Apac biotech sector could draw capital as investors seek diversification amid US-China tensions

[SINGAPORE] Asia-Pacific (Apac) could be the new frontier for biotechnology investment, a report by consulting firm Bain & Company indicated on Thursday (Jul 31).

Markets in the region are gaining ground as credible innovation hubs as global biotech strategies shift amid geopolitical tensions and deep US research funding cuts, according to the report.

The report was developed jointly with the Economic Development Board, the Agency for Science, Technology and Research, JPMorgan and SG Growth Capital.

“The potential for US-based scientific talent to migrate to more favourable regions could also create an opportunity for Asia-Pacific governments and institutions to strengthen their innovation bases,” the report indicated.

Favourable intellectual property regimes, regulatory agility and tax incentives – particularly in Singapore – position Apac as an attractive destination for global biotech investment, it added.

Moreover, the region is winning recognition for next-generation modalities, from mRNA and cell and gene therapies to artificial intelligence-enabled drug discovery.

Fabio La Mola, partner at Bain & Company, said: “We are looking at an exciting era for Apac’s biotech sector, with the opportunity for true innovation to emerge from a geography that historically has been primarily a commercialisation hub.”

China leads, but geopolitical conflict could pull capital away

China dominates Apac’s biotech investment scene, but geopolitical developments could divert capital elsewhere, said Bain & Company.

The country accounted for more than 75 per cent of regional biotech venture capital and private equity flows since 2019, and industry giants such as Pfizer and AstraZeneca are committing billions to research and development facilities in China, said the report.

SEE ALSO

Medical tourism, biopharma leading the way in China’s healthcare flows to Asean

China biotech’s stunning advance is changing the world’s drug pipeline

Why China biotech is getting a DeepSeek moment, too

With stunning strides over recent years, China’s biotech sector is poised to challenge Western dominance on innovation. Notably, the number of Chinese novel drugs entering into development surpassed that of the European Union in 2024.

However, the report noted that geopolitical tensions are reshaping biotech strategies, with biotech funding activity in China having slowed over the past few months.

Amid fraught US-China relations, US pharmaceutical companies are rethinking their reliance on China and are seeking diversification to hedge against risk, Bain & Company said.

“While China continues to offer significant advantages in cost efficiency and scale, persistent geopolitical tensions and mounting policy uncertainty are diversifying capital flows into emerging hubs like Singapore and South Korea,” the report said.

“China has long been Asia-Pacific’s biotech leader in terms of scale, but Singapore is emerging due to its commitment to innovation, political neutrality, intellectual property protection and regulatory alignment,” it added.

US innovation slowdown may present early-stage R&D opportunity for Apac

As tightening research budgets threaten to slow US-led innovation, particularly in early-stage academic research, Apac markets could step in to fill the gap, the report said.

This comes as proposed funding cuts at the US National Institutes of Health are expected to reduce grant availability.

“As a result, Asia-Pacific markets are increasingly positioned to lead in early-stage research, with big pharma likely to turn more actively to the region for sourcing innovation,” Bain & Company said.

The report indicated that public funding plays an increasingly important role in supporting early-stage research, given that capital tends to flow towards later-stage, clinically-validated biotech deals, as higher investor risk aversion has led to a preference for more mature projects with clearer commercialisation pathways.

This is seen in how early stage funding in Apac declined at an 11 per cent compound annual growth rate from 2019 to 2024, while late-stage biotech deal volumes grew 1.5 times.

In response to the early-stage R&D funding gap, Apac governments are stepping up to seize the opportunity.

They are launching targeted programmes providing capital and infrastructure that support early-stage R&D projects to attract private capital investment flows to their markets.

For instance, the Korea Drug Development Fund is committing US$1.6 billion to more than 1,200 projects by 2030, while Japan’s Bioventure Support Program is deploying US$366 million to nurture biotech startups.

In Singapore, the government has allocated S$28 billion to support science and technology development, including biomedical R&D, under the ongoing Research, Innovation and Enterprise plan.