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outlook 2015: biomed

Industry very much in the pink

Promising signs with companies restructuring, consolidating and entering new growth markets

STANDOUT: The biomedical sciences industry is showing no sign of slowing down as it continues to expand year-on-year, helping to lift GDP growth.


THE various sectors here may be softening with analysts cautious about the 2015 Singapore economy outlook but the biomedical sciences industry is showing no signs of slowing down as it continues to expand year-on-year, helping to lift the country's gross domestic product (GDP) growth.

As we move into 2015, the industry continues to look promising amid the flurry of mergers and acquisitions (M&As), cost-cutting measures, as well as shrinking research and development (R&D) units. Already, the global biomed sciences industry has seen several consolidation moves - one being US drugmaker Pfizer's attempt to take over British drugmaker AstraZeneca in May - and this trend is set to continue.

Yong Chern Chet, Deloitte Southeast Asia's healthcare sector lead said the M&As are driven by the intent to enter new growth markets, to restructure to adapt to a new business model or to acquire new capability and innovation.

So far, Singapore has been rather shielded from these consolidations and restructuring, said Kevin Lai, executive director, biomedical sciences and consumer businesses of the Singapore Economic Development Board (EDB), who noted it is business-as-usual in the industry.

This may be because targets for M&As lie in the surrounding region, but activities post M&As will still likely be based here because of the business environment and high-end human capital availability, said Dr Yong, who cited British drugmaker GlaxoSmithKline's (GSK) new consumer division to be established at Beach Road as an example. It follows GSK's M&A activity with Switzerland-based Novartis.

Today, the manufacturing sector accounts for 20 per cent of the Singapore economy while biomed sciences industry contributes some 4 to 5 per cent of GDP and employs 23,000 people.

Over in the pharmaceutical sector, total output grew from S$5.1 billion in 2000 to S$18.6 billion in 2013. It contributed some S$9.8 billion, accounting for 3.2 per cent of the Singapore economy last year. Such strong showing is attributable to the explosion of the Asian middle class and rapidly ageing population in the region that have fuelled the growing demand for affordable, quality healthcare solutions.

Still, it may be a bumpy road ahead for pharma companies as they struggle with cost pressures. Mohit Grover, the life sciences and healthcare leader for Deloitte (SEA) said pharma companies' R&D units will continue to restructure and enter into partnerships to drive productivity in 2015.

And this is something the EDB has geared up for as it paves the way for global drugmakers to collaborate with public institutions. The EDB, Agency for Science, Technology and Research (A*Star) and the Health Ministry has formed a partnership office where a dedicated team is able to "match" researchers to the different companies and vice versa.

Pharma companies are now building new-generation plants in land-scarce Singapore, trying out new production methods and getting creative with their operations.

US drugmaker Amgen, for example, launched its S$200 million first next-generation biomanufacturing facility in the world in Tuas in November. The new plant is cheaper to build and run than conventional facilities, uses less energy and water, reduces carbon emissions and produces the same level of output.

Continuous manufacturing of active ingredients in drugs, which dramatically reduces waste, is another aspect pharma companies are diving into. Drugmakers have found that they are able to produce lower volumes faster in smaller reactors based on flow through a pipe, eliminating the need to stop, cool or clean the reactor, thereby reducing waste.

GSK is in the midst of experimenting with this and, if proved successful, in one to two years, it will pave the way for more to adopt this here, said Mr Lai.

In the near term, EDB will continue to invest in biologics, an area it decided to zoom in in 2007 and has fast expanded since. To ease the biologics talent crunch, the EDB is working with the Singapore Workforce Development Agency (WDA) to train people ahead of time under the Biologics Overseas Skills Training (BOOST) programme, which was launched in February. They are now reviewing the scheme to potentially raise the number of people being trained from the current 150.

In the next three years, the EDB's priority is to help companies in biologics, pharmas and medical devices move into the value-creation mode from the exisiting value-adding mode.

Lu Yoh-Chie, chairman of local startup Peregrine Ophthalmic, said that even though Singapore is starting to produce more scientists and engineers, the missing link is what he calls "a catalyst". "It's just like you have all the knowledge from the book, how do you apply (them)? This is where I still think it still needs someone who can translate that into commercialisation and I think it still needs a little effort."

Since 2009, the government has placed much emphasis on developing the medical technology and digital health areas, in light of Singapore's rapidly ageing population and spiralling healthcare costs. Coupled with higher demand for relevant and accurate health information and advances in medtech and infocommunications, digital health is expected to speed ahead in 2015.

About two-thirds of investments in the biomedical sciences industry by EDBI, the corporate investment arm of EDB, have been ploughed into medtech and digital health since 2009, with the latter being a smaller component.

The investment firm's chief executive officer and president, Chu Swee Yeok, said more investments will be made in terms of digital health, specifically in hospital workflow, health mobility and health analytics.

To improve hospital operation workflow, EDBI is looking to develop the nursing operations and employ health analytics, as well as monitor patients' mobility.

As for medtech, Ms Chu said EDBI is focusing on implantable devices, particularly cardiovascular and ophthalmology, and minimally invasive surgery.

Singapore will be the test bed for new healthcare technology in the region due to its high level of tech literacy in the relatively small population, good overall connectivity and high penetration of mobile computing devices, which will form a key component in the strategy on how healthcare delivery will be transformed, said Dr Yong.

He noted that the change affects many different areas beyond healthcare, including various government divisions to truly come up with a comprehensive healthcare solution of the future.

"Once successful, I foresee Singapore going to the other countries in the region to collaborate with the local governments in this whole smarter and better healthcare solution for the people," he said.

But how is cheap and good possible? It would not be, said Dr Yong, who added that the cost has to be shared between patients and the government.