Country Report: Taiwan - Pharmaceutical Executive


Country Report: Taiwan

Pharmaceutical Executive


Soushan Wu, Chairman, GreTai Securities Market
Are we looking at a bubble? Wu is frank: we are. "I think more than 30 percent of the biotech companies trading on the GTSM are overvalued," he says. "The GTSM has a higher average turnover ratio, and higher average P/E ratio, than the exchanges you will find in places like Shanghai, New York, Tokyo, or even Seoul. The ratios for biotech are higher still. Based on the numbers, no one can say this isn't a bubble in the truest sense of the word."

Lee-Cheng Liu, President & CEO, Eirgenix
Dr. Soo, managing director of the Supra Integration and Incubation Center (Si2 C), is equally candid: "The environment is starting to overheat. The problem is that this shooting star might have promoted a short-term investment strategy which is antithetical to the interests of the development of the industry. We need to address this danger."

C.Y. Cheng, President, Formosa Laboratories
"And yet," Wu continues, "we need that bubble to grow. Moreover, I would say the bubble is still under control. Why? First, we have more NT dollars circulating in Taiwan today than in years past—for better or worse, this is a result of the low interest rates we have today.

The second reason is this dream is a good one. Look at how many people there are in China that need safe drugs."

Whaijen Soo, Managing Director, SI2C
Still, investors would do well to exercise caution. Tsu-Der Lee, chairman of Taipei Medical University, says of the state of the public market, "In a hurricane, even a turkey can fly!"

For now, some companies are opting for a more traditional approach. TWi Pharmaceuticals, a US-focused generics company, presents itself to investors first and foremost as a business that cares about the bottom line.

Tsu-Der Lee, Chairman, Board of Trustees, Taipei Medical University
Calvin Chen, the company's president, reports, "We told our underwriters and analysts not to look at us as a pharma company, but rather as a profit-driven business, regardless of our sector. Better to compare us to the IT industry! In fact, IT companies' profit margins typically approach 20-30 percent, while ours is closer to 60 or 70. We believe that revenues, rather than story, should drive up the valuation of a company."

Calvin Chen, President, TWi Pharmaceuticals
Chen has a few words of caution. "The market is quite hot right now," he says, "and my background as a venture capitalist makes me look at the situation with a bit of concern. Certain Taiwanese drug development companies have out-licensed their compounds to US companies, and now their market cap is equal or greater than that of their US partners.

Rongjin Lin, Chairman, TTY Biopharm
"That seems very strange to me. In my experience, unless a US biotech can sell its own product—unless they have the capabilities of a Celgene or an Amgen—they cannot become very profitable. The reason US investors recognize the value of smaller biotechs is because the typical expectation for these companies is that a larger player will acquire them. For the investor, it's almost like buying an option. But I wonder about the biotechs in Taiwan. What is the ultimate exit for their investors? We haven't seen any such acquisitions in this country yet.

"Local investors may not be sophisticated enough today. I wonder, when reality hits, what their reaction will be."

Hsing-Jien Kung, President, National Health Research Institutes
Perhaps the market and its investors could use a bit more education, and a bit more experience. Indeed, implanting a new thought process is at the heart of Si2 C's strategy. "It is critical that the government, academic institutions and investors reaffirm a stable, long-term investment approach and do not panic and flee at the first sign of difficulty," says Dr Soo. "Staying true to that approach will insert confidence and faith and stability in the system, and in the process, averting a psychologically driven run on the exchange."


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