New leadership, funding set to boost Taiwan's biopharma industry

Print 06 April 2016
Dave Silver / BioWorld

Editor's note: This is part one of a two-part series looking at the state of the biopharma sector in Taiwan.

TAIPEI, Taiwan – In recent years, Taiwan has been pouring considerable attention, effort and funding into the development of a sustainable biotech industry, seeking a new economic driver to replace the diminishing prominence of its once-dominant electronics manufacturing sector.

The rise of China as an industrial powerhouse, coupled with the worldwide trend away from the desktop computer ecosystem in favor of mobile tech, has had a major effect on Taiwan's economic condition and prospects. Economic growth and salaries have been effectively flat over the last decade and a half, in stark contrast to the rise of its Asian neighbors, particularly China, Korea and Singapore.

But that could be poised to change.

While various biotech industry developmental blueprints enacted over the last two decades have laid a solid infrastructure and regulatory foundation in Taiwan, what really kickstarted the industry was the 2007 Biotech and New Pharmaceutical Development Act, Taiwan's equivalent to the U.S. Bayh-Dole act, which not only encouraged new companies to form, as researchers and academics in government-funded facilities began to participate in the private sector, but also included tax breaks that incentivized investment.

All signs indicate that attention is finally bearing fruit, with the number of companies and drugs in clinical trials growing rapidly in recent years, and local capital markets rewarding biotech stocks handsomely. Biotech stocks began to truly take off in 2009, with the value of that sector in terms of market capitalization increasing dramatically, from about $6 billion in 2009 to $21 billion in 2013, an increase of more than 350 percent.

And Taiwan's investors continue to have a strong appetite for life sciences offerings. Roughly 90 of companies defined as "biotech" by the government are listed on local stock exchanges – specifically the TaiEx main board and the smaller Taipei Exchange – though that number includes pharmaceutical and medical device makers and outliers such as fitness equipment manufacturer Johnson Health Tech. The number of offerings is boosted by local regulations allowing companies to list before they are profitable, a condition unique among comparable exchanges in the region such as Hong Kong and Singapore. That has encouraged early stage companies to list early for access to easy financing, giving rise to Taiwan's reputation as a particularly favorable location for biotech IPOs.

But for all its hype, the scale of the industry is still small. According to the latest government numbers, there are about 500 companies categorized at "biotechnology" (across all subsectors, including services), but their combined revenues total only about $2.5 billion. For comparison, that is less than one-third of what Pfizer Inc. spends on research alone each year ($7.6 billion in 2014).

The number of companies actually involved in biologics is only about 30, with approximately 60 drugs in total under development.

LIFE SCIENCES-FRIENDLY LEADERSHIP

One of the biggest boons to Taiwan's biopharma sector might be its new leadership.

With the economy flat, but with the Taiwan identity movement strengthening, it was no surprise that January's national elections swept in the Taiwan-centric Democratic Progressive Party-led government after eight years under the more China-oriented Kuomintang government under President Ma Ying-jeou. What is interesting is that Taiwan now has a leadership pairing with serious life science credentials; President-elect Tsai Ing-wen was founder and chairwoman of HIV drug developer Taimed Biologics Inc. (the other founder being Time Magazine's Man of the Year 1996, AIDS researcher David Ho).

Her vice president is Chen Chien-jen, a renowned epidemiologist, vice president of the island's most important research institute, Academia Sinica, and a one-time government minister of health. Along with Taipei Mayor Ko Wen-Je, a highly regarded doctor who less than a year ago was still a practicing emergency ward physician, the leadership at the most important levels of the country is now uniquely knowledgeable of, and receptive to, the life sciences.

George Yeh, general manager of drug delivery technology company Taiwan Liposome Co. (TLC), has seen firsthand the intent those leaders have in taking Taiwan biopharma to the next level. One of Tsai's first appointments after the election dust had settled was a fact-finding tour of companies in the Nankang Biotechnology Plaza in East Taipei, where she called on the offices of TLC.

"Based on this visit, it's obvious that her team understands biotech. They are already working on proposing changes in regulations," Yeh said. "We'll have to see how it will turn out, but I sense that she has an urgency about this."

As one of several executives chosen to represent Taipei's biotech community, Yeh accompanied Taipei mayor Ko to the U.S. in early March, one of the objectives being to visit the growing biocluster in the Mission Bay area of San Francisco. With ideas gleaned from that trip, Ko is planning to upgrade the collection of biotech-focused science parks and research institutes already forming in the Nankang area in Taipei into a true biocluster, according to Yeh.

One person who knows well President-elect Tsai's commitment to the industry is Taimed's CEO, James Chang. In her role as chairwoman of Taimed, Tsai handpicked Chang for the position eight years ago. And, in the years since, Taimed has been one of Taiwan's success stories. Its monoclonal antibody, ibalizumab, an HIV entry inhibitor (TMB-355), is in a phase III trial in the U.S. and Taiwan, and last week the company said it signed a 12-year agreement with Montreal-based specialty pharma Theratechnologies Inc. to market TMB-355 in the U.S. and Canada. Terms included a mix of cash, stock and an impressive 52 percent of the drug's future net sales.

While Chang agreed that it's wonderful to have Tsai in the presidential hot seat, he said he also believes what's needed is not new development policies or blueprints but rather a shakeup of outdated regulations. "A lot of the policies are dating back to 40, 50 years ago. These are really suffocating companies, suffocating innovation and productivity," he said, citing as an example that in Taiwan "board members are not allowed to take stock options from the company. Even it they get sufficient cash compensation, there's no real motivation for them to think for the company for the long term."

