Overview: Malaysian Healthcare Biotechnology The Malaysian Healthcare Biotechnology Sector A Frost & Sullivan Whitepaper 2009 1 Contents Please note; all data included in this paper is from published sources or Frost & 04 •Introduction Sullivan’s proprietary information, or from industry participants. Where currencies are mentioned, the conversion of Malaysian Ringgit to US Dollar 05 •Goals and Strategies for the Sector uses the following exchange rate: RM 3.6 = US$1.0 Malaysian Biotechnology Policy Disclaimer 9th Malaysia Plan Information, opinions or recommendations provided by Frost & Sullivan are presented solely for informational purposes. The information used and statements of fact made 08 •Malaysian Healthcare: Over the years and today have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy of such statements. The information presented 10 •Healthcare Biotechnology Focus Areas and the opinions expressed are subject to change without notice. Frost & Sullivan Focus Sector Overview: CMO takes no responsibility for any incorrect information supplied to us by published Focus Sector Overview: CRO sources or industry participants; however all care is taken to verify data. Quantitative Focus Sector Overview: Biopharmaceuticals/Biogenerics market information is subject to fluctuation. In no event will Frost & Sullivan or Focus Sector Overview: Medical Devices & Diagnostics employees thereof be liable for any decision made or action taken in reliance on the Focus Sector Overview: Therapeutics information in this report or for any consequential, special or similar damages, even if Focus Sector Overview: Drug discovery and Drug Delivery advised of the possibility of such damages. About Frost & Sullivan 17 •Key Success Factors Frost & Sullivan, a global growth consulting company, has been partnering with Biodiversity: Healthcare/Therapeutics clients to support the development of innovative strategies for more than 45 years. The Designated Economic Corridors company's industry expertise integrates growth consulting, growth partnership BioNexus services and corporate management training to identify and develop opportunities. Government Incentives Frost & Sullivan serves an extensive clientele that includes Global 1000 companies, Human Capital emerging companies, and the investment community, by providing comprehensive Intellectual Property Right Protection industry coverage that reflects a unique global perspective and combines ongoing Funding analysis of markets, technologies, econometrics and demographics. 24 •Conclusion For more information, visit www.frost.com 2 Contents Please note; all data included in this paper is from published sources or Frost & 04 •Introduction Sullivan’s proprietary information, or from industry participants. Where currencies are mentioned, the conversion of Malaysian Ringgit to US Dollar 05 •Goals and Strategies for the Sector uses the following exchange rate: RM 3.6 = US$1.0 Malaysian Biotechnology Policy Disclaimer 9th Malaysia Plan Information, opinions or recommendations provided by Frost & Sullivan are presented solely for informational purposes. The information used and statements of fact made 08 •Malaysian Healthcare: Over the years and today have been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy of such statements. The information presented 10 •Healthcare Biotechnology Focus Areas and the opinions expressed are subject to change without notice. Frost & Sullivan Focus Sector Overview: CMO takes no responsibility for any incorrect information supplied to us by published Focus Sector Overview: CRO sources or industry participants; however all care is taken to verify data. Quantitative Focus Sector Overview: Biopharmaceuticals/Biogenerics market information is subject to fluctuation. In no event will Frost & Sullivan or Focus Sector Overview: Medical Devices & Diagnostics employees thereof be liable for any decision made or action taken in reliance on the Focus Sector Overview: Therapeutics information in this report or for any consequential, special or similar damages, even if Focus Sector Overview: Drug discovery and Drug Delivery advised of the possibility of such damages. About Frost & Sullivan 17 •Key Success Factors Frost & Sullivan, a global growth consulting company, has been partnering with Biodiversity: Healthcare/Therapeutics clients to support the development of innovative strategies for more than 45 years. The Designated Economic Corridors company's industry expertise integrates growth consulting, growth partnership BioNexus services and corporate management training to identify and develop opportunities. Government Incentives Frost & Sullivan serves an extensive clientele that includes Global 1000 companies, Human Capital emerging companies, and the investment community, by providing comprehensive Intellectual Property Right Protection industry coverage that reflects a unique global perspective and combines ongoing Funding analysis of markets, technologies, econometrics and demographics. 