Has the Investment in Singapore’s Biomedical Sector Paid off?

1. The Multi-Billion Dollar Investment

Singapore established its commitment to ace in the R&D space in Asia when it initiated a multibillion dollar investment in Oct 2003 to develop a world class biomedical research hub, A*STAR. The Singapore biomedical ecosystem is comprised of a closely knitted concoction of start-ups, Pharma MNCs and basic Scientific research institutes working collaboratively to accelerate Scientific discovery. It was seen to benefit Singapore in the long-run by increasing domestic accessibility of innovative medicines, alleviating burdening healthcare costs and boost economic growth. Favorable government policies, tight Intellectual property (IP) law, tax incentives, educated workforce and cutting-edge scientific infrastructure had lured a flux of Pharmaceutical giants such as GSK, Novartis and Pfizer to set up R&D facilities and expand their manufacturing capabilities in Singapore. Sir David Lane, founder of p53; Nobel Laureate Dr Sydney Brenner and Dr Alan Colman, the creator of Dolly the sheep, were among the many star Scientists wooed to pioneer research endeavor in Singapore to solve pressing medical needs in areas of Oncology, Neurological therapeutics, Glaucoma and Diabetes.

In 2015, the National Research Fund (NRF) launched a new 5-years long investment scheme called the Research, Innovation and Enterprise 2020 (RIE 2020) amounting to $19B [1]. The health and biomedical sectors secured ~21% ($4B) of the RIE2020 investment portfolio (Table 1). This year, an $80M boost was added to the RIE2020 plan for three cell therapy manufacturing R&D programs [2]. Although the R&D expenditure by public and private sectors in Singapore has increased steadily from 2003 to 2008, the amount is significantly lesser in comparison with US, Japan, Republic of Korea and China (Figure 1). World Bank revealed YoY increase of 1.73% of GDP in Singapore’s R&D expenditure for the period of 1998 - 2014, peaking in 2008 at 2.62%. However, The Straits Times reported that the R&D GDP expenditure in 2019 has dipped to ~2.3% with private to public spending ratio lower than expected [2].

Figure 1: Gross domestic spending on R&D (million USD)*. Singapore ranked bottom among countries compared. USA top the charts with 456.9B of R&D spending in 2015 with China following closely behind at 374.9B; China showed the highest YoY growth rate of 14.86%. Source: World Bank. *Includes all resident companies and institutes (both private and public sectors) but excludes domestic funds for R&D performed outside the domestic economy.

Table 1: Singapore government injected ~$7B into the Biomedical field to accelerate R&D discoveries between 2016 – 2020.

2. ROI and Key Milestones

The biomedical sector contributed ~3% of GDP (2017) with revenue streams churning out mainly from the pharmaceuticals and medical technology (MedTech) clusters [3]. MedTech registered a stunning 3-times increase in output between 2011 and 2018 amounting to $13.2B worth of medical instruments for the global market (Appendix A). This is due to the continuous high export demand of new medical devices. Volatility observed in the biomedical output and corresponding real growth was predominately attributed to varying pharmaceutical ingredients (API), biologics and drug production levels in the pharma sector that is influenced by changes in corporate strategic plans, competition of generic drugs and fluctuating market demands (Figure 3a & b). Pharma contributed a healthy average revenue of $19B between 2011 and 2018 (Appendix A). The lucrative biomedical sector is the result of extensive government’s support in enabling research institutes to build innovative technological platforms such as robotics, 3D-printing and IoT that complemented the needs of MNCs to increase manufacturing productivity [4].

Up-trending fixed asset investment (FAI) in the biomedical sector has garnered $949M (2018) with United States being the largest source of FAI commitments, followed by investors from Europe (Figure 3c) [5]. This suggest that foreign investors continue to be confident and committed in the development of the local biomedical industry. Currently, Singapore is home to 20 MedTech and ~30 Pharmaceutical companies [6, 7]. Popular brand names in the MedTech sector like Thermo Scientific and Medtronics; Pharma sector like GSK and Amgen have their presence here.

