Building a Bio-nexus


Economic News

22 Jul 2010
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Malaysia's biotechnology industry is set to receive a boost, as the government announced three new programmes aimed at enhancing investment in the sector.

The bio-nexus scheme, among the plans announced by the prime minister on September 7, proposes to grant biotechnology companies bio-nexus status, which is a list of benefits outlined in the nine-point bio-nexus bill of guarantees. These include freedom of ownership and the ability to source funds globally, along with unrestricted employment of knowledge workers. Bio-nexus status will be evaluated by an inter-ministerial committee, and will be managed by the Malaysian Biotechnology Corporation.

The companies selected would also have access to shared laboratory and production facilities as well as access to an information network linking research centres.

Among financial incentives, "[The companies] are eligible to 10 years of tax exemption on company profits as well as tax deductions on early-stage investments," Prime Minister Abdullah Ahmad Badawi said.

The industry has been on the government radar since the early 1990s, but has had slow and fitful progress in spite of heavy government investment.

However there are signs that the bio-nexus concept, and the national biotechnology policy that fostered it, is a step in a new direction, and one that is in line with the evolution of the biotechnology industry.

Bio-nexus, rather than heavy infrastructure, is providing the Malaysian market with a more liberal environment not only through tax incentives and ownership guarantees, but also greater connectivity with international research centres.

Iskandar Mizal Mahmood, CEO of the Malaysian Biotechnology Corporation, told OBG that bio-nexus represents some of the main priorities of the national biotechnology policy - research and development and human capital. "We want to leverage on the strengths we have in terms of infrastructure, and focus our new developments on the soft side," he said.

He added, "the bio-nexus concept is not location-specific, but rather the entire ecosystem - companies, financiers, venture capitalists, research institutes, etc. One particular company doesn't manage everything in the value chain; we want to facilitate collaboration."

Another challenge for the industry is that of developing biotechnology professionals in Malaysia. Abdul Reezal, the CEO of KL Biotech, told OBG that the situation is "a bit like the chicken or the egg. Encouraging Malaysians to pursue advanced degrees in biotech-relevant disciplines or attracting scientists from abroad is difficult without a solid biotechnology industry in place in Malaysia. But without such a skills base to draw from, building the industry is equally difficult."

But Iskandar is confident the bio-nexus concept can jump this hurdle. He said, "In biotech, if there's collaboration around the world with Malaysians abroad or foreign companies, we can benefit. In today's industry, research can be carried out in Canada for a European pharmaceutical company that benefits investors in the US. The Malaysian market can benefit as long as the collaboration is in place. In the meantime, the government is committed to pushing scientific research more to the forefront of schools and universities."

In order to be competitive in a field that is becoming more crowded, Malaysia must focus on certain areas of biotechnology in which it has a competitive advantage. The national biotechnology policy identifies agriculture, pharmaceuticals, and industry as sectors ripe for biotechnology investment.

In addition to the bio-nexus status scheme, the prime minister announced plans for the Malaysian Life Sciences Capital Fund (MLSCF) and the government backing of the Inno Biologics Biopharmaceutical plant. The MLSCF is a biotechnology venture capital fund that has amassed RM547m (US$150m) of committed funds so far. The fund will provide investors who might be relatively new to the industry an opportunity to diversify and gain knowledge of the business in an atmosphere of less risk. The RM100m ($27.22m) Inno Biologics project is a contract-manufacturing organisation specialising in biopharmaceuticals.

These investments follow the Budget 2007 allocation of RM210m (US$57.1m) for developing biotechnology in Malaysia.

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