Chinatrust Financial Holdings Co (中國信託金控) signed an underwriting agreement with ScinoPharm Taiwan Ltd (台灣神隆) yesterday, paving the way for the biotech company to become listed on Taiwan's over-the-counter stock exchange -- the TAISDAQ (櫃買中心).
ScinoPharm, the largest independent US Food & Drug Administration-approved biotechnology company in Asia, plans to go public in the fourth quarter of 2004, with stocks trading unofficially from as early as February next year.
A Chinatrust official is optimistic over the biotech venture's prospects.
"ScinoPharm is developing drugs to treat strokes, heart problems and cancer," Michael Jong (
"It's a fascinating industry. Just look at the example of Viagra and how popular it is," he said.
ScinoPharm makes pharmaceutical products for other companies and specializes in active pharmaceutical ingredients (APIs).
The most expensive part of a drug, APIs are the actual medicinal content.
Biotechnology has now been recognized as a sub-sector of the TAISDAQ. Ten companies are already listed in the sub-sector.
Chinatrust's support of ScinoPharm is an indication of growing interest in the pharmaceutical industry.
"ScinoPharm is the first biotechnology company we are underwriting," Jong said.
According to one market observer, an underwriting agreement shows confidence in a company, but it does not involve putting cash up front.
"The underwriter, generally speaking, agrees to purchase stock at a heavy discount and then sell it on to brokers," said David Silver, director of BiotechEast, a Web site that promotes Taiwan's biotechnology and pharmaceutical industries.
Whatever stock they do not sell on, they are obliged to buy themselves, he said.
Although Chinatrust Securities does not yet have any plans to invest in ScinoPharm, the agreement demonstrates a long-term commitment, Jong said.
"With biotechnology companies you have to invest for the long term -- five to 10 years -- before you see any return," he said. "It's not like the computer industry," he said.
But the market might not have to wait that long. ScinoPharm is already producing drugs for a large US pharmaceutical company.
"We had our first commercial launch two months ago," Jo Shen (馬海怡), ScinoPharm's president and CEO, said after the signing ceremony yesterday. "We hope to launch new products every few months from now on. We are working with a lot of multinational firms in the sector."
Shen brushed aside recent concerns raised over competition from other Asian countries, such as India and China, where labor costs are cheaper.
"India and China are our allies, not our competitors," Shen said. "They provide raw materials for us, but they lack compliance with FDA regulations and patent protection, so they cannot compete."
The Taiwan government is actively promoting biotechnology and has pledged NT$52 billion to the industry over the next five years.
Part of this investment includes low rents on facilities in industrial areas dedicated to biotechnology.
The first of these is inside the new Tainan Science-based Industrial Park (
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