Singapore’s biotech strategy will benefit from collective, not competitive, thinking

IN AN interview with private-equity investor David Rubenstein, chief executive officer of Novartis Dr Vasant Narasimhan spoke about the potential and possibilities of pharmaceuticals in a fiercely competitive industry.

Rubenstein questioned Dr Narasimhan on whether constant drug patent expiry and the need to generate new portfolio of drugs is a good way to make a business. Dr Narasimhan acknowledged the “constant treadmill” and the value of a company’s replacement power, which requires strong research and development capabilities, as well as long-term thinking.

Few industries in the world are subject to such clockwork-style competitive advantage erosion, where businesses know the exact year in which generic drug sales will erode their revenues.  

When it comes to biotech innovation, having a strong conviction and research environment is good, but excellent risk management is better. On the surface, biotech innovators appear to have diametrically opposite goals to patients, insurance payers and policymakers on the path towards building better health solutions. But it does not have to be so.

Singapore’s competitive advantage

Complex systems theory has the concept of a tipping point, where events happen “gradually, then all at once”. This is similar to China’s global rare-earth dominance being a result of years of deliberate state strategy and sustained investment.

In biotech and pharmaceuticals, while private industry and companies are subject to free-market incentives to innovate, the role of the state in creating the appropriate conditions to amplify fledging companies cannot be overstated.  

On Dec 5, Singapore announced that the National Research Foundation (NRF) will be investing up to S$37 billion in research, innovation and enterprise across domains such as longevity research. This is a style of long-term thinking that few other economies globally can emulate. Whether it be in the size of investments or the multi-decade macro trend bets, this combination of research and commercialisation focus will build a strong biotech ecosystem. 

Importantly, given Singapore’s unique combination of size, nimbleness, ability to fail quickly and long-term horizon thinking – it is the blue ocean that will form the basis of strategic focus.

Instead of unseating established players and markets, Singapore’s biotech bet on broad trends, such as ageing populations, shows a focus on areas where no specific country or contender could claim to be first past the finish line.

Drug developments tend to be self-reinforcing. Capital, innovation, research and commercialisation roll-out must converge. NRF’s investments, while important, are also part of the broader strategy of attracting talent, building infrastructure and changing mindsets when thinking about biomedical research.

Singapore’s high liveability index, talent-driven immigration policies and Asia-Pacific hub status will be key leverage factors to achieve strategic success. 

Taking a risk-based approach to biotech development

Yet, strategy and investment are merely one part of the bargain. Controlling for other factors, the clinical development time of a typical innovative drug is 9.1 years. Even after years of preclinical development, 90 per cent of drugs that enter clinical trials in humans are never approved.

Singapore’s agility, capacity for rapid iteration and long-term vision makes it uniquely suited to pursue blue oceans as a strategy.

Such sobering statistics are the primary distinction when thinking about biotech versus other types of innovation.

We all already know the megatrends in healthcare. At its core, the biotech game boils down to risk.

Success here is not a function of size of investments and environment alone, but first-class risk management. 

Therefore, proponents of biotech innovation will need to apply risk management frameworks of bet sizing, understanding value at risk, stage gated funding, portfolio optimisation and allocating capital thoughtfully across research themes.

And as with all complex systems, risk is not just about likelihood and potential losses, but also thinking multidimensionally. Biotech players ought to consider scientific risks alongside regulatory risks, policy changes, commercial landscape and competition globally.

Given the large number of research themes, development risk is not about finding a point estimate, but a distribution.

While the success of GLP-1 receptor agonists or the failure of recent drugs in combating Alzheimer’s disease will tend to make news headlines – it is often the quieter, and less sexy, path-dependent decisions that allow biotech innovators to retain maximum optionality to grow sustainably.

Thinking beyond a zero-sum game

Dr Narasimhan suggests that it is the big pharma players who can absorb portfolio-level risk via diversification and strong financials, thus cushioning single asset failure.

From that vantage point, the logical conclusion will be for scientists, research institutions, policymakers and commercial partners to look beyond a zero-sum game, where collective value creation will yield dividends for all.

Beyond nurturing a single successful Singapore biotech startup to an initial public offering, it is also about having Singapore transform itself into a unified, great biotech player globally.   The writer, a medical doctor by training, advises on macro strategy for a long-only global all-sector innovation fund