Biotechnology

CurrentTrends

Biotechnology

KeyTrends

- Higher growth will be continued on Biotechnology sector during the next four
years,around14%annually.
- Asiapacific countries are the most promising to convert the leaders in the
biotechnologysector.
- Western countries will have to create more competitive new products against
theAsianPacificemergingmarketsproducts.
- Smaller companies in the biotech sector must learn to manage alliances with
betterestablished,internationalfirms.
- BiotechInvestmentwillmultiplytheinvestorsearnings.

1.CurrentTrendsonBiotechnologySector
Biotechnology is one of the fastest growing industries; in the last decade the
biotechnologyindustryhasexperiencedveryhighgrowth,thatswhysomanycountries
andregionshavesetupincentivestoattractmorebiotechnologycompanies.

Inthelastfewdecadeswehaveseenextraordinaryadvancesinthisemergingindustrial
sector, biotechnology. Firms that operate in this profoundly innovative and highly
competitive environment need future leaders to meet the challenges as the use of
extremelysophisticatedtechnologyensuresconstantevolution.

Thedrivingforcesthataredrivingthecountriesandregionswiththehighestdegreeof
development and growth around the world in the biotechnology sector are closely
relatedto:

- Strong Government Support, which facilitates and enables the viability for
developmentofthesector.
- HumanResources
- Biodiversity
- Infrastructure
- LowCost,whichallowsahigheroutputandhigherincomes.
1.1EmergingSubSector
We highlight some subsectors within the biotechnology sector, which could highlight
and develop many new products to drive further growth of the biotechnology sector,
thesesectors,whichwecallemergingsectorsare:
- ContractResearch/Manufacturing
- Vaccines
- Generics
- StemCellResearch
- Nanotechnology
- Bioinformatics

Asian countries are creating competitive niches in the vaccine space by developing
vaccines at more affordable price. Using pioneering technologies and efficient
production methods, companies such as Chinas Sinovac Biotech and Indias Bharat
Biotech have successfully developer vaccine fordiseases such as Hepatitis A and B at a
fraction of western price. Western companies are already recognizing that the region
will play an increasingly important role in the global vaccine market and are making
investmentandformingalliancewithAsiancompanies.

1.2FutureOutlook
- IncreaseGovernmentSupport
- Roleofprivatesector
- ImprovedIntellectualPropertyRegime
- MergersandAcquisitions
- InfrastructureImprovement
- SustainedGrowthinrevenue

The Asian Government has identified biotechnology as a key industry and as a result,
most of these countries have allotted a substantial amount of cash from their yearly
budget for the growth of their biotechnology industry. For example, the Singapore
government has allocated a budget of close to US$8 billion for the 5year period from
2006to2010tofurtherstrengthenresearchanddevelopment(R&D)capabilitiesinthe
country.ThisisalmostdoubletheGovernment'sR&Dbudgetfor2001to2005.

Not only has the government increase their funds, but has also introduced many
incentivesandbenefitsforcompanywhowanttoinvestintheindustry.

Countries in the AsiaPacific region were late starters in the biotechnology market.
However,theindustryisgrowingmuchfasterthantheindustriesinNorthAmericaand
Europe, primarily due to low costs, strong government support, large talent pool and
biodiversity.InfuturebothIndiaandChinaareexpectedtoemergeasleadingplayersin
theglobalbiotechnologymarket.

Japan, China, and Australia are the three largest biotechnology markets in the Asia
Pacific region, with combined market share of around 79% in 2007. The medical
biotechnologysectorpresentlyaccountsforthehighestshareintheoverallmarket

Japan remains the largest biotech market in the region; therefore, the country
representsamorematuremarketascomparedtootherneighboringmarkets.

China and India, with low costs and big talent pool, are likely to emerge as the most
potentialbiotechresearchandmanufacturingoutsourcingdestinationsinthefuture.

AsiaPacificisexpectedtobecomeamajordestinationforstemcellresearchand
biogenericmanufacturing.

1.3BusinessPerspective
Biotechisthenamegiventoanimportantsectoroftheeconomy,withmorethan4,275
activecompanies(ofwhich710arepublic,withaggregatemarketcapofUSD492bnand
global revenues of USD86 bn, growing at 14% annually) related not only through their
technologybasebutalsothroughcreativenewstrategiesandbusinessmodels.

We find biotechnology in the production of foodstuffs and nutritional products where

the industry is learning to more effectively manage important communication issues,
such as the fear of potential risks to health or the environment from genetically
engineered crops among the public. As products from those approaches are reaching
the markets, biotech is starting to contribute significantly to the convergence of the
pharma and nutrition sectors in a growing nutraceutical field. Finally, biotechnology is
already having an impact on industrial processes and environmental management. In
thefieldofenergy,longtermsustainabilityofaneconomybasedonbiofuelsisthegoal
ofR&Dactivitiespromotedbyincreasinglydemandingpolicymandates.

In the biomedical sector, new mechanisms are emerging to facilitate the trade of a
varietyofintellectualassets(e.g.data,materials,expertise,services).Suchknowledge
marketsencourageknowledgesharingandcreation;theymayalsoincreasethespeed
and efficiency with which healthrelated research is translated into innovative goods
andservices.

Biofuels are already a reality in countries such as Brazil and would revolutionize the
worldeconomyiftheyweretoreachintotheglobalfuelsmarkets.Thechallengehereis
todeveloptechnologythatwilluseinexpensivecellulosebyproductsandbecompetitive
evenwithloweroilpricesandintheabsenceofsubsidies,butnoneofthisisintrinsically
beyondthegraspofbiotechnology.

Biotech barely makes sense if not from a global perspective, and smaller companies in
thebiotechsectorlearntomanageallianceswithbetterestablished,internationalfirms,
to achieve efficient marketing and commercialization. We are starting to see alliances
betweentwobiotechfirmsforthispurpose.Someanalystsnolongerwatchexclusively
forclassicalpharmabuyingupbiotechcompaniesbutpointoutthatthebiotechsector
couldeventuallyengulfthepharmasectorratherthantheotherwayaround.Aswecan
see, cross fertilization and intermarriage is rapidly closing the gap between these
sectors.

Whatever happens, the impact of biotechnology on the economy is likely to increase

fast,andmakingdistinctionsbetweenclassical(whetherpharmaceuticals,diagnostics,
nutritionorcosmeticscompanies)andbiotechisnotgoingtobeusefulforverylong,
as these two sectors converge. In the final analysis, attracting and retaining the right
people that can work effectively in multidisciplinary teams is the only difference that
willmatter.

Intermsofcontributiontothesociety,thebiotechsectorstandsinthetopleague.For
aninvestmentofonedollar,thissectorisgivingback1.25dollartothecompanyand50
centstothesociety.25percentofthebenefitsarebeingploughedbacktothesociety.
TwothirdsoftheincomeofthissectorisgoingfortheHRcostsandthusitisamajorjob
creator.
1

JonathanAragonez
Economist/InvestmentForesightCenter(IFC)
FDIGlobalMarketIntelligenceandForesight
ExportandInvestmentCenterofthe
DominicanRepublic(CEIRD)
2009

1
Nobel Laureate Prof. Sidney Altman Sterling Professor of Molecular, Cellular and Developmental
Biology, Yale University,