Malaysia’s Broken Biotech Dreams

A decade ago, then-Prime Minister Abdullah Badawi ushered Malaysia into the biotech era with the opening of the BioMalaysia 2005 conference, aimed at making the country a global player by building a conducive environment for R&D through leveraging existing strengths, particularly in biodiversity and bio-resources.

But that policy lies in a shambles, having eaten up huge amounts of money and having produced almost nothing of value. The 15-year master plan (2005-2020) crafted by the late Jamaluddin Jarjis, then the Minister of Science, Technology and Innovation (MOSTI), who unfortunately was killed on April 4, 2015 in a helicopter crash, has almost been abandoned.

Among the main biological processes that catapulted the biotechnology revolution worldwide are the genetic manipulation of microorganisms for the production of new drugs, the cloning and manipulation of selected genes in animals and crops to introduce improved varieties, the sequencing of the entire genome including the human one to better understand diseases, and the use of stem-cells in curing chronic diseases. These technologies were mainly originated in laboratories operated by leading universities and research institutions, mostly in the developed countries.

Universities and laboratories are the fertile grounds where the seeds of biotechnology are grown, and scientists are the workhorses that plough these fields. Without the hard work and ingenuity of these scientists, there is no biotechnology. But these scientists do not work in silos. They work very closely with entrepreneurs. The biotech industry is fundamentally built brick-by-brick through tightly knitted collaborations between academia (education & research) and the private sector.

Malaysia wanted to be part of this biotech revolution and wanted to do it quickly even it was already a latecomer. Thus the government launched a biotechnology development agency, Malaysian Biotechnology Corporation Sdn Bhd., under the purview of the Ministry of Science, Technology and Innovation with a strong mandate to steer and expedite the growth of the industry.

In the Ninth and Tenth Malaysia Plans, Biotech Corp was allocated a total of RM300 million to boost the industry through its Bionexus commercialization grants, technology acquisition programs and other industry facilitation apparatus. Two biotech institutes, one in pharmaceutical and another in agriculture were completed in the 11th Malaysia Plan. A biotech industry park was established in Nusajaya, Johor, ostensibly to rival Singapore’s Biopolis.

After hundreds of millions of dollars in public funding were poured into securing Malaysia’s place as an advanced country in biotechnology, where are we today? In order to gauge our ability to build biotech businesses, let’s take a look into three government-owned enterprises that were supposed to pave the way. They preluded the National Biotech Policy as both were incorporated before 2005.

The first is NineBio Sdn Bhd, a company established in 2003 under the purview of the Ministry of Health to spearhead the development of local pharmaceuticals particularly in halal, or Muslim dietary rules, vaccines. A budget of RM350 million was initially allocated to the company and a piece of land in Enstek Park in the university town of Nilai southeast of Kuala Lumpur was purchased for the vaccine project. The Auditor General’s Report in 2008 highlighted gross mismanagement of the company and the Ministry of Finance tried to revive the project in 2010, but to no avail. The company is now as good as defunct and the halal vaccine project suffered a premature death.

The second is Inno-Biologics Sdn Bhd, a company wholly owned by the Ministry of Finance, incorporated in 2002 with a paid-up capital of RM93 million. The company was targeted to be the national center for the commercialization and skill development in bio-manufacturing. Inno-Biologics was supposed to lead the country into the field of bio-pharmaceuticals -- block-buster billion dollar drugs -- such as erythropoietin and human insulin.

After 10 years of operation, Inno-Biologics hasn’t broken even and has continued to register huge losses. The Auditor General’s Report for 2014 pointed out that the company had losses of RM 78 million in three consecutive years between 2010 and-2012. Now the company is justifying its existence by reframing its business model and plotting new business ventures into an entirely different field of regenerative medicines such as stem-cell therapies.

The third company is TPM Biotech Sdn Bhd, owned by Technology Park Malaysia, an agency under the science and technology ministry, with paid-up capital of RM10 million to spearhead the country’s commercialization of herbal products through biotechnology. The company operates two manufacturing sites, one in Raub in the state of Pahang and the other in Kangar in Perlis. Both facilities were built using funds provided by the central government totaling more than RM 60 million.

Without taking into consideration the capital expenditures, the Auditor General’s Report for 2014 pointed out that TPM Biotech registered an operational loss of RM 580,000 over two consecutive years 2012-2013. And yet the company is now entering into new ventures into the fields of halal validation services. The government is investing another RM20 million in the same applications.

What went wrong with these three ventures? All three claimed they had invested in or entered into collaborations with partners with “state of the art” technologies in their respective fields. An all three companies were reliant on the government as sole and benevolent funder.

In the case of Inno-Biologics the government undertook very risky investment into a very specialized manufacturing platform, mammalian cell cultures. The technology can quickly turn out of date. To minimize risks, Inno-Biologics should have in the first place entered into long term binding strategic partnerships and equitable risk-sharing with established players internationally, both technically and commercially.

The field of biopharmaceuticals is full of proprietary technologies belonging to third parties which are costly and are well protected. The regulatory barriers are numerous and not easily maneuvered. The markets are well monopolized and covertly guarded. It was a huge undertaking, and so far we have not produced any success story.

The case of TPM Biotech the company has invested in herbal extraction, processing, and analytical facilities that are supposed to uplift the status of our herbal products from mere traditional preparations into scientifically validated health supplements. Scientific validations are the necessary steps needed to place our local products into the multi billion global health supplement markets. Analytical tools of biotechnology are useful to validate our products’ safety and efficacy.

These three cases demonstrated the following salient points:

• State-of-the-art technology does not by itself guarantee success. The technology can quickly become irrelevant and its usefulness dissipates over time. It is only useful insofar as it continues to create products that disrupt markets and generate profits. Acquiring technology is a relatively simple exercise provided that you have the money. The real challenge is how to use the technology.

• We should have given higher priority to developing human capital rather than giving more priority into purchasing equipment, constructing buildings and acquiring technologies. It is the people that drive technologies, not machines. Strong and independent teams of scientists that create innovation are the main drivers of biotechnology, not just a team of administrators.

• Government-owned companies should not just rely on continuous government funding in their financial planning model. Having a benevolent funder at your side throughout the entire commercialization process will only breed contentment and do not encourage innovation. Government investment should only facilitate and match private sector investments.

The proponents of the industry may argue that a high technology and knowledge-based industry like biotechnology is capital intensive and would take a long gestation period to mature. They are right. But that does not mean that we can justifiably continue to bleed public’s money into costly mistakes, one after another, without learning from them. So far we have a few broken dreams of biotechnology, experienced by none other than three of government’s own enterprises. Let’s not turn these broken dreams into another public nightmare.