Strong research output from local universities and research institutes over the past decade have earned Singapore its place on the global biologic map. ~95%(30,954 journals) of the Scientific research articles published locally in the field of Biochemistry, Genetics and Molecular Biology have been internationally cited. This places Singapore at the 33th position (2018) in the world for high quality Scientific research [8]. Although lagging behind larger Asian economies like China, Japan, Republic of Korea, Taiwan and India, Singapore’s high productivity in translational research had paid off within just a decade of biomedical investment.

The first FDA approved drug developed in Singapore, Finafloxacin, is for treatment of ear infection, which made its landmark debut in 2015 [9, 10] . It was born from the collaboration of local company Merlion Pharma and US partner, Alcon [11] (Table 2). A couple of years later, potential therapeutic interventions comprising of chemical and biological compounds targeting solid tumors and Zika infections respectively entered clinical trial phase 1 [12, 13]. The main drivers of the rapid national research output is due to the huge investment in R&D costing $1.3B (2018) in total business expenditure (TBE) [5] and simultaneous expansion of the biomedical workforce. For the past 7 years, R&D manpower in the Pharma and MedTech segments expanded 1.47x with value-added productivity peaking at $17.4B in 2018 (Figure 3d & e). The biomedical cluster contributed 17.5% of the value-added share within the manufacturing cluster, making it the second largest contributor in the manufacturing industry, behind electronics [5].

Local innovation performance also grew correspondingly. Singapore is ranked 1st in Asia and 8th in the world as the most innovative country by Global Innovation Index 2019 [14, 15]. Intellectual Property Office of Singapore (IPOS) revealed that biotechnology has the highest patenting activity, especially in the area of arthritis and oncology [16, 17]. However, a staggering 85% (2016) of the IPOS portfolio was non-resident patents [18]. This is due to the high volume of quality research and innovations generated by the large number of global pharmaceutical companies residing in Singapore. Strong local IP protection rights and well-organized dispute mediation protocols have attracted numerous major Pharma companies to set up their R&D businesses here and file creative innovations locally. Roche, Pfizer, Sanofi and Johnson & Johnson have emerged as the top patent filers in Singapore. Local patent applicants include A*STAR, NTU and NUS that had generated innovations in the field of MedTech, Biotech and pharmaceuticals.

Table 2: Landmark therapeutics discovered by Singapore that have either been commercialized or in the process of development.

Table 3: Economic performance of Singapore’s biomedical sector

3. Headwinds

3a) Brain drain and departure of pharma MNCs

Singapore has been successful in advancing the knowledge of basic science with high impact publications churning out from A*STAR research institutes and local universities. Investment in the biomedical manufacturing space has paid off as a result of MNCs-driven manufacturing activities that served regional and global needs for Pharma and MedTech products. However, the local biomedical R&D space has yet to prove its profitability for every dollar invested. Billions of dollars have been poured into R&D for almost 16 years now since the launch of A*STAR and it is still on the waitlist for tangible breakthroughs, increase accessibility and innovative treatment options for prevalent diseases in Asia.

The biomedical R&D sector suffered a huge blow in 2010 when a succession of multi-national R&D companies began uprooting from Singapore[19-21]. The first to leave was Eli Lilly, followed by Pfizer, GSK and Novartis (Table 4). To exacerbate the matter, key Scientists Dr Edison Liu of Genome Institute of Singapore, Scientist-couple Neal Copeland and Nancy Jenkins, and Alan Coleman also left their positions as head of the local research institutes (Table 5) [22]. Internal cost cutting measures and change in global strategic planning are often cited as reasons for the departure of R&D firms. However, a more plausible underlying reason is the local R&D output from research institutes had failed to meet the business demands of these Pharma MNCs. There is no doubt that the local biomedical research institutes are capable of delivering cutting edge Scientific discoveries such as uncovering novel disease pathogenic pathways and identifying new functions of zinc-finger proteins. However, the inability to translate Scientific knowledge into commercially viable products, platforms and services is the main cause of driving foreign R&D investments away.

Evidently, a huge market gap exists between local research endeavor and commercial companies. This persisting problem must be fixed in order to propel the biomedical sector into achieving higher future ROIs.

Table 4: Closure of foreign Pharma R&D arms in Singapore within < 10 years of launch.

