NEED FUEL? GAS UP AT THE GRETAI
"Perhaps the most profound change in the industry has been the ascent of biotech companies pursuing an IPO," says Audrey
Tseng, deputy chairman at PwC Taiwan. "By pursuing this capital raising path, many companies have reaped the rewards. As a
result of the sector's development and Taiwan's unique stock trading environment, there has been a conspicuous shift in investment
capital from the ICT sector and towards the biotech arena."
ASLAN, a Singapore-based virtual drug development company, took the decision to set up an office in Taipei. Its CEO Carl Firth
says he and his team came for the forward-thinking clinical environment—but they don't mind the financing options either.
Carl Firth, CEO, ASLAN Pharmaceuticals
Firth says, "Look at the number of venture funds that exist in Taiwan. There may well be hundreds! Many are now actively looking
for a piece of the pie in biotech. At the same time, we have the 'Mom and Pop' investors sitting at home and thinking that
they want a bit of risk in their stock portfolio, and don't just want to buy into blue chips. A younger, up and coming biotech
company can look quite appealing. Finally, we have big corporates that have set up venture funds. YFY—a paper conglomerate
that set up YFY Biotech Management Company—is a good example. These funds have an appetite for risk that is quite unique in
Hong-Jen Chang, Chairman & CEO, YFY Biotech Management Company
As the ICT sector has matured, investors are looking for a new outlet. Lai-Shou Su, deputy executive secretary of the state-controlled
National Development Fund (NDF), says that the Ministry of Economic Affairs recognized the waning opportunities in Taiwan's
prize industry, and looked toward incubation. "For the past thirty years, this country has been very successful in semiconductors,"
he reports. "But increasingly, the profit margins in this field are shrinking. Meanwhile, in the year 2000, the human genome
was sequenced—and like many other countries, Taiwan became very excited about the future of biotech. The sector was chosen
as an important driver in the diversification of our economy away from high tech."
Lai-Shou Su, Deputy Executive Secretary, National Development Fund, Executive Yuan
Reflecting on his place in the ecosystem, Su says, "the reason the government created this fund is to help build new industries
from the ground up, when there is not yet much guarantee of success. In this way, the private sector can build confidence."
The NDF must "set the fire—then others will join in by throwing more kindling!"
Drug Development in Taiwan
Among the private sector, the fire is now raging. According to the Market Post Observation System of the Taiwan Stock Exchange,
the market capitalization of listed and over-the-counter (OTC) biotech companies in Taiwan has grown an astounding 520% in
the last four years alone, from USD 2.5 billion in January 2009 to USD 15.7 billion in March 2013.
Of course, biotech tends to be a much longer-term play than high tech. Investors have had to taper their expectations. Before
the mentality shifted, many of the early-mover companies had to demonstrate steady revenues before they could get into the
larger rounds of financing. But increasingly, companies are able to sell the dream: "Some time ago," reports Lee-Chen Liu,
president and CEO of the startup EirGenix, "investors in Taiwan would always ask if they could see a return within two or
three years. Now, they ask about the product, and the potential. Now, they seem willing to wait."
Biotechnology Industry Market Capitalization, 2007–2013
EirGenix recently bought DCB's biopharmaceutical pilot plant facility, with an eye toward providing contract development and
manufacturing services (CDMO) to the world. "Our experience was quite remarkable," Liu says. "We raised USD 18 million in
just two months. Our investors include active pharmaceutical ingredient (API) producer Formosa Laboratories—which owns 20
percent of the company—venture capital firms, and banks. I have never seen a fundraising round go this fast in the US."
When it is ready, EirGenix will have a great option for going public: the GreTai Securities Market (GTSM). Built with small
and medium enterprises (SMEs) in mind—helping Taiwan's economy to develop the "Taiwan way" says GreTai chairman Sou-Shan Wu—the
multifunction GreTai offers both listed and over-the-counter (OTC) trading, tailored for companies that are part of emerging
Biotech has taken over the exchange. At the time of writing, the top three stocks traded on GreTai's 'emerging,' or OTC, market,
are Taigen, TWi Pharma, and OBI; Mycenax is 6th: all pharma companies. Meanwhile, the biotechnology and healthcare index leads
GTSM listed stock categories, more than doubling the numbers put up by the majority of other sectors. In 2012, more biotechs
went public in Taiwan—13—than companies from any other industry.