Singapore Reduces Risks To Life Sciences Entering The Asian Market

By Fred Olds, contributing editor

While life sciences companies view Asia as a huge potential growth market, there are huge challenges. Opening operations 12 time zones away in a location without shared values, customs, or economic practices can be difficult for planners trying to estimate expenses and risks. Companies would rather look for a location where risks can be minimized. Kevin Lai, director of biomedical sciences, Singapore Economic Development Board (EDB), contends, “Singapore provides an environment for businesses to thrive and is the ideal and efficient market for businesses to access Asia.”

A tiny country with no natural resources or markets, the government of Singapore placed its survival on international commerce when it was founded in 1965. It established practices that consistently rank it at the top of places to conduct business in the world in almost all categories.

At the millennium, the government enacted plans to attract the life sciences. “We started off by building Singapore as a key manufacturing center for pharmaceutical and medical technologies,” says Lai. “At the same time we began to build capabilities for R&D.” Singapore constructed Biopolis, a 3-million–square-foot innovation center. Biopolis provides adaptable space and shared equipment to industry to conduct research. Companies can contract for office space, state-of-the-art laboratories, and/or access to equipment like mass spectrometers, DNA analyzers, and advanced IT resources.

Coincident with the construction, the country focused on growing its intellectual capabilities to support R&D in the life sciences. Universities and research centers developed expertise in biomedical projects, bioinformatics, molecular biology, and immunology. Where gaps in knowledge or capabilities developed, Singapore recruited additional talent.

Controlling Operating Costs
“The broad variety of resources in Singapore allows a company to turn fixed costs into flexible costs. A company only has to pay for the resources it needs, and only for as long as it needs them,” says Lai. To do this, Lai says, “The EDB enters into a deep engagement with a company to understand what drives their business, and from there we can propose collaboration models to meet their very specific needs.”

The EDB can facilitate access to laboratories and equipment and make contacts with researchers, clinicians, or regulators. In some cases the collaborations can be elaborate without a major physical plant.

When Michael Schröter, Ph.D., head of global academic alliances, opened Roche’s first Translational Medicine Research Hub in Singapore, he says, “We were looking for a new business model which would allow us to engage in tackling complex problems in a multidisciplinary approach across institutes, spanning preclinical as well as clinical.” As science becomes more complex, he says, you need increased collaborative input from different areas of specialization. In Singapore the centers of knowledge are geographically concentrated, making this collaboration straightforward and easy.

“In Singapore, it’s the nimbleness to build up value chains,” says Schröter. He brought in a small cohort of Roche scientists, project managers, and clinicians. This group networked locally to find the expertise and science to conduct their research projects. “The network is very lean and flexible and requires no substantial physical presence,” says Schröter. It now includes colleagues at 26 universities, hospitals, and research institutes. By leveraging the local talent, Roche reduced facility overhead costs while achieving its scientific goals.

“Singapore is run like a business, which makes it easy for companies to interact with the government; they speak the same language,” says Schröter. Roche has a small staff on-site in Singapore to manage the partnership and the various collaborations. The umbrella agreement obviously took some time to negotiate, but once established and staffed, Roche was running several projects within one to two months.

Incentives
Beyond access to the infrastructure of research facilities and intellectual capabilities, the government does not comment on specific incentives it can offer to a company. Each partnership is individual. However, the government does structure its overall policies to support its long-term economic goals.

Taxes in Singapore are among the lowest in Asia, with a 7% consumption tax and 17% corporate tax. They are structured to incentivize investment and business activity that conforms to the country’s long-term strategies. “Developing our knowledge base and R&D fit that strategy,” says Lai. “Companies can enjoy incentives if they conduct research and development in Singapore. For example, they can earn 150% deduction for research expenses incurred in Singapore.”

Regulatory consistency
In an interview with Pharma IQ, Jack Wong, director of regulatory medical affairs at Johnson & Johnson, points out two challenges for R&D in Asia. One is that even in countries where regulations have been established, like Japan and China, those regulations continue to change. The other is occurring in Asian countries without their own regulations. In the past, these countries accepted the registration approvals from proxies, such as the country in which a drug was developed. Inevitably, they will develop and enact laws of their own, introducing added uncertainties to companies trying to introduce therapies and protect their interests.

“There is no harmonized regulatory process in Asia,” says Lai. “As a result, companies find it easier to conduct phase 1 and phase 2 trials in Singapore because of the infrastructure we’ve built and the regulatory environment.” Lai says Phase 3 trials need to be conducted in the host country, but in the early stages of development when IP is being created, a company needs confidence that its IP will be respected and protected legally.

In much of Asia IP protection is inconsistent and evolving. Singapore ranks only behind Finland as having the world’s best IP protection according to the World Economic Forum Global Competitiveness Report 2011-2012. Lai says, “In collaboration with local researchers, there have been no problems with conflicts or infringements. We have proven to companies that IP is respected, and that is a unique differentiating factor.”

Location — Both Strategic and Challenging
Sitting as it does halfway around the world from the U.S., Singapore’s location is both a challenge and a strategic advantage. Time differences can be a challenge when you have an international presence and have to collaborate across time zones, says Schröter.

Yet Singapore has grown into one of the world’s busiest transportation hubs for shipping because of both its location and its commercial focus. Singapore representatives believe that, for the life sciences, the country offers two distinct advantages. “First,” says Lai, “think of not only China and India, but also of Southeast Asia, Australia, Korea, Japan, and Indonesia. From Singapore you can quite efficiently access markets in China, India, and Southeast Asia.”

“The second,” he says, “is because of ethnicity and culture. The three largest ethnic groups in Singapore are Chinese, Malay, and Indian.” This affords an understanding of cultural influences that may affect innovative advances, and it’s an ideal population from which to draw sample groups for clinical studies.

Challenges of Success in International Commerce
Singapore thrives when world economies thrive. Conversely, recent world downturns have led to slow growth in Singapore. In turn, this places pressure on the government to respond to complaints from its citizens that foreign nationals take jobs and property they could hold.

Historically, Singapore has had an open immigration policy. In attracting high-tech expertise, the country has become one of the wealthiest in the world. With that comes high costs. Expatriates and companies drawn to the country compete with native nationals for resources on a tiny piece of land. The government is now dealing with growing antiforeigner sentiment among nationals. In an effort to protect its citizens, the government has enacted laws to slow immigration and to protect the ability of nationals to have access to housing and jobs. This may increase the costs and restrict the ability of companies to expand.

Asia or Not
All of this begs the question of whether a company needs a physical presence in Asia to enter the market. Lai points out that a company needs to locate some functions in Asia. Sales need to be close to the customer. Distribution is more efficient from an Asian site. He also argues that R&D should be there. “Be in Asia to innovate for Asia.”

Culture, ethnicity, infrastructure, geography, and economics are different in Asia and affect how therapies may be accepted and utilized. Practitioners might be in a small, isolated village with few amenities or a well-fitted hospital. Expense, complex administrations procedures, cultural reluctance to use medications, or biological variations may affect therapeutic efficacy.

Device companies like Greatbatch have opened R&D centers in Singapore. Thomas Hook, president and CEO of Greatbatch, says his company chose Singapore as the site for its active implantable medical device R&D center because of the nation’s commitment to biomedical sciences and complementary research being conducted in the country’s research centers.

The World Bank ranks Singapore as the world’s easiest place to do business in its Doing Business report 2012. This makes Singapore an attractive option for any business. For life sciences, the added advantage is the government’s active search and support for companies pursuing life sciences innovation.