Biologics – the next wave

12 NATIONAL DAY SPECIAL
The Business Times, Thursday, August 9, 2007
ECONOMY
Can growth be sustained?
ANNA TEO takes stock of the perils and prospects that face Singapore’s economy
L
IKE just about everyone else, the
Monetary Authority of Singapore
was upbeat about Singapore’s
growth prospects - both near and
medium-term - when it released
its latest annual report two weeks
ago. But amid the optimism, the
central bank did sound out a note
of caution about global financial shocks. It
couldn’t have known then how quickly the
warnings would ring true.
At a media conference to unveil the report,
MAS pointed to economic and financial risks
that threaten financial stability, not least of
which include weaker-than-expected US
growth as a result of a more severe unravelling of its sub-prime market. The US housing
mortgage problem has led to increased risk
aversion in the credit market, particularly in
structured products, MAS noted. If the risk
aversion spreads, there could be a sharp
spike in volatility across various asset classes
and markets, with spillover effects on the Singapore economy and domestic financial sector. Sentiment around the region would take
a hit, and investor decisions will be affected, it
said.
Sure enough, the US sub-prime woes worsened, and stock markets across Asia-Pacific
were mauled early this week, to put it mildly.
The question is – will it prove to be a short
sharp slump, another blip on the charts, or
Dramatic
Singapore’s GDP*
12
10
8
6
4
2
0
-2
-4
%
‘81
‘85
‘90
‘95
‘00
* at 2000 market prices
will the market turmoil develop into a
full-blown crisis with deleterious effects on
Singapore’s financial markets and economy at
large, just when it looked like Singapore was
ensconced in a new “golden era” of growth?
The signs and indicators so far - buoyant
job market, rising incomes, erstwhile bull
stock market, a runaway property market,
plus an influx of business talents and opportunities- had “Boom Town” written all over. Exuberant economists could hardly contain
their enthusiasm about Singapore’s exciting prospects and potential in the years ahead.
With the economy having
notched up well over 8 per cent
growth in the second quarter (despite weak manufacturing output
7.9%
in June), Singapore has seen nine
consecutive quarters where its
GDP growth exceeded 6 per cent.
And if growth for the year turns
out at 8 per cent - about the same
pace as in 2006 - it would be the
fourth straight year that the economy has outrun the official trend
growth estimate of 3-5 per cent.
Such growth streaks - with
05
scant hints as yet of overheating
Source: MTI
pressures - have no doubt inspired talk of the dawn of a Golden
Era here. The question - as always, but particularly in light of the latest market meltdown - is, how sustainable? The
world - not least the regional economies - has,
of course, undergone some sea changes in the
last 10 years since the Asian crisis. But a look
at Singapore’s growth record over the past 25
years or so does show a pretty impressive
pre-1997 growth streak that would be hard to
beat, or even match.
Between 1987 (when it pulled out of a debilitating recession) and 1997, Singapore’s
GDP growth averaged about 9.2 per cent a
year. The period includes two relatively “slower” years - 1991 and 1992, when economic
growth eased to about 6.5 per cent.
In his 1992 Budget speech, then Finance
Minister Richard Hu spoke of Singapore’s medium-term sustainable growth as 5-7 per
cent, which he said “may seem a let-down after the average growth of 8.5 per cent in the
last three decades”. But Singapore’s GDP had
reached a higher base of over US$10,000 per
capita, he said, the economy was at full employment, and “expansion could no longer be
as effortless and rapid as before”.
The official estimate of the country’s
long-term growth potential was later cut to a
more conservative 4-6 per cent, but economists in the mid-1990s were confident that
“regional factors” could add a few more bonus growth points.
In the event, the government has actually
since pared the economy’s trend growth potential down to 3-5 per cent, given its maturing status and supply constraints, notably
slow labour growth.
Fast forward past the 1997 regional crisis,
the 2001 IT bust-up, and a restructured, revitalised economy has, since 2004, enjoyed
above-trend growth every year. And economists again believe that the economy’s underlying growth potential has risen to near-8 per
cent, helped this time by not just new “region-
al factors”, the Chinese and Indian growth dynamoes, but also domestic policies. An even
more proactive pro-enterprise strategy, diversification away from the electronics mainstay,
as well as a more liberal immigration policy,
are key.
