doesn't require NT$3 billion," said the industrial source.

"A control-release drug firm would only need an approximate capitalization of NT$20 million, and it would take only NT$1 million to set up a consulting service company," said an industry source.

But others point to an inherent unwillingness among domestic firms to collaborate.

"Unlike foreign pharmaceutical firms, local pharmaceutical firms are very conservative, and are not willing to work with other firms," said an industry observer.