The Star, October 20, 2007

Building a bio-tech hub

WHEN Datuk Iskandar Mizal Mahmood became CEO of BiotechCorp in 2005, he had already been more than familiar with the biotechnology industry. He was previously heading Malaysian Technology Development Corp (MTDC), a Government-owned venture capital outfit that invests in high-tech companies.

Even back then, he was championing local researchers. “I can flatly deny if somebody tells me that Malaysian research is not on par with that in other countries,” a June 2004 news report quoted him as saying.

Such faith in our abilities is necessary as he leads BiotechCorp on its mission to make Malaysia a major player in biotechnology.

His working experience should prove useful. An accountancy graduate, he has served at several financial institutions – “I was a merchant banker a very long, long time ago,” he says - and had been a general manager at Malaysia Airports Holdings before joining MTDC.

Iskandar has been a part of Malaysia’s biotechnology push practically from Day One. He had a hand in creating the National Biotechnology Policy and is BiotechCorp’s first employee. He explains to BizWeek what BiotechCorp is doing and he shares his views on what it will take to transform Malaysia into a biotechnology hub. Excerpts:

In an article, you talked about how pervasive biotechnology is. Can you expand on that?

Biotechnology affects people in so many ways. You go to the clinic to get your jab. Where does the drug come from? It s biotechnology. From a farmer’s standpoint, certain methods and materials based on biotechnology can increase yields. The use of good tissue culture is an example.

The businesspeople can use this technology to create businesses and generate economic activity. The products are so pervasive that you can reach the entire population of the world. And when you talk about global warming and cleaning up Earth, biotechnology is behind biofuels and natural microbes that can treat waste, for example.

Biotechnology is a true wonder because it’s pervasive. The other thing is there’s no such thing as competition: it’s all collaborative.

Let me give you an example of how wide the value chain is and why no one country can say it controls everything, not even the US.
Remember Tamiflu, the drug that became well known during the avian flu outbreak? It’s made by Roche, a big Swiss company.

Few people know that the science behind it originated from a university, which has licensed it out to a US company called Gilead, which is listed on Nasdaq. So from the US it goes to Switzerland. But it doesn’t stop there The basic active ingredient for Tamiflu is derived from shikimic acid, which is from China (Shikimic acid is extracted from star anise pods.) So, it s from the US to Switzerland to China.

So, the beautiful thing about this industry is that no one company can control everything or even claim that it can do everything.

What advantages does Malaysia offer? How important is our biodiversity?

We have many strengths. We’ll talk about biodiversity. From a pharmaceutical perspective, out of the total market size 30 of the drugs out there are still natural substance based. They cannot synthesise these just yet. Our biodiversity will bring in a lot of value to that.

The healthcare cost in the US is a chronic 16% of the GDP. The cost in Europe is increasing very quickly as well. The world is moving towards wellness instead of curative, which is very expensive. We do know that there are sciences out there that can prevent rather than cure. That’s why there’s now a big push into nutraceuticals.

We have known for the longest time that there are certain ingredients in our flora and fauna that can cure or prevent certain thing. So, we have such a huge advantage in bringing value to the table.

Is our advantage in biodiversity about proximity to the natural resources or is it about the knowledge?

Knowledge is more important. Proximity is a different thing altogether. You can have somebody over in Europe, who s far from the resources, but if he has the knowledge, he can utilize it. If you know what a herb or a plant can do and if you take a more scientific approach to it, just imagine the sort of market we can establish.

Several of the BioNexus companies are operating in that space - using natural substances, studying them further, doing a little bit more developmental work and conducting clinical trials.

Why about our other advantages?

People may find it hard to believe, but did you know that Indian and Chinese companies are coming here? It’s a testimony of the knowledge and resources we have. Our competitiveness doesn’t just come from biodiversity. Operational efficiency in the public and private sectors is something that a lot of Indian companies are seeking.

One of the companies that we have managed to bring in says a key thing is our understanding of its business, how it fits our competitive advantages and how we can help. The other thing is how fast we can assist the company in bringing it over here.

The human capital pool is an important element in this business. Another attraction is the sustainable pool of human capital that we have here in Malaysia. For those who are not in this space, it would be unimaginable that China and India does not have the human capital to sustain its biotechnology.

The Government is always talking about sustainability of human capital. Every time we hear the Prime Minister talk, he is talking about human capital. We have a lot of programmes here in Malaysia that will ensure the sustainability of a solid human capital pool over the next 20 years. And this pool actually suits the needs of the industry. We do not just go out and get a generic sort of human capital. We will always make sure it relates to the industry and when the industry is wide enough, we target the focus areas.

So human capital is important. Let’s not talk about competitiveness in pricing: that’s a well-known fact.