ENCOURAGING START-UPS

Funding initiatives also are needed, not that government investment hasn't been forthcoming. As of the end of 2014, the National Development Fund (NDF) had invested more than $300 million in the local biotech industry, including in more than 13 companies. And the Diamond Action Plan for Biotech Takeoff, a 2010 government-led development blueprint, included a significant new funding initiative: a $1.9 billion "Megafund" to be formed by combining private sector investment against matching government funding. While that fund never got off the ground (blamed on a lack of private sector commitment), the concept evolved; now a number of smaller-sized funds would be made available, again to be combined with the private sector.

From that evolved a new iteration whereby NDF money would combine with a sovereign fund from another country along with a private sector partner, a three-way so-called "Co-Fund" for investing in high-tech start-ups. The first example of that model was the GRC SinoGreen Fund III, finalized in 2014, planned as a $75 million fund between Taiwan and New Zealand partners, a partnership made easier by the 2013 free trade agreement signed between the two countries (significant for Taiwan as its first with a major trading economy).

Although biotech is not the focus of that fund, the managers are open to life sciences enterprises within its high-tech investment mandate. Tony Bishop, part of the GRC fund management team, said he sees the Co-Fund concept as a win-win for both countries' burgeoning biotech sectors.

"The model works really well where there are points of difference of capability. So New Zealand and Taiwan were ideal, because New Zealand is very strong in innovation but very weak in commercialization. And Taiwan is stronger in the commercialization side, and very strong in electronics and manufacturing," he said.

It also works using Taiwan's unique position both culturally and geographically as a gateway to China for foreign companies.

"Use New Zealand IP and then team up with a Taiwanese partner who knows how to go into China; it's a very good model," said Bishop.

The model has since been replicated with the Daiwa Taiwan-Japan Biotech Fund announced late 2014 between Taiwan and Japanese partners. An additional New Zealand-Taiwan fund will also soon be announced, this one with a portfolio of life sciences investments exclusively.

MAKING THE MOST OF LOCAL EXPERTISE

As with the rest of the world, for the majority of Taiwan biologics companies the focus is on developing cancer therapeutics. But local expertise also exists in infectious diseases, particularly viral-related such as hepatitis (Pharmaessentia Corp.), and HIV (Taimed, UBI Biopharma Inc.). With immunology being another Taiwanese specialty – the co-inventors of Xolair (omalizumab, Genentech), the world's first biotech asthma drug, Nancy Chang and Chang Tse-wen, are Taiwanese – there are also companies plugging away in the immunotherapy space, with Thevax Genetics Vaccine Co. Ltd., and OBI Pharma Inc. being two such examples.

Cell therapy is also the interest of several companies, but for now activity in that sector is limited as current regulations prohibit much more than the providing of services around cord blood storage.

Another specialty is drug reformulation, in particular liposome encapsulation, where TLC, for example, has developed a variety of drug delivery enhancement technologies, including multilayer encapsulation for sustained release and liposome-ligand complexes to target drugs not just to tumor tissue but to the cellular level. Pharmaengine Inc. incorporates a similar encapsulation technology in Onivyde (irinotecan liposome injection), its drug for advanced pancreatic cancer. Twi Pharmaceutical Inc. is another example, with expertise in the reformulation of existing drugs for sustained or controlled release. It achieved a milestone for the country in March 2015 when its U.S. subsidiary, Twi Pharmaceuticals USA, became the first company from Taiwan to market generic drugs under its own label in the U.S.

While most new drug development activity has been in biologics, up until recently, manufacturing capacity to service that demand has been lacking. Currently, there are only three contract manufacturers that can provide clinical batch quantities: Eirgenix Inc, Mycenax Biotech Inc. and JHL Biotech Inc.

But scale is still an issue. Taimed, despite its strong Taiwanese identity – the government still holds an 18 percent ownership stake though the NFD – had no choice in 2012 but to sign a supply agreement with a contract manufacturing organization from China, Wuxi Pharma.

"At the time, there simply wasn't a Taiwanese company which could meet our demand," CEO Chang explained. "We were looking for a certain scale – bioreactor sizes of 1,000 to 2,000 liters – [and] there wasn't a single company that could manufacture above 500 liters. And for such a small scale, your unit cost is going to be way up there."

Manufacturing will be key if Taiwan continues efforts in biosimilars, another emerging opportunity. Taiwan has four entrants, Mycenax, JHL Biotech, United Biopharma Inc. and Fountain Biopharma Inc. Mycenax's Tunex, a biosimilar of etanercept (Enbrel, Amgen Inc.), is closest to the finish line, with an expected launch in 2017. But, although the number of players in the biosimilars field may increase in the near future, Taiwan does not have, nor is it likely to have, the same national attention on that sector as does Korea or China.

"Biosimilars do play to Taiwan's historic strengths in drug manufacturing, so it seems an obvious place to go; however, these companies require experienced teams and deep-pocketed investors," said Carl Firth, CEO of Singapore-headquartered Aslan Pharmaceuticals who is based in Taiwan where the company has a subsidiary. "Companies like JHL seem to have been able to deliver on this promise, but I think it would be challenging to see a lot of new entrants be successful in this space."

Taiwan simply hasn't built up the same reputation as some of its Asian neighbors.

"In Korea, they say, 'OK, we're focusing on biosimilars'; companies such as Celltrion, then Samsung, LG, etc. So when people think of biosimilars, they think of Korea. They put an equals sign into it," commented TLC's Yeh. "But with Taiwan, everyone is doing different things. It's good and bad. On the bad side, the government doesn't really know where to put their investment."

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