Why Hong Kong’s bet on biotech is doomed to fail – if private backers don’t step up
Publicly-funded research in universities is flourishing but few investors are currently willing to bankroll local scientists looking to commercialise findings, despite nudges from the government
Hong Kong is betting on biotechnology for the future as mapped out in the recent Budget but private sector investments are so anaemic that the few players around fear the industry may never take off in the city.
Checks by the Post on the number of investors found analysts and venture capital executives scratching their heads trying to estimate just how many private funders are involved.
The Post did find one entrepreneur, Ian Huen Chung-yuen, 38, who is focusing on biotechnology and putting money in local research to fund applications for wider use.
Huen said the high bar to biotech investment is a deterrent. It requires investors who have specific knowledge in the potential of a research project compared to, for example, those who do conventional property investment. Biotech also needs backers prepared to stick around for the long-term, not those seeking quick returns.
In 2016, Huen founded Aptorum Group, a Hong Kong-based life sciences and bio-pharmaceutical company, to support local scientists wanting to commercialise their research findings.
At least US$50 million has been earmarked by Huen’s group in the coming five years on over 20 research programmes mostly initiated by local universities.
Top scientist Richard Kao Yi-tsun is among those whom Aptorum is funding. While he was fortunate enough to get backing, he said there were just too few investors for researchers to turn to.
“Financial support from the private sector now is not sustainable enough … private investment on a certain project now might just be by chance” Kao, an associate professor from the University of Hong Kong’s department of microbiology said.
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Kao added that without an eco-system developing, the industry will struggle to find a firm footing despite Financial Secretary Paul Chan Mo-po promising in the latest Budget last month that he would spend an extra HK$50 billion (US$6.37 billion) supporting innovation and technology development. Chief executive Carrie Lam Cheng Yuet-ngor also announced last year in her maiden policy address additional tax deductions for research and development expenditure incurred by enterprises.
The Innovation and Technology Commission said biotechnology is one of the key disciplines supported by the government. Among its funds is the Innovation and Technology Fund’s Enterprise Support Scheme, which gives direct funding support to private entities to carry out in-house R&D.
Despite the private sector’s lack of interest, biotech research is flourishing in the universities.
According to the Research Grants Council, which approves research funding to local universities, 803 projects related to biotechnology were funded by the council from 2013/2014 to 2017/2018 to the tune of about HK$1.25 billion.
Kao said while the government was moving in the right direction, without funding from private investors, early-stage discovery made with public resources at the universities risked not getting off the ground.
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“Without private money, we will always stay in the early discovery stage,” Kao warned. “Without private money, we cannot move to the next level.”
For example, in drug development, the area Kao is working on, cross-sector collaboration is important due to the high costs involved and private investors are badly needed.
“[On the development of] a drug from its day zero to the end when it appears in the market for consumers or hospitals, the cost of research and development (R&D) is around US$1 billion to US$10 billion,” Kao said.
The model of collaboration between universities and private sector has been well established in many developed countries, but Hong Kong still lags behind the others.
“Hong Kong is still in the infancy [stage] and not mature,” Kao said.
He believes the city, which has top-notch scientists, has the potential to be a world-class drug development hub, a status that would be “accelerated” with private sector support.
Stand-out examples should also serve as encouragement. For example, Chinese University Professor Dennis Lo Yuk-ming, renowned for his research in liquid biopsy, which uses a few drops of blood to detect cancer, managed to secure private capital in 2014 to form a start-up to accelerate his research in cancer liquid biopsies and turn them into actual clinical tests.
Venture Investors Alliance, a group consisting of active venture and angel investors, said biotech has not yet been a focus for most of them but interest is slowly picking up.
“Most venture investors focus on internet and consumer sectors and very few focus on biotech and health care,” the alliance said.
A health care market research analyst, who declined to be named, also said the number of private investors in Hong Kong interested in biotechnology is “pretty small”.
Kao believed local investors were deterred by the long-term investment required.
“Hong Kong investors often look for short-term return and hope [invested] products could be launched in the market in one to two years,” Kao said, adding that a drug could take seven to 10 years of development before it can be ready for the market.
“Investors need to know that perhaps 90 per cent of [what they have invested] would not be successful,” said Kao. “Possibly only 10 per cent would succeed but its impact could be very important.”
Entrepreneur Huen said Hong Kong holds advantages in conducting biotechnology research.
“Hong Kong’s health care system is on par with those in other countries,” he said. “Our close link to mainland China also provides huge human and financial capital [for research].”
“Hong Kong has all those ingredients [for a good research environment], we just have to do more,” said Huen.
Huen’s interest in biotechnology came out of a personal encounter with illness. Fifteen years ago, he was kept in an isolation camp for 10 days after his father was infected with the deadly Sars virus.
“I was watching television every day [at the camp] and waited for Professor Yuen Kwok-yung to tell us there would be a cure,” Huen said, referring to the University of Hong Kong expert who played a key role in the discovery of the coronavirus that caused Sars.
Huen’s father recovered and it was the dedication of local scientists in the battle against Sars, as well as the help of doctors and nurses that moved him to think of supporting health care research.
“My father’s Sars illness opened my mind towards the opportunities on Hong Kong biotech,” said Huen. “I dug deeper to know more and I saw the potential of our local biotech.”
As for Kao, he is busy with his spin-off company, Acticule Life Sciences. With private sector help from Huen, he is working to commercialise his current research on drugs targeting the influenza virus and superbug Methicillin-resistant Staphylococcus aureus (MRSA). He hopes the two drugs can make it to clinical trials within two years.
“Knowledge has to be used to improve our society and should not stay only within academia,” Kao said.