24 •Conclusion For more information, visit www.frost.com 3 Goals and Strategies Introduction for the Sector The healthcare biotechnology industry is undoubtedly a strategic investment opportunity, both from an Malaysia has identified biotechnology as one of the new engines of growth for the national economy and it is economic as well as a social stand-point. Thanks to cutting-edge research, biotechnology companies have expected that the sector will generate US$75 billion (RM270 billion) in revenues by 2020. The country has a contributed a portfolio of products to diverse industries ranging from human and animal health to protection of rich biodiversity and cost-competitive skilled labour markets, as well as good transportation networks, ICT the environment and in the food-processing industries. Globally, there are about 4,000 small- and infrastructure and strong capabilities in R&D. These combined characteristics make Malaysia an attractive medium-scale enterprises belonging to the biotechnology fraternity, and they are involved in continuous potential destination for foreign biotechnology companies and investors interested in the healthcare research. Biotechnology has created more than 200 new therapies and vaccines, including products to treat biotechnology sector. cancer, diabetes, HIV/ AIDS and autoimmune disorders. As traditional pharmaceutical industry pipelines dry up, the industry has started looking towards biotechnology to fill this gap. The Malaysian Biotechnology Policy While the market capital of the top 5 US pharma companies has fallen approximately 20% in the last 5 years, the biotech market capital has seen an 18% gain over the same period. The Malaysian Government has identified the biotechnology sector as one of the key strategic sectors that will support the growth of the Malaysian economy. It is anticipated that growth in the sector will be supported by Top Five US Pharma* vs. Total Biotech Market Cap leveraging on the strength of the country’s diverse natural resources and cost effective human capital talent Market Value of selected pool. The Government has identified the need to create a strong supporting framework to facilitate the long $800 Big Pharma acquisitions of public Biotechs term growth of the sector. In 2005 the Malaysian government enacted the Malaysia Biotechnology Policy to (2005-2009) Despite a general perception and a consensus on the $700 achieve this goal. The policy detailed nine focus areas deemed critical to creation of a sustained biotechnology Top Five US Pharma* = $284 Billion positive outlook for the healthcare biotechnology ($ Billion) sector, one of which is to support the growth of the industrial biotechnology sector. $600 industry, some of the constraints that plague the $168 Billion $500 progress of the biotechnology industry are highly The Malaysian Biotechnology Policy detailed a series of aggressive development goals. The biotechnology industry $400 undervalued stocks of these biotech companies, $162 Billion is expected to contribute approximately 2.5 % of national GDP by 2010, 4.0% by 2015 and 5.0% by 2020. insufficient funding, inexperienced management and $300 Furthermore, it is estimated that the industry will create 280,000 new jobs – both directly and indirectly – by 2020. a sound conceptualization of the business model. $200 Total Biotech Market Cap = $290 Billion Investments in biotechnology are considered risky, Total Market Value $100 and investors are increasingly reluctant to invest in The Nine Thrusts of the National Biotechnology Policy $0 biotechnology companies. The number of IPOs 1 Agricultural Biotechnology Transform and enhance the value creation of the agricultural sector 2001 2002 2003 2004 2005 2006 2007 2008 2009 within the biotechnology industry has declined as through biotechnology. *Pfizer, Merck, Lilly, Wyeth, and Schering-Plough well, reflecting investors’ concern on the average 2 Healthcare Biotechnology Capitalise on the country's biodiversity for commercialising the Source: Capital IQ, Windhover, Burrill Analysis length of time taken to achieve a return on investment. discoveries of health related natural products and bio-generic drugs. In the Asian region, other than Japan and Australia, countries like China, India, Korea and Singapore are 3 Industrial Biotechnology Leverage on the country's strong manufacturing sector to increase emerging as key destinations for the healthcare biotechnology