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The Biotech Boom – How Malaysia’s Biotech Industry is Faring under the Downturn (May 2009)

Technology Business Review, May, 2009

The Biotech Boom – How Malaysia’s Biotech Industry is Faring under the Downturn

Malaysia’s biotechnology thrust began as early as in 1995, when the National Biotechnology Directorate was formed under the purview of the Ministry of Science, Technology and Innovation. However back then, biotechnology was still in its infancy in Malaysia and not much consideration has been given to it. A decade later, the sector was given a much needed boost when then Prime Minister Tun Abdullah Hj Ahmad Badawi announced that it would be the engine for Malaysia’s economic growth and development. Following the announcement, a rapid series of policies and decisions were made by the Government to support the industry first the National Biotechnology Policy was tabled in mid-2005, the National Biotechnology Division was established, and the Malaysia Biotechnology Corporation was then founded in May 2005, followed by BioNexus Malaysia in 2006. Since the implementation of these initiatives, the sector has enjoyed modest growth. Technology Business Review takes a look at how the sector is faring in these uncertain times and what the future holds for these uncertain times and what the future holds for the sector.

Policy Thrusts

To understand the entire biotechnology sector as a whole, one first needs to look at the Government’s ambitions for the sector. This has been made clear in the National Biotechnology Policy, where the Government’s direction and measures have been specified with the aim of developing the biotechnology sector to become a key driver for wealth creation and national well-being.

This policy encompasses nine specific thrusts, which are outlined in the table below:

The first three thrusts form the main ideology behind the development of the National Biotechnology Policy. The Government hopes to be able to utilize and leverage on existing capabilities and to move them up the value chain. With biotechnology development focusing on the country’s agriculture, healthcare and manufacturing sectors, it is hoped that this will encourage the adoption of high technology use to further enhance the growth of these sectors.

The next two thrusts - thrust four and thrust five - sees the BioNexus Malaysia initiative coming into the picture. In order to further develop the research & development capacity of Malaysia’s biotechnology sector and build up human capital in biotechnology through education, the Government launched the BioNexus Malaysia hub. Comprising of an integrated network of centres of excellence, biotechnology firms and organizations, the hub is the first of its kind in the region and aims to provide support to the existing infrastructure of research centres in the country.

One of its core functions is to facilitate R&D projects and implement major programmes. These encompass technology transfers; international collaborations; post-graduate programmes; public awareness programmes; technology development; and industry partner-ships. Another function is to enhance and support the capabilities of local universities in the biotechnology sector so as to nurture a generation of skilled knowledge workers for the industry. Lastly, it also aims to serve as the anchor to attract other organisations in the related areas of expertise to strengthen Malaysia’s biotechnology network.

Thrust six sees implementing provide resources biotechnology ventures the Government guidelines to that will support at all stages of development from the laboratory to commercialization and to the market. Thus, a wide range of funding options and incentives has been made available to encourage the commitment of the academia, private sector and government-linked companies to venture into biotechnology. For example, under the Ninth Malaysia Plan, the Government has allocated US$570m for R&D & industry development in biotechnology & life sciences, with greater emphasis put on commercialization. Moreover, the Malaysian Life Sciences Capital Fund worth US$150m was established in 2007 to further help local biotechnology firms while agencies such as the Malaysia Technology Development Corporation have various grants and government funding schemes. And for biotechnology firms that come under the BioNexus Malaysia network, they would receive tax exemption for up to five years.

The last three thrusts basically cover the regulatory framework for the biotechnology sector, enhancing international reputation of Malaysia ’s biotechnology and foster international collaborations as well as the establishment of a dedicated agency, the Malaysia Biotechnology Corporation, to spearhead Malaysia ’s efforts to develop the biotechnology sector.

Growth

With these thrusts, the Government and private sectors has been rigorously pursuing the development of the biotechnology sector. The results, according to the CEO of Malaysia Biotechnology Corporation. Datuk Iskandar Mizal Mahmood, have shown that the industry has witnessed an impressive growth in line with the growth trends of the global biotechnology industry.

"In line with the still positive global and regional trends, biotechnology in Malaysia recorded strong growth in the activity and number of BioNexus companies in 2008," he said. In particular, the corporation has succeeded in developing 92 BioNexus companies, an increase of 119% from the 42 companies in 2007.

He also revealed that the total approved investment in BioNexus had increased by 18% to RM1.3b (US$317.9m) previously. BioNexus companies have also continued to attract international investments from UK, US, France, Germany, Italy, Belgium, India, China, Japan, Taiwan, Hong Kong, Singapore, Thailand, Australian and New Zealand. Furthermore, of the 92 companies, 47 recorded unaudited total revenue of RM378.6m (US$109.4m) by the end of 2008, which represented the first full year of financial for these BioNexus companies.

Proving their technological competencies and international-class standards, Malaysia’s biotechnology companies continued to expand their capabilities in agriculture, healthcare, industrial biotechnology and bioinformatics. The development of these new companies have also created job opportunities, with 2008 seeing an impressive 382% increase in biotechnology knowledge workers, from only 384 in 2007 to more than 1,850 workers in 2008.

Despite the onslaught of the financial crisis, it is quite clear that the Malaysian biotechnology sector is indeed enjoying a robust period of growth, judging from the figures provided by the Malaysian Biotechnology Corporation. Besides the corporation, the Malaysian Debt Ventures (MDV) is another agency that has made a significant contribution to the development of biotechnology firms over the past year. According to M. Zubir Ansori Yahaya, the CEO of MDV, the economic crisis has affected the ICT industry more than biotechnology, thus “we are seeing less good deals in ICT” and “better deals in biotechnology”. To date, MDV has already given out loans totaling RM200m (US$56.3m) to 13 Malaysian biotechnology companies.

Future Prospects

To underline the importance of the biotechnology sector as one of the key growth sectors that will stimulate the economy, the Malaysia Biotechnology Corporation said that the initiatives put forth by the Government has to be escalated. This is to enable conventional sectors that will benefit the most from biotechnology investments such as agriculture, manufacturing, healthcare and industrial to move up the value chain. Thus, according to Datuk Iskandar, this is actually the time to further strengthen the private-public sector partnership and scientific collaborations between Malaysian centres of excellence and global economies that could take Malaysia further in growing the biotechnology business when things turn around.

This has been specified in the second stimulus package that was announced in March by the Prime Minister Datuk Seri Mohd. Najib Tun Abdul Razak. One of the biotechnology projects approved under the public-private partnership is the provision of infrastructure to develop a biotechnology cluster located within Iskandar Malaysia. The investment support given to the biotechnology cluster in Iskandar Malaysia will help facilitate the increase of FDI inflows into the sector.

Another key focus area is to increase investments in science and innovation. This will expedite the creation of new technologies and innovation R&D that will enable the Malaysian biotechnology industry to produce a higher success rate of commercialization. Currently, the Malaysia Biotechnology Corporation is already offering guidance, training and support to public universities, research institutes, BioNexus and biotechnology companies to formalize technology transfer which is a critical step in intensifying commercialization. With the increase of commercialization output, the Malaysia Biotechnology Corporation hopes that it will give the biotechnology industry a much needed boost in its growth and development. By 2020, the corporation expects the sector to be worth RM30b (US$8.47b).

The Malaysian Government has shown that it is forward-thinking when it identified biotechnology as a catalyst for the nation’s future economic growth and development. The initiatives that have been put in place yet to yield much fruits but progress has certainly been made. Nevertheless, with the added support of the private and public sector and foreign investments, Malaysia is in a prime position to become a significant contributor to the global biotechnology value change in the years to come.