Still, even with the best-laid plans, there
will emerge external factors, forseen and unforseen, to throw things awry. This
“sub-prime” fallout is not the first market battering this year, and surely it won’t be the
last. For now, most analysts are of the view
that the region will come away perhaps a little
battered and bruised from the upheaval but
with its economic fundamentals intact, and
Singapore should still be on course to achieve
another milestone of sorts this year - when its
per capita GDP crosses US$30,000.
Still, for an indication of the effort and challenge it takes to scale new peaks as the economy prospers, it took Singapore five years - between 1989 and 1994 - for its per capita GDP
to rise from about US$10,000 to
over-US$20,000. In 1980, it was still under
US$5,000.
Evidently, breaching the US$30,000 mark
- still just over a third of Luxembourg’s income level - has taken Singapore a whole lot
longer, 13 whole years. But considering that
back in 1965, the newly-independant country’s per capita GDP was just over US$500,
the growth has been nothing short of a feat.
Biologics – the
next wave
Production of biopharmaceuticals is set to fuel growth
in Singapore’s biomedical sciences manufacturing
sector, as CHEN HUIFEN finds out
S
INGAPORE’S biomedical sciences
(BMS) manufacturing sector looks set
to reach its output target way ahead of
time. Last year, the cluster posted a
30.2 per cent jump in production output to $23 billion - just a tad below the $25
billion mark that was set for 2015.
Value-added generated surged some 47
per cent to $13.6 billion and the level of fixed
asset investment went up to $901 million last
year, from $859.5 million in 2005. Back in
2000 when the BMS drive was launched, production output was just $6.4 billion and value
add was $5.2 billion.
“Although the BMS initiative was started
in 2000, the Economic Development Board
had already been promoting BMS manufacturing opportunities for a while then,” said EDB
executive director for biomedical sciences
group Yeoh Keat Chuan. “The first company
to set up manufacturing operations in Singapore was Beecham Pharmaceuticals in 1972.
It was in the 1990s that many BMS companies made the decision to set up their
plants in Singapore. These included
Becton Dickinson, Baxter, GlaxoSmithKline (GSK), Merck, Pfizer, Schering
Plough and Wyeth.”
Pharmaceutical manufacturing accounts for more than 90 per cent of
both the output and value add in BMS
manufacturing last year, with medical
devices taking up the rest. Key to its
phenomenal growth was the set up of
the $67 million Tuas Biomedical Park
(TBP). Launched in 2000, the 183-ha
development was positioned as a
world-class manufacturing hub dedicated to pharmaceuticals, biopharmaceuticals, biologics, vaccines and medical devices companies.
“EDB worked with JTC Corp to develop TBP as a plug-and-play environment for manufacturing operations,
providing ready access to essential infrastructure such as roads, drainage
systems, power and water supply, as
well as telecommunication lines,” explained Mr Yeoh. “Manufacturers can also leverage on third-party utilities and services
such as steam, natural gas, chilled water and
waste treatment. Companies found it very
easy to set up their operations here quickly.”
To date, the island has already attracted
eight of the world’s leading drug makers to
base their production here. And the TBP has
reached 90 per cent allocation, with a second
188-ha park being developed for future investments.
“Having established a reputation as one of
the most competitive and trusted site for pharmaceutical bulk activities and secondary manufacturing, EDB is now aggressively pursuing
investments in biologics, an area that will
drive growth in the drug industry,” said Mr
Yeoh. “We are quickly building critical mass
for biologics manufacturing and expect to
maintain this momentum as we continue to attract new investments in this area.”
Biologics – or biopharmaceuticals as they
are sometimes known - are drugs made from
living cells such as proteins and hormones.
Unlike the oral pills which are made from synthetic chemicals, biologics today can be largely derived from either mammalian cells or microbial cells. They are larger molecules, and
usually in liquid form, to be injected into the
body. Some examples are insulin and other
vaccines.
In keeping with the trend in the pharmaceutical industry, biologics are likely to fuel
the growth in Singapore’s BMS manufacturing in future. With companies like Novartis
and Roche taking an increasing interest in biologics firms and buying up vaccines and biotech companies, a significant proportion of future drugs is expected to come from biologics
products.
