Biotech on the Rise

Taiwan is banking hard on biopharma, and investments that were made in previous decades are now close to bearing fruit.

Flush with cash and success, some of Taiwan’s most renowned biopharma firms are on the cusp of bringing to market first-in-class, breakthrough drugs targeting some of humanity’s worst scourges, such as AIDS, cancer, and hepatitis.

TaiMed Biologics, for one, recently announced a number of milestones. It went through another round of financing in November this year, right before it received notification of positive results from the Phase-2 trials of its groundbreaking drug targeting HIV, TMB355. The company, started in 2007, has already received “Breakthrough Therapy” and “Fast Track” designation by the U.S. Food and Drug Administration, which will allow it to decrease the size of its Phase-3 trials from 300 patients to 30, and its costs from US$50 million to US$5 million. Company executives are optimistic that by 2019 the drug will be helping some 8,000 to 12,000 AIDS victims who have developed resistance to currently available medications.

TaiGen Biotechnology Co. Ltd., another Taiwanese biopharmaceutical firm, also made the news for gaining approval in China for Phase-2 trials of its anti-cancer drug burixafor. This year TaiGen also announced its participation with the Johns Hopkins University School of Medicine in a clinical trial using burixafor for patients with prostate cancer.

Two of the leading biopharma firms are TaiMed Biologics (header photo), which has a groundbreaking drug targeting HIV, and TaiGen Biotechnology (above, with public figures attending its press event), which has developed a promising oncology drug.

Yet another Taiwanese biopharma firm, PharmaEngine Inc., announced the publication of its research in the The Lancet, the prestigious U.K. medical journal, describing the results of “a global, randomized, open-label phase-3 trial” on its drug ONIVYDE. The study confirmed that ONIVYDE, in combination with two other drugs, offers “clinically and statistically significant improvement in overall survival” for patients with certain pancreatic cancers. Both the Taiwan FDA and the U.S. FDA granted regulatory approval to the drug this October.

Taiwan’s biotech successes have come most prominently in biopharma, which is the research and development of protein-based drugs. Unlike traditional pharmaceuticals, which are based on “small molecule” chemicals, biologics are based on “large molecules” manufactured in living organisms such as bacteria, yeast, and mammalian cells. The drugs include vaccines but also products in new fields like genomic therapy.

The recent advances tech follow decades of investment and research, both in the private sector and in government-sponsored institutions such as the Development Center for Biotechnology (DCB), established in 1984, as well as industrial parks dedicated to biotech and the expansion of biotech study, plus research in universities. An important initiative was passage in July 2007 of the Act for the Development of Biotech and New Pharmaceutical Industries, which mandated the expansion or establishment of three biotech parks: the Nangang Biotechnology Park, Hsinchu Biomedical Science Park, and a biotech corridor in the Southern Taiwan Science Park.

Further, the government made dramatic changes to the tax code, offering special tax rebates and offsets to spur investment in the industry. The concessions specifically targeted at biotech firms included 35% tax breaks on investments made in R&D and personnel training, special rules favoring investment in startups, and funding through the National Development Fund.

The founding of many of Taiwan’s most prominent biotech firms, including TaiMed and TaiGen, came about after those rule changes, which caused the domestic biotech sector to begin attracting interest from venture capital firms and biotech experts both here and abroad. TaiMed, for example, was started in cooperation with David Ho, Time’s Man of the Year in 1996 for the development of the “AIDS cocktail” – the array of drugs that, when taken in correct dosages and in proper conjunction, could battle the HIV virus until it was no longer evident in the bloodstream.

Ho made his discovery more than 20 years ago, and since then the world has been faced with another AIDS-related issue: drug-resistant HIV. James Chang, CEO of TaiMed, says that the cocktail of drugs would need to be taken multiple times a day for as long as the person lives, a regimen that some who are infected with HIV find hard to maintain. Instead, Chang says, TMB355 is a long-acting agent that is injected into the body every few weeks, maintaining its fight against HIV with little effort on the part of the infected person. But the new drug will be quite expensive. News reports indicate that a year’s treatment will likely cost anywhere between US$40,000 and US$50,000, with TaiMed seeing 80% gross margins to make up for over a decade burning through cash while generating no income.

Like many of Taiwan’s biopharma companies, TaiMed is yet to earn any revenues, but the firm has raised some US$100 million in its initial three rounds of funding, and another US$110 million in the latest round.