People are wrong when they say our researchers are not really at par with those in other countries. Go down to the ground and sniff around. The science that they (local researchers) have is actually very good.

Prof Mary Jane Cardosa sits on our board. The interesting thing is she also sits on the Scientific Board of the Bill and Melinda Gates Foundation Grand Challenges for Global Health. Doesn’t that tell you something about the quality of Malaysian researchers?

We have this pool of people in agriculture and biotechnology. If you go to UPM (Universiti Putra Malaysia) in Bangi you’ll bump into one of the best in the world every three metres you walk. The pool of human capital that we have here is just tremendous.

We are running several programmes that address the sustainability of human capital. We have a grassroots programme on biotechnological entrepreneur training primarily for graduates.

We recently launched an executive-in-residence programme Most of our local BioNexus companies are start ups. These companies need to familiarise themselves with the industry and bring themselves up to a global scale.

We’re giving them assistance by bringing in the veterans-those who have been there and done that. These include retired CEOs of biotech and pharmaceutical companies. We get them to come over to Malaysia for one year and assign each of them to several of our BioNexus companies to provide mentorship.

How do you address the potential problem of BioNexus companies that do not do what they said they would?

We nip it from the very beginning. Our principle is to make sure that we get it right from the very beginning. If we discover only later that things are wrong, it’ll be very difficult to rectify. You can go and check with any of the 39 BioNexus companies. They will tell you that they have gone through hell. After they had gone through the vetting process, they said they were exhausted.

Our BioNexus evaluation process is so robust and stringent. Our guys go through every single line of the business plans and question the management on how they plan to execute the plans. It’s the same with the foreign companies, particularly with their investments. We will go through all these things to determine the viability of these companies.

How do you balance your function of drawing investments with your role as gatekeeper to ensure quality of companies?

The process is already there. It’s about making sure that the management team can deliver what they have laid out in their business plan. Number two is the robustness of the business plan. Number three is the sustainability of the business plan.
The characteristics of the management are important. My guys grill these people to the extent of coming back with a report that covers the traits of the key executives. It’s the people who build the business.

We balance it out in such a way that even if somebody says he will put in a huge amount of money, but if we are not sure that he can source the funding and that the management can take on the business, we will express our reservations to the BioNexus committee.

In what way are the requirements of BioNexus different from those for MSC

We are business-oriented and results-oriented. That’s why a whole lot of emphasis has been given on the business plan. We want to make sure that companies that get BioNexus status have robust and sustainable business plans so that we can build solid local companies. I am sure the BioNexus committee will not give out BioNexus status just for the sake of giving out BioNexus status. They must start operations as soon as possible and there are certain milestones they must achieve.

But once you are a BioNexus company, you have the Biotech Corp’s army behind you. We have our industry development people. We’ve recruited people who have actually been in the industry to give guidance to some of these companies.

Do you approach companies or entrepreneurs who may have companies or ideas that may be developed to be ready for BioNexus status?

We segmentalise. There are good companies out there that are at an early stage, the idea stage. Idea-stage companies can also qualify for BioNexus status. We also target other companies that we want to nurture for say, listing. Another segment, of course is the multinational companies. We also look at researchers. We tell them “This is good science that you have. We know this entrepreneur. You want to consider being partners? We go to this extent to help build a good, solid BioNexus company.

Of course, there are also companies in existence that will apply for BioNexus status without us coming in. So it’s a multi-prong strategy.

There are a whole lot of foreign companies that we are talking to. Things are looking up. They’re very interested in coming to Malaysia. Obviously, that’s a testimony to the value propositions that we have.

But we are very selective. We will only chase after companies that can bring value to Malaysia. If there’s no value if it’s not within our focus areas and if it cannot bring value to the ecosystem in Malaysia, we won’t go for it.

That implies that the whole initiative will take a long time to achieve the desired results?

People have this perception that biotechnology is very risky and that
it’ll take a long time to see returns. It is not true. When we talk to our BioNexus companies or those companies that we are nurturing, the first thing we tell them is, biotechnology is just an enabler. It’s just a tool. They need to identify a target market and then look for a science.

What characteristics should the business community here have to make our biotechnology industry a success?

Just look at the successful models in the US, where the industry have been around for about 20 years. What are its characteristics? No 1, there is the belief that this can be turned into a business. No 2 is their very strong network of angel investors. This is lacking in Malaysia at the moment. And then, of course, the industry government collaboration, particularly in research, is a basic building block for any knowledge-based industry, not just biotechnology. That’s a template for moving to the next generation of business. Did you know that in the US, companies pay for the universities to do research? Can you name me a company here in Malaysia that spends more than 0.5% of its revenue on R&D?