According to EDB, about 30 per cent of the
approved drugs in the US last year were biologics. A Datamonitor report forecasts that
the compound annual growth rate (CAGR) is
13 per cent for biologics compared with a CAGR of 0.9 per cent for small molecule products
(chemically synthesised medicines).
In addition, biologics products, being
grown in specially engineered cells, are much
tougher to produce. Focusing on the sector
will raise the barriers for competing BMS
manufacturing hubs because of the highly
skilled manpower, stringent manufacturing
standards and complexities involved in the
production process.
To EDB’s credit, Singapore has attracted
According to EDB, about 30
per cent of the approved
drugs in the US last year
were biologics. In addition,
biologics products, being
grown in specially
engineered cells, are much
tougher to produce.
Focusing on the sector will
raise the barriers for
competing BMS hubs.
four major biologics investments totalling
close to US$1 billion in the last two years.
Swiss contract manufacturer Lonza is building two plants here, GSK is setting up a vaccine factory, and world leading biotech firm
Genentech has recently broken ground for another to make blockbuster biologics. Should
Singapore draw another one to two more this
year, it would have created a critical mass for
a budding industry.
Thus far, Singapore is believed to be the
only country in the region to actively grow the
biologics sector. It is relying on a track record
for pharmaceutical manufacturing, availability of skilled talent, plug and play infrastructure and robust IP regime to sell itself as a biologics destination.
On top of that, it is building pockets of capabilities across the value chain in the biologics
sector - from research to pilot-scale production, to commercial scale manufacturing. On
the research end, there is the Bioprocessing
Technology Institute under A*Star, which has
close to 100 scientists conducting research in
biologics. This provides a talent pool where
the industry can tap. Singapore also boasts an
established pool of more than 28,000 trained
and experienced engineers and technicians
from related industries such as food processing and chemicals manufacturing.
For smaller scale and test production,
homegrown contract manufacturer A-Bio
Pharma offers a facility that provides such
What are biologics?
BIOLOGICS
PHARMACEUTICALS
(Large molecules)
(Small molecules)
Definition
Complex molecules derived from living
sources
Simple organic compounds that
are synthesised chemically
Production
method
Produced via live cells, such as mammalian
cells (eg. Chinese Hamster Ovary cells) and
microbial cells (eg. E.Coli)
Chemical synthesis
Delivery
Usually given through injection because the
drugs may not retain their properties in the
digestive system
Usually taken orally
Form
Liquid form. Types include therapeutic
proteins, monoclonal antibodies, immunomodulators (including vaccines) and growth
hormones
Tablets, capsules
Example of
products
Enbrel, Herceptin, Rituxan, Avastin
Lipitor, Nexium, Prevacid,
Gleevec
NOVARTIS
Delicate task: Biotech pharmaceutical
production at Novartis' production plant in
Huningue, France.
services, while Lonza completes the picture
for companies looking to outsource their requirements.
Clearly, biologics is set to drive the “next
wave” of BMS investments, which will also include a greater focus on medical technology
sector, especially in cardiovascular, vision, diagnostic and imaging, and research tools and
scientific instruments
“There are now close to 45 pharmaceutical, biotechnology and medical devices manufacturing plants in Singapore,” said Mr Yeoh.
“But our job is never finished! We are constantly working with companies who are already here to expand their scale and scope of
operations as well as to attract those who are
not yet in Singapore. You can be sure that we
will revise our (output and value add) targets
once we reach them.”
The four biologics manufacturing plants
INVESTMENT (US$m)
JOBS
OPERATIONAL BY
Lonza Biologics Singapore *
250
200
2009
GSK Biologicals
200
200
2010
Genentech
140
100
2010
Lonza Biologics Tuas
350
350
2011
PLANTS
*100% capacity contracted to Genentech. Genentech has an option to buy this plant by 2012.
Key indicators for BMS manufacturing sector in 2006
OUTOUT
Pharmaceuticals
20,934
Medical Technology 2,069
Total
23,002
YOY %
GROWTH
34.5
-1.7
30.2
VALUE ADD YOY %
EMPLOYMENT YOY %
(S$M)
GROWTH
GROWTH
12,355
1,210
13,565
52.3
8.4
47
4,020
6,551
10,571
3.0
4.5
3.9
Photo: Terence Tan; Source: EDB