PharmaEngine, meanwhile, is invested in by both venture capitalists and Taiwanese generic drug maker TTY Biopharm. The National Development Fund also holds 31% of TaiGen’s shares, and local paper-making conglomerate YFY Group another 34%. All are patiently waiting for the company’s drug pipeline to reach the approval stage.

Reminder of risk

As rosy as the picture now looks for Taiwan’s biopharma industry, the flame-out of local maker Medigen Biotechnology offers a cautionary tale. Like many of Taiwan’s biopharma startups from the early 2000s, Medigen staked its fortunes on a shallow pipeline of drugs under development. When news reports last summer revealed that its main cancer drug failed to deliver in Phase-3 human-patient trials, the share price plummeted. The case ignited a firestorm of controversy, with accusations made that the company continued to talk up the stock even after disappointing early results were known. Since July 2014, Medigen’s share price has plummeted by 75%, from NT$400 per share to the current level of under NT$100.

The Medigen case vividly illustrates some of the risks of investment in biopharma. Drug development is an extremely long and uncertain process, and companies that have only a few candidate products in their pipelines may find themselves on shaky ground. Carl Firth, founder of Aslan Pharmaceutical, a Singaporean company that does extensive work in Taiwan, says that Taiwanese investors need to have a greater awareness of the risks involved with biopharma. “In the United States, the risk is priced into the shares, but in Taiwan that doesn’t seem to be the case,” he observes.

Still, Firth says, Taiwan offers a number of definite advantages, which is why Aslan finds it attractive to conduct clinical trials here. A key reason is that the highly educated, well-trained personnel in the industry have skills and knowledge levels comparable to their counterparts in Western countries, yet are far less expensive to employ. DCB President and CEO Lawrence L. Gan, a 30-year veteran of the U.S. biotech industry, says that while few of the researchers in sub-managerial positions at his institute have degrees from universities outside Taiwan, “after a few years at DCB, the way they conduct research and deal with issues is just as good as, if not better than, researchers in the United States.”

The low salaries, however, present a problem with staff retention and in attracting foreign talent to Taiwan.

Another of Taiwan’s strengths is the number of highly respected hospitals with considerable experience conducting clinical trials. Gan cites Chang Gung Memorial Hospital, Taipei Medical University Hospital, and National Taiwan University as examples. “We can recruit patients, and conduct and close trials much faster than other countries,” he observes.

The presence of well-run research institutes, including the DCB as well as the National Institute for Health and the biotechnology division of the Industrial Technology Research Institute (ITRI), are another attraction for biotech firms in Taiwan. Gan explains that the DCB will often work with academic researchers on particular projects, helping them get a promising drug candidate over the research and regulatory hurdles, including animal testing. If the prospects for the drug continue to look positive, DCB will license the technology to private corporations through its annual technology auction.

Chief among the traits common to the companies interviewed for this report is their commitment to seeking treatments for some of humanity’s worst diseases, many of them specific to Asian populations. TaiMed is targeting HIV sufferers in the United States, while Aslan is developing a biologic drug for oncology, including a treatment for cancer of the bile duct to the liver. “This is a very rare cancer in populations outside of the region, but Asia has 130,000 sufferers,” says Firth. “And there is not a single drug specifically tailored to fighting this cancer. There’s a desperate need for effective therapies for this cancer.”

Going after these horrific and often rare diseases is an act of humanitarianism, but also a calculated business decision. Pushing for first-in-class, breakthrough medications offers the promise of high margins and speedier approval times.

On the downside, though, Taiwan is a relatively small market, and most biopharma firms have needed to look outside – especially to the United States or China – to gain the market scale they will need to become profitable.

Firth also observes that setting up a company can take a long time in Taiwan. “The regulatory hurdles are pretty extensive,” he notes. “There’s a lot of administrative overhead and red tape that snags all new companies.”

Nevertheless, expert observers consider that Taiwan’s biotech era is just beginning. When the Nangang Station is added to the Taiwan High Speed Rail network, all of Taiwan’s biotech clusters from Hsinchu to Nangang will be connected in a “biotech belt,” according to DCB’s Gan. In addition, the development plans call for Nangang to be site of a new biotech park adjacent to Academia Sinica that would eventually house the DCB, the Taiwan FDA, and a number of other biotech-related government organizations and NGOs.

“The next few years will be a good time to be in biotech,” predicts Gan.