Table 5: Pioneering top Scientists leaving Singapore

3b) Threats from emerging markets: radical change to stay competitive

Singapore’s biomedical manufacturing sector has garnered substantial domestic returns since the establishment of the local biomedical hub and continues to sustain healthy growth in recent years. However, regional emerging markets like China and Thailand pose an immense threat to Singapore’s biomedical manufacturing industry. These developing countries offer attractive incentives for multi-national Pharma companies to plant their manufacturing and R&D operations by offering a relatively cheaper unit labor cost, massive and highly skilled human capital and competitive state-of-the-art Scientific infrastructures. The raising R&D expenditure in China also shines a positive sentiment on the Chinese government’s commitment in prospering its biomedical sector.

Recent large-scale investments by pharma giants GSK ($130M) and Merck ($20M) in setting up drug manufacturing facility and drug testing laboratories respectively indicate investors’ confidence in the Singapore’s biomedical ecosystem [29-31]. An over-reliance in manufacturing and foreign investments within the biomedical industry exposes Singapore to tough competition with emerging markets. To stay competitive, it is important to promote creative innovation and build integrative healthcare business models. A functional life science ecosystem requires an interplay among research institutes, start-ups, hospitals and Pharma companies to feed on one another’s capabilities. The challenge that remains in the local biomedical space is bringing these entities coherently together.

Start-up companies will be the solution for bridging the gap between basic scientific discoveries generated from research institutes and commercialization goals of Pharma companies. The inauguration of JTC launchpad @one-north in 2015 kick start the exponential growth of biotech companies in Singapore [32]. Till date, a total of 79 homegrown biotech companies have been born, of which a quarter were spun off from A*STAR [33, 34]. The biotech / biomed start-up ecosystem is a vital incubation ground for local innovations and liberating the sector’s dependence of pharma giants to generate domestic revenue. Dr Koh Poh Koon, Senior Minister of State for Trade and Industry, has a positive outlook of the Biotech sector in Singapore and envision that ‘it will be an important sector to drive the future (Singapore) economy’ [33].

4. Still a Worthy Investment

(and proven so in the current Covid19 crisis)

Despite the challenges faced by the biomedical manufacturing and R&D clusters, the investments in Singapore’s biomedical venture has been worthwhile and it is more evidently so in the current Covid19 pandemic that had struck the nation hard. In this crisis, the biomedical industry has displayed exceptional capabilities in designing and manufacturing diagnostic test kits quickly to meet the urgent need for detection and diagnosis of patients. A*STAR was the first to receive provisional authorization by Health Science Authority of Singapore (HSA) for its FORTITUDE KIT, on 07 Feb 2020 [35]. This was speedily followed by Singapore-based Veredas Laboratories’ VereCoV Detection kit. Scientists from Duke-NUS has also teamed up with international partners to commence clinical trials for Covid19 vaccine this year[36]. Collectively, these results and initiatives are proof of Singapore’s Scientific excellence and competency.

Ultimately, everyone is inevitability affected by healthcare. The local R&D endeavor has played a pivotal role in meeting these growing demands for innovative therapeutics and diagnostics. The unique heterogenous population in Singapore is a huge competitive edge over other homogenously populated Asian countries like China and Japan, that drives precision medicine research in its favor for many diseases – to a large extent in oncology. The study of precision medicine has led to the understanding that drugs have varying impact on different genetic makeup and drugs produced in the West may not have desired clinical outcomes in Asians. The pressing need for Asian-centric remedies coupled with the raising world-class biomedical and clinical research capabilities in Singapore has made it one of the top destinations to accessing top-notch innovative therapeutics and treatments in Asia.

Over the past 16 years, the biomedical sector has generated substantial economic growth for Singapore by creating value-added jobs and significant GDP contribution. Like all other industries, it faces radical change from time to time and is susceptible to macroeconomic impact (e.g. recurring trade war between China and US). Hence, it is critical for the sector to identify looming threats and adapt strategically. With challenges come plenty of opportunities. Singapore has the track record of turning homegrown companies into internationally renowned corporations such as Singtel (Market Cap: $50B) and Singapore Airlines (Market Cap: $10B). With perseverance, it is likely that the next indigenous global brand be born from its biomedical sector.

It is a success story in the making.

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Appendix A: Economic Indicators of the Biomedical Industry in Singapore (Adapted from Ministry of Trade and Industry Singapore)

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