The Hindu Business Line : `Venture funds not biting Asian biotech bait'

Mumbai May 13 Despite interest from large industrial houses and cross-border deals, Asian biotech tigers still seem to have a problem with venture capital (VC) funding, according to Ernst & Young, in its recent global biotechnology report.

In 2006, many traditional funding sources like public and private equity investors are "challenging" for Asian biotech companies, the report said.

While venture capital is soaring for other industries, biotech is not always getting a fair share of the action, it added.

Citing the example of China, it says that the venture capital environment in that country was booming in 2006.

Overall venture investment grew 55 per cent, making 2006 one of the best years on record.

"However, less than one per cent of the total went to biopharmaceutical firms," the report said.

Part of the reason was because Chinese companies are in early stages of commercial development and unable to provide VCs viable exits in the timeframes they seek.

"The focus on biotechnology in the Asia-Pacific is of relatively lesser origin. The strong University-led research culture, which led to startups, venture capital funding and finally a public enterprise through listing, was also missing," Mr Utkarsh Palnitkar, Partner Ernst and Young, who co-authored the report, told Business Line.

In Japan, biotech ventures find the lack of funds inhibiting business expansion, the report said.

It quoted from a survey that found VC funding in the Japanese biotech sector fell 32 per cent in the year ended March 2006.

Startups finding funds difficult to come by is a reality in markets from Australia to India and beyond, according to the report.

Only, the consequences would be more serious for the Asian region's fledgling industry, it added.

"Asian companies are reinventing themselves and reinvesting their earnings from contract services into innovative research.

"Beijing's Starvax reinvested its earnings from performing outsourced pre-clinical services for Western clients into proprietary research. India's Biocon has an integrated approach to combining its research for innovative products with outsourced research services."

It also said: "In the Asia-Pacific, the familiar path trodden by western biotech sectors - that of University spin-offs and venture-backed startups - may be replaced by new solutions that best leverage the region's unique strengths and challenges."

India, for instance, could begin with tapping the biodiversity that exists in its geography to trigger local VC interest, the co-author said.

More Stories on : Bio-tech & Genetics | Venture Capital

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