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Pharmaceuticals

Taiwan’s biotech industry stands at a crossroads

After years of heady expansion, sector is feeling growing pains

by Jean-François Tremblay
June 11, 2018 | APPEARED IN VOLUME 96, ISSUE 24

 

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Credit: iStock
Most of Taiwan's biotech firms are based in the island's bustling capital city, Taipei.

The election of Taiwan’s current president, Tsai Ing-wen, was widely expected to usher in a golden age for the island’s biotech sector. An alumna of that sector, Tsai used to chair a prominent biotech start-up, TaiMed Biologics. Her vice president is an epidemiologist with a degree from Johns Hopkins University, while Taiwan’s premier holds a master’s in public health from Harvard University.

But by most accounts, the high expectations set for biotech have not yet been met. The government’s attention has shifted, some say. And for the past two years, a towering local figure, biochemistry professor Chi-Huey Wong, has been entangled in a complex insider-trading and corruption scandal that is casting a shadow over the whole industry and highlighting deficiencies in Taiwan’s ability to regulate its biotech sector.

Still, Taiwan has achieved a lot since it began promoting biotechnology a few decades ago. Several of its biotech firms have drug candidates in late stages of clinical trials in the U.S. and other countries. And the island seems on the cusp of blending biotechnology with its considerable knowledge of electronics to create a new generation of innovative medical devices.

More success than most

Considering that many administrations around the world, be they municipal, state, or national, have tried—and mostly failed—to nurture a biotech sector, Taiwan’s accomplishments are worth noting.

Johnsee Lee, a biotech entrepreneur and chair of the Taiwan Bio Industry Organization, provides some perspective. After getting his Ph.D. in chemical engineering from Illinois Institute of Technology and a stint at Argonne National Laboratory, Lee returned to Taiwan in the 1990s. For almost seven years he headed the Industrial Technology Research Institute (ITRI), a huge Taiwanese government lab that employs 6,000 people, 1,200 of whom have Ph.D.s. During his time there, Lee founded the institute’s Biomedical Technology & Device Research Laboratories. He also headed the Development Center for Biotechnology (DCB), another government lab created to boost Taiwan’s drug development capabilities.

“Taiwan developed its first biotech strategy in the 1980s, when it was early days for the industry worldwide,” Lee says. The recent pause aside, the island’s biotech sector has boomed in the past decade, Lee says. In 1984, no Taiwanese biotech company was listed on a stock exchange; today, Taiwan boasts more than 100 listed firms with a combined value of almost $25 billion. And whereas 20 years ago, Taiwan had no lab offering capabilities in toxicology, biosafety, and drug metabolism and pharmacokinetics (DMPK), several private companies now offer those services.

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Credit: Jean-François Tremblay/C&EN
Taiwan's government recently opened facilities on the outskirts of Taipei to incubate biotech efforts.

“What Taiwan has done right is public, stable funding of research for the past 20 years,” Lee says. Every year, the government provides between $100 million and $170 million to ITRI and DCB, he notes. “There is no doubt the government wants to support.”

At ScinoPharm, a contract manufacturer of pharmaceutical active ingredients based in the southern city of Tainan, CEO Fred Chen notes an increasing number of Taiwanese customers. Initially, he says, ScinoPharm exclusively served clients from the West.

“Taiwan customers prefer to come to us rather than contractors elsewhere because communications are easier,” Chen says. Currently, ScinoPharm’s domestic business is modest because Taiwan-based customers tend to be at early stages of the drug development process. But “the industry is booming,” Chen says. In fact, even ScinoPharm has started its own oncology drug discovery program, led by a former DCB scientist.

One of ScinoPharm’s largest Taiwanese customers is TaiGen Biotechnology, a developer of drugs for infectious disease, cancer, and the complications of diabetes. ScinoPharm notably manufactured clinical quantities of TaiGen’s burixafor, a stem cell mobilizer currently in Phase II trials in the U.S. for leukemia.

TaiGen’s founder and CEO, Ming-Chu Hsu, is another local pioneer. Before returning to Taiwan in 1998, she obtained a Ph.D. in biochemistry at the University of Illinois, Urbana-Champaign; taught at Rockefeller University; and led Roche’s oncology and virology research in the U.S. She launched TaiGen in 2001 after implementing a biotechnology program in Taiwan that fostered collaboration among 67 university departments and research institutes. Employing 70 people, TaiGen has several drug candidates in late phases of testing in the U.S. and China.

One thing in favor of biotech start-ups in Taiwan, Hsu says, is that there are relatively few. “Unlike in the U.S., where there are so many companies, in Taiwan, we stand out,” she says. When TaiGen was looking for seed capital, it received an investment from the U.S. venture capital firm MPM Capital. TaiGen, she claims, was “the best candidate” for investors looking to put money into Taiwan.

