Taiwan Biopharma: Is Industry Underexplored or Just Underachieving?

Editor's note: This article is part of a series of two that look at the state of the biopharma sector in Taiwan. Click here to download the second article.

While debate continues around how much biopharma innovation is actually taking place in Asia, Taiwan is pitching itself as an under-explored location where innovation is available for those who take the time and effort to uncover it.

Huang Bor-Fuei, secretary general of the Taiwan Bio Industry Organization (TBIO), said the research output is underrated. "From Academia Sinica [Taiwan's largest basic research institute], Taiwan University, medical schools and so on, there's a lot going on," he said. "If you look at the National Research Program, they have a lot of stuff in there as well."

For example, the government-funded Development Center for Biotechnology (DCB) developed a new mTOR inhibitor cancer drug candidate, DCBCI0901, licensing it out in 2011 to an alliance of four local pharmaceutical companies. In 2014, it had received FDA and TFDA approval to begin phase I trials.

Others are not quite so sure about Taiwan's innovation output. During the Biologics World Taiwan conference in Taipei last February, a panel of regional licensing executives from big pharma made the frank assessment that the amount of local innovation was still low, not just in Taiwan but throughout Asia.

Taimed Biologics Inc. CEO James Chang illustrated that by pointing out that some years ago his company had intended to forge ties with local research institutes and collaborate on basic research, hoping to in-license some of their discoveries, but had to give up on the idea.

"From a commercial standpoint, it's very hard to license stuff they are working on. They're really too much into the 'basic' of basic research, without really thinking whether what they are doing will have a direct commercial application," he said.

If there is a highlight to be found, it's in Taiwan's highly regarded clinical trials environment. There's broad agreement that local clinical trial conditions and capabilities are second to none.

"That's a bright spot. The hospitals, the doctors, they are really top notch," said Chang. "We've done three or four trials in Taiwan; part of U.S. trials. And just comparing the results and the kinds of patients they are screening, the ability to follow the protocol, we always get better results back from Taiwan compared to the U.S."

Another unique local resource is the massive and growing medical records database, the result of centralized medical records collected for the entire population going back to the implementation of the National Health Insurance (NHI) system in 1997.

TBIO's Huang emphasized the importance of that resource.

"At this year's BioBusiness Asia conference [part of the BioTaiwan week-long festival of events being held in July in Taipei, and organized by TBIO], we plan to have a session on big data and digital health. It should be very popular, as Taiwan is well placed to be a really strong player here," Huang said. "With the NHI database, you have a large volume of longitudinal data. If you have plenty of data and good analysis, you can identify candidates for your clinical study more effectively."

DEVELOPMENT-ONLY MODEL CUTS RISK

The clinical trial conditions, and its smaller-sized companies, make Taiwan well suited to the "acquire, develop, transfer" biotech business model, a model in which companies in-license assets at the preclinical or early clinical phase, and develop them locally in the clinic for later out-licensing to larger partners. Local or regional rights are also retained in some cases. Local firms that have successfully employed that model include Pharmaengine Inc., touting its "no research, development only" model, along with Taimed and Taigen Biotechnology Inc., a company that also boasts in-house discovery expertise.

As opposed to the U.S., where it's rare to find a listed biopharma firm that doesn't have commercialization in its sights, in Taiwan it's equally rare to find a company attempting a late-stage clinical trial on its own. The risks are heightened for the shallow pipelines typically found, as two recent high-profile cases illustrate: Medigen Biotechnology Corp. in 2014 and OBI Pharma Inc. earlier this year.

Both were considered industry flagships at the time they reported disappointing interim late-stage trial results, causing their respective stock prices to plummet. For Medigen, preliminary results for its multinational phase III trial for PI88, the company's adjuvant treatment of hepatocellular carcinoma after surgical resection, showed no improvement of survival rates over placebo. With OBI Pharma, a multinational phase II/III trial of its immunotherapy product, OBI-822/821, for metastatic breast cancer, did not meet a particular primary efficacy endpoint of progression-free survival. (See BioWorld Today, Aug. 1, 2014, and Feb. 29, 2016).

Each company lost more than $1 billion in value in the post-announcement sell off. In the case of Medigen, nervous investors exited the sector en masse as their eyes opened - perhaps for the first time - to the risks of investing in drug development.

In fact, with the rise and prominence of local biotech stocks, many consider the sector overvalued and due for a correction. The market is becoming more volatile and with trading volume dominated by local retail investors, there is a lot of sensitivity in the market.

"Investors are very sensitive to the news flow. Taiwan's free-wheeling media are also responsible. It's good that Taiwan has all this hype, because you need hype to create a marketplace, to get people interested, but it needs to become more mature," said Taiwan Liposome Co. (TLC) CEO George Yeh.

"Taiwan investors are not necessarily naive, but perhaps too media or celebrity-oriented; many don't even know what a company is doing; they don't understand the technology," said Jean Lo, previously of local VC firm IBT Management Corp. and now a private investor. "There are many companies with only one or two drugs that put more effort on media exposure than on drug development." She added that she prefers to seek out and invest in companies that hide from the spotlight instead.

COST EFFECTIVE LOCATION, FOR A PRICE

Adding to the life sciences infrastructure already in place in East Taipei, the new National Biotechnology Research Park, a seven-building development project nearing completion alongside the campus of Academia Sinica, is set to provide a home and space to grow for companies, research institutes and government entities. "Probably 60 to 70 innovative biotech companies will move into this park, along with the Development Center for Biotechnology [DCB] and the TFDA [the Taiwan FDA]. The national animal facility will also be located on site," said Chi Wei-kuang, director of the DCB's bioengineering group, adding that he expects the facility to house between 2,000 and 3,000 people.

But bringing in qualified people is often hampered by the low salaries plaguing the country.

With more than 8,000 life sciences majors graduating each year, including more than 400 PhDs, a large pool of entry-level researchers is available to the industry. Yet salaries remain low in Taiwan for graduates, a trend that stretches across all sectors, not just in biotech, where researchers in Taiwan are getting only 20 to 30 percent of what similar positions would offer in the U.S.

While that makes Taiwan a very cost-effective location for applied research, with more bang for the buck, the low salary environment is a double-edged sword for much-needed internationalization, particularly important for a globally integrated industry such as biopharma, as it makes it difficult to recruit from abroad. Those who try find they can't offer competitive salaries, and must try to make it up by offering stock options or other benefits. But that also isn't easy. "The stock option system in Taiwan is like that from the 1950s," Taimed's Chang lamented. "They have all kinds of constraints, and the amount of options granted to individuals needs to be approved by the government."

Coupled with complicated work visa requirements for foreigners and a virtual ban on hiring from China, Taiwan's biotech industry – like most of its high-tech sector – remains glaringly homogeneous.

So it's not surprising that a common plea is for deregulation.

"Deregulation in terms of talent recruitment and deregulation in terms of financial aspects," said TLC's Yeh. An example of the latter involves regulations around just setting up a company in Taiwan.

"Everything is still set up for the traditional brick-and-mortar type of business," he said. "But financially, with the new knowledge-based industries, everything is different. A lot of our regulations are still based on the old economics."