The Edge, 22 May 2006
Give it time
By Lee Wei Lian and Karamjit Singh 03:51PM (22-05-2006)The
first anniversary of the launching of the National Biotechnology
Policy (NBP) went by quietly last month. And that is how
some would characterise the progress of biotech in Malaysia.
Despite a lot of rhetoric, meaningful progress has been
quiet.
One of the key announcements made at last year?s April
biotech conference was the formation of Malaysian Biotech
Corp Sdn Bhd (Biotechcorp) as the implementing agency
responsible for furthering Malaysia?s biotechnology objectives.
Immediately, a lot of hope was placed on Biotechcorp as
a mover of the agenda. But Iskandar Mizal Mahmood, the
CEO of Biotechcorp, says the industry has a wrong perception
of what Biotechcorp is supposed to do. "There is
a feeling that we are involved in research and in funding
for research but that is an area handled by the Ministry
of Science, Technology and Innovation [Mosti]. Our charter
clearly spells out that we are to attract biotech investments,
source partnership opportunities and support local biotech
entrepreneurs in setting up their business." Despite
that clarification of roles, there is a distinct feeling
in the biotech community, both among entrepreneurs and
scientists, that Biotechcorp has not done anything meaningful
to advance the industry. They point to the fact that no
significant foreign investments in biotech have been made
by any major player and that there is no real sense of
excitement on the biotech scene beyond biodiesel, which
in itself is being driven by large players. There also
seems to be dissatisfaction with the mostly youngish group
of executives at Biotechcorp. Iskandar is clearly unhappy
and frustrated with the criticisms he hears. He was initially
quite stiff during the interview and took almost 40 minutes
to answer our first question. "I challenge them to
come in and give us a business proposal. If it falls within
our ambit of support, we will do everything we can for
them. We have had a one-stop centre in place for this
very reason since last December. Don't just talk.."
He says Biotechcorp has been working its tail off to deliver
value for the industry and that it will happen. "Give
it time," he urges. "What is killing me is not
the tough job we have at hand but the things people talk
about without knowing anything. That really drains your
energy."
He also gives us a first look at the incentives the government
is offering all biotech players. These include something
Biotechcorp is very proud of income tax deduction for
investments by a company and high net worth individuals
with business income in BioNexus-status companies at seed
or early stage. BioNexus is the brand that will be promoted
to market Malaysia's initiative in this to investors and
potential partners. To strengthen the brand, an attractive
package of initiatives will be offered to domestic and
foreign BioNexus-status companies (see box on Proposed
Bill of Guarantees on page 2).
netv@lue2.0: After one year of the NBP, what tangible
benefits are there for the industry? They don't want to
hear about what will happen. But what is better today
for them versus one year ago? Iskandar: First, let me
say that our charter is as an industry developer. Our
focus is on companies that are in the biotech industry
or want to get into the biotech industry. But as far as
the coordination of research and allocating funds for
research, that still comes under Mosti. I hope people
are clear on that. If you look at the Ninth Malaysia Plan
[9MP], it is spelt out clearly that we do not have a research
component. We do not do research and do not have a research
funding programme. In terms of what is there for the industry,
we have been putting a lot of emphasis on identifying
good value propositions from a developmental standpoint.
We have a one-stop centre for any company that needs assistance.
But we cannot help if you don?t come to us or write in.
For instance, there is a company called InqPharm. The
founder wanted us to help get his products registered
with the NPCB [National Pharmaceutical Control Board].
So we helped him through the process. It may seem a trivial
thing to do but he eventually aims to manufacture his
products here. This is just the first step for him. Then,
there is Bioven Holdings Sdn Bhd, which asked us to help
it do clinical trials stage II. We brought them to see
the CRC [Clinical Research Centre] and helped them through
the process. Those who come to us with a plan or something
that they want us to help, I?ll throw my people behind
them. But they must, as entrepreneurs, initiate the contact.
What funding does Biotechcorp have?
We have RM100 million for commercialisation, RM100 million
for technology acquisition, RM50 million for entrepreneur
development and RM50 million for intellectual property
[IP] framework development. We are waiting now for the
money to be disbursed and we are trying to expedite the
process. But bear in mind that this is only RM300 million
out of RM2.1 billion allocated for biotech in the 9MP.
What will you be doing with the funds for IP framework
development ?
Having been involved in the process of applying for IP
during my time with Malaysia Technology Development Corp
(Iskandar was CEO from Oct 2003 to May 2005), let me tell
you that this is a difficult, time-consuming and costly
process to undergo but it is critical, nonetheless. For
instance, if the IP application that you are filing does
not meet your business objectives, it could end up meaning
nothing to your business. You could die! There are vultures
out there. This means patent examiners must understand
the science and business of the application. If you look
at countries like Australia ? they have microbiologists
as patent examiners. We don't have that here. So, what
we will do with this fund is to develop a global IP benchmark.
We will then hire experienced IP examiners from anywhere
in the world and we will second them to MyIPO [Malaysian
IP Organisation] at no cost to resolve backlogs and, more
importantly, to train our patent examiners.
How does the commercialisation fund help the industry?