Finding capital domestically, she says, is harder. The government’s National Development Fund invested in TaiGen. But local private investors aren’t used to the long-term and risky nature of biopharmaceutical investment. “They have low failure tolerance,” she says. “If you fail twice, you’re dead.”

Women at the helm

That Hsu is a woman heading one of Taiwan’s most successful biotech firms is no accident. Whereas in the U.S., biotech firms tend to have men at the top, in Taiwan, women executives are ubiquitous. When the subject is raised, Hsu appears surprised, then realizes she’s talking to a foreigner. “Biology is not a men’s subject in Taiwan,” she says.

Grace Yeh, the CEO of PharmaEngine, another prominent biotech firm, explains that in her day, university entrance was competitive and decided by a national examination. Students who did well in biological sciences could elect to study medicine, biology, zoology, or related subjects. “The men tended to choose medicine, and the women biology or zoology,” she recalls.

A native of Taiwan, Yeh launched PharmaEngine in 2003 after studying and working in the U.S., England, and France. In 2011, the company out-licensed for over $200 million the European and Asian (except for Taiwan) rights to Onivyde, a drug candidate that later became a standard treatment for pancreatic cancer. Pharma­Engine has several drug candidates in late-stage clinical studies and $130 million in the bank.

After returning to Taiwan in 1998, Yeh teamed up with Jo Shen, a cofounder and former CEO of ScinoPharm, to form Bio-Ladies, a group that has played a role in encouraging women to join the biotech industry. Nowadays, Yeh says, “CEOs of biotech companies tend to be women.”

Lan Bo Chen, a pathology professor at Harvard Medical School and a high-tech entrepreneur who founded or cofounded numerous start-ups on both sides of the Pacific, says, “Taiwanese women are the heroes of Taiwanese industry.”

Even at Taiwanese organizations headed by a man, women hold many of the key jobs. At the government lab DCB, most managers are female. “We have three vice presidents; two are women, and the third position is vacant,” reports DCB President C. H. Herbert Wu. About two-thirds of DCB’s 400 scientists are women, he observes.

Government a clumsy driver

Local executives point to Taiwan’s funding of DCB over the years as an illustration of the government’s support for biotechnology. The lab was the first in Taiwan to offer toxicology, biosafety, and DMPK services, activities that it has since spun off, Wu notes. Much of the lab’s current work consists of developing drug candidates it can license to Taiwanese companies. A secondary goal is to be a source of skilled human resources.

DCB recently moved into a sparkling glass building in a high-tech park that the government just built on the outskirts of Taipei. The park will also be the new home of Taiwan’s food and drug agency. One building will be an incubator for biotechnology start-ups. And Academia Sinica, Taiwan’s national academy, will set up a satellite in the park for academics who want to launch high-technology businesses.

Besides such investments, Taiwan’s government has tried to offer a favorable regulatory environment. A law promulgated in 2007 and updated in 2017 provides a legal framework to encourage the biotech sector through tax exemptions and special regulations.

Biology is not a men’s subject in Taiwan.
Ming-Chu Hsu, founder and CEO, TaiGen Biotechnology

But industry leaders say the government could do a lot more. “The government is driving with one foot on the gas and the other on the brake,” says Lee, of Taiwan’s biotech association. In the past two or three years, the number of biotech companies listing on the stock market has stalled, he says, and overly strict regulations on labor and environmental protection have become problems.

Another industry leader, TaiMed CEO James Chang, says current regulations won’t foster a vibrant biotech industry that comes close to what the U.S. has in Boston or the Bay Area.

“Biotech is the right idea for Taiwan, but there has not been enough follow-through,” Chang says. In the U.S., he says, thousands of Taiwanese scientists have five to 30 years of pharmaceutical industry experience. Tapping their talent would provide Taiwan a shortcut to a world-class biotech industry. But in many cases, it makes zero sense for these people to go home. The business culture in Taiwan discourages companies from paying salaries as high as in the U.S. Regulations restrict companies’ ability to provide stock options. And working in Taiwan would expose those who hold American citizenship to double taxation.

A successful business, TaiMed markets the HIV drug ibalizumab. TaiMed has a 20-person R&D lab in Taiwan that does preclinical studies. But the lab is managed remotely by a chief medical officer who lives in California.

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“Taiwan produces plenty of graduates, but drug development requires people with experience,” Chang says. Everyone on TaiMed’s senior management team, including Chang himself, spends most of their time in the U.S. “Biotech is a talent-intensive business; Taiwan needs more than a handful of talented people,” he says. Making it easier for companies to grant stock options to managers would yield the greatest benefit, Chang believes.

At TaiGen, Hsu says the number of talented people who can be recruited domestically is rising, but companies like hers still need to headhunt people abroad and offer them competitive packages. “Finding experienced Taiwanese in the U.S. and appealing to their love for Taiwan won’t work,” she says.