We hope to cover the funding gap at the seed stage as
venture capitalists [VCs] and angels do not play in that
space. There is no way in the world anybody in Malaysia
will give you seed money to start a biotech company. Not
even VCs who say they eat risk for breakfast. Biotech
is all about ideas and if nobody funds those ideas, the
innovation economy is not going to happen.
RM100 million is very little. How much will each company
get?
Originally, we requested for a lot more as this is an
important component. Our wish list was to have at least
a RM500 million fund. We actually asked for a RM1 billion
commercialisation fund. Nevertheless, I take it very positively
as this is enough for us to start out with. We will fund
good ideas, via grants, we don't take any equity, but
there are certain criteria. It must have a good science
base and the application of that science must have a market.
Also, please remember that biotech is risky, so not all
companies that receive the grants will succeed. But if
you get two or three big successes, it will make up for
the other eight failures. As to the amount, we are looking
at RM500,000 to a possible maximum of RM2 million.
People are saying that Biotechcorp is too big picture
and too focused on bringing in the Pfizers and Novartis
of this world. Every country is trying to woothese companies
and I read that the US Health Department has just given
Novartis US$220 million to set up a lab in the US. That
shows what we?re up against. The chase for these glamour
companies means there is not enough focus on local businesses.
How do you address that? For any industry, you need a
catalyst. You need a company that is big enough to encourage
smaller companies to set up. To expedite local company
development, we prefer to bring these global players to
them in the country rather than have our companies go
around the world knocking on doors. By bringing in these
big companies, our local companies can build around them.
It is true every country courts these big pharma players.
Some countries even give them money to set up in their
country. But we do it differently. We actually go through
the annual reports of these companies and find out everything
we can about the company. We went for Novartis because
most pharmaceutical companies have stopped their natural
substance research, but not Novartis. We have a rich biodiversity
and have done some very good research on many natural
substances. We sent them a list of the research we have
done and are currently undertaking in the natural substance
area and they are interested. So we said to them, "Let's
form a smart collaboration." That's how we pitched
ourselves. Their CEO Daniel Vasella would not be coming
down to Malaysia this September if they were not interested.
Before that, in July, a big team from Novartis is coming
to Malaysia to follow up on talks we had with them in
Basle in January.
What about the US$100 million deals you mentioned in BIO
2006 in Chicago?
It is a big contract-manufacturing entity but I cannot
reveal who yet as negotiations are still ongoing. Most
pharmaceutical companies outsource their manufacturing.
So we are targeting this industry. Hopefully, before the
end of the year, we can have two or three big investments.
This is not normal manufacturing but precision-based manufacturing.
Is this different from what local companies like Inno
Biologics (InnoBio) and Alpha Biologics are doing?
This company is a commercial, big-time player. They have
almost 100,000-litre for their manufacturing capacity.
InnoBio has 1,000 litres, which is well suited for clinical
batches, and maybe, to a certain extent, for some commercial
production too. But if we induce this global firm to tie
up with InnoBio for clinical batches, why not? This firm
is presently committed to building a facility somewhere
else but we are trying to get them to do it in Malaysia.
As a contract manufacturer, they are not going to build
the plant unless they get confirmed orders. What we can
do is secure that order for them if they build it in Malaysia.
To pull this off we are working with another company to
locate here. This biotech firm will need to manufacture
vaccine and can provide the orders the contract manufacturer
needs to commit a plant here. That's how we work. We try
and do things differently.
Tax incentives for biotechnology:
Incentive for the holding company
A holding company that fulfills certain conditions can
claim a tax deduction for its investment in its approved
subsidiary biotechnology company against its profits.
Tax exemption for biotechnology companies:
Approved biotechnology companies will be eligible for:
1. Pioneer status with 100% tax exemption on statutory
income for 10 years, commencing from the first year the
company enjoys profit.
2. Investment tax allowance with 100% of qualifying capital
expenditure to be set off against 100% statutory income
for five years from the date of first qualifying capital
expenditure incurred (not applicable if holding company
incentives have been claimed). * Dividends distributed
from tax-exempt biotechnology companies will be treated
as tax-exempt income for its shareholders.
* Import duty and sales tax exemption on approved biotechnology
equipment and materials be considered under the pre-packaged
incentives.
* Double deduction for qualifying expenditure on R&D.
Definition of R&D broadened to include pre-clinical
and clinical trials/testing. However, companies solely
undertaking pre-clinical and clinical trials/testing
activity are not entitled for double deduction.
* Ex-pioneer BioNexus status company undertaking R7D
activity (subject to separate accounts) are given:
- Corporate tax rate of 20% for 10 years on income
relating to 'qualifying activities'; or
- Normal corporate tax rate on income relating to 'non-qualifying
activities'.
* BioNexus companies undertaking manufacturing activity
and enjoying tax exemption of 15 to 20 years commencing
from first year of profitability are not eligible for
extension of tax exemption.
* Accelerated building allowance to be written off within
a period of 10 years for buildings used for research
purposes only.
* Double deduction for qualifying expenditure on export
promotion.
* Income tax deduction for investments by a company
and high net worth individuals with business income
in BioNexus status companies at seed or early stage.
* Exemption on stamp duty and real property gains tax
in relation to mergers and acquisitions of BioNexus-status
companies based on merits of the case, particularly
for R&D companies. |