Still, Hsu says she understands the government’s recent lowered emphasis on the sector, pointing to more pressing issues. For example, urgent measures implemented to restructure the national pension fund, rapidly heading toward bankruptcy, resulted in massive and violent street protests. “Everyone thought they would open all the doors for biotech, but instead, they took care of retirees,” she says.

The tale of Chi-Huey Wong

Many in Taiwan blame poor regulations and government’s unfamiliarity with technology transfer for the accusations of insider trading and corruption leveled against Chi-Huey Wong, a Scripps Research Institute California academic who in 2014 won the prestigious Wolf Prize for his work on carbohydrate synthesis. The case forced Wong to resign from his position as president of Academia Sinica in 2016, a move that was initially rejected by Taiwan’s president at the time, Ma Ying-jeou. Wong had occupied the position for a decade.

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Credit: TaiGen
Ming-Chu Hsu, CEO of TaiGen, is one of many women heading biotech firms in Taiwan.

Wong did not want to leave the U.S. for Academia Sinica in the first place, recalls Harvard’s Chen, who claims to have helped convince Wong. But since returning to the island, Wong has played a role in the launch of numerous firms, Chen says. “Wong is the father of biotech in Taiwan,” he says. Cho Pharma, a company at which Chen is a U.S.-based executive, aims to commercially develop research done by Wong.

OBI Pharma is the company that got Wong into trouble. In 2016, he was accused of insider trading for selling OBI stock shortly before the company disclosed negative trial results. He was recently cleared but is still fighting charges that he accepted a bribe from OBI in exchange for the rights to a technology he developed at Academia Sinica.

The scientific community in Taiwan and the U.S. has rallied to Wong’s defense. Hundreds of U.S.-based scientists, most of them originally from Taiwan, signed a petition in support of Wong. Lan Bo Chen finds the accusations against Wong outlandish, even speculating that it may be the work of a disinformation campaign mounted by China.

At Academia Sinica, James Liao, who replaced Wong as president, says the accusations were a setback for Taiwan, adding that unclear technology transfer rules that the institute used at the time may have played a role in the saga. “Both the government and the media misunderstood how technology transfers work,” he says. “We have since clarified our technology transfer procedures.”

Wong tells C&EN that he expects to be fully cleared soon. But “the case will of course discourage many other scientists to come back to Taiwan if it is not properly handled,” he says.

Despite his woes, Wong says he remains optimistic about the future of biotechnology in Taiwan. “Biotechnology is a candidate for being the next big thing in Taiwan after semiconductors,” he says.

Beyond biopharma

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Heady rise
Taiwan's biotech sector has grown tremendously since 2008.

Note: Taiwan dollar figures converted at the U.S. Federal Reserve's 2017 exchange rate of 1 USD = 30.4 TWD.
a Includes health care biopharma, agricultural biotech, and diagnostics.
 Source: Taiwan Bio Industry Organization

Hong-Jen Chang, CEO of Taiwan Global Biofund, which invests in Taiwanese biotech start-ups, shares Wong’s optimism. “The OBI saga cast a shadow over the whole industry in 2016 and 2017,” he says. He expects Taiwan’s biotech sector to return to strong growth in the near future, although it might not be led by pharmaceuticals.

“Back in 2000, I had predicted the market-cap growth of biopharmaceutical companies; now, I predict a cluster effect in medical devices,” Chang says. Medical instrumentation is a natural fit for Taiwan, he explains, because the island has a highly developed electronics industry. “We have strengths in information technology, robotics, as well as a strong medical system, so I expect a lot of success soon.”

Taiwan’s competitiveness in electronics serves as an inspiration and a source of ambition for the managers of Metatech. Formerly an electronic components trading firm, Metatech is reinventing itself as a producer of biomaterials. “We want to become the Taiwan Semiconductor (TSMC) of the biotech field,” says Andy Teng, a vice director of the company. “TSMC is a major supplier of integrated circuits; we want to supply human tissues.”

Metatech is building manufacturing facilities in the Taipei district of Xizhi. The company’s first products will be cell sheets made from a patient’s own tissues that can patch postsurgical lesions of the esophagus. Metatech is also developing cell sheets grown from a patient’s own cartilage that can be used in knee repair. Metatech uses technology licensed from the Japanese firm CellSeed.

Back at TaiGen, CEO Hsu remains optimistic about biotechnology—including pharmaceuticals—in Taiwan. Her company has a pneumonia drug on the Taiwanese market and is in advanced stages of getting that drug, and others, approved in both China and the U.S. “Yes, the Taiwan government could do a lot more, but all governments have deficiencies,” she says. “You develop a vision for your company, and you stick to it, but you also modify according to the conditions.”

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