Singapore, May 10, 2010: The government has recognized the potential of the country’s pharmaceuticals industry and is promoting it as a crucial sector. Malaysia has a strong local drugmanufacturing industry and products largely comprise basic generics that have gained reputation abroad. The Malaysian pharmaceutical industry is growing. According to a Danish report, the market is expected to top $1.82 billion in value by 2012 due to increased healthcare spending, which is seen to be growing at about 13 percent per year, fueled by medical tourism, specialist therapy-driven market, increased use of generic medications, dietary supplements, traditional and herbal products. Although small considering low capita medicine consumption, it still is a very significant market and has drawn the attention of big pharma companies.

“The country has a aggressive objective of improving its bioeconomy and has invested in all aspects of bioeconomy that includes agriculture, industrial biotech and healthcare,” says Ganesh M. Kishore, the CEO of Malaysia Life Sciences Capital Fund, a joint venture between Burrill and Company and the Malaysian Technology Development Corporation.

The Malaysian pharmaceutical industry produces almost all dosage forms, including sterile preparations, soft gelatin capsules, time release tablets and powders. The companies also make drugs from licensing, research and development. According to a government report, the industry produces almost 80 percent of the various categories in the Malaysian Essential Drugs List.

Over the last decade, the Malaysian pharmaceutical market has grown between 8—10 percent annually. The 2010 market size is estimated to be about RM 5 billion (1.56 million) for prescription and OTC medicines. The market for traditional medicines together with health and food supplements was estimated to be about RM 2 billion (6.26 million). However the market still relies, to a significant extent, on imports.

There are approximately 300 manufacturers in Malaysia licensed by the Drug Control Authority. Of these, just about 100 are licensed to produce pharmaceuticals and the rest produce traditional medicines and cosmetics. Currently, the local pharmaceuticals companies have control on the generics and over the counter (OTC) products, while multinational companies have established hold on branded/ethical drugs.

The pharmaceutical products manufactured by the Malaysian pharmaceutical industry can be broadly categorized as: prescription, OTC, traditional medicines and health and food supplement. The prescription medicines comprise patented and generic drugs, the sale and transaction of which are confined to doctors and pharmacists. The OTC, traditional medicines and health/food supplements may be sold by non-professional outlets and to the public.

About 30 percent of the drugs manufactured by Malaysian companies—mainly OTC and generics—is used locally while the rest is exported to other Asian countries, Africa, Europe, Latin America and Gulf countries. Malaysia is a member of Pharmaceutical Inspection Convention and Pharmaceutical Inspection Cooperation/Scheme (PIC/S) since January 2002. This led to country’s exports of pharmaceutical products receiving a boost, especially among the member countries, which include the European Union, Australia and Canada. The Malaysian pharmaceutical manufacturers are focusing on high-margin niche segments all the while adding value to the existing products by applying drug-delivery technologies, and moving into biopharmaceutical and branded generics and biosimilars to remain competitive.

While the local companies control 30 percent of the pharmaceutical business, MNCs have a sway over 70 percent as they still import patented drugs sold in the country. Another significant development in the industry is the growth in pharmaceutical exports.

The exports from Malaysian pharmaceutical companies will continue to grow among the local companies as a gateway to increase their revenues. Malaysia will be able to gain advantage from its capability and infrastructure of producing halal-certified products to fulfill the needs of local and foreign Islamic communities.

In view of intense competition and globalization, local companies that produce drugs at lower cost with good quality will sustain their growth and make difference for the country.

Biotechnology

The Malaysian government has recognized biotechnology as one of the top five sectors in which to make investments. The government believes that biotechnology will propel the country as a global biotech powerhouse by 2020.

“Malaysia has a diverse population and an excellent educational support system and infrastructure that enables a solid biotechnology research capability,” said Mr Peter Wulff, CEO of Sentinext Therapeutics, based in Penang, Malaysia. The company is developing safe and efficacious vaccines and therapeutics for tropical infectious diseases. “I believe Malaysia has everything it takes to be a powerhouse, however it has been underrated, while its neighbors take all the credit,” said the Denmark-based Wulff.

The biotechnology industry offers opportunities for both domestic and multinational companies. The government is making lot of efforts to promote the biotechnology industry in a bid to attract foreign investment and to boost the local economy. Hence the government has included the sector in its Ninth Malaysia Plan which ends in 2010. This sector comprises the development of vaccines and therapeutics, contract research and manufacturing, medical devices, diagnostics and drug delivery technologies. With the skyrocketing rise in the cost of clinical trials, many companies are shifting their activities offshore and Malaysia is seen as an attractive destination. The country also boasts a strong foundation in diagnostics products using homegrown technologies.

The herbal industry, though has not transformed into a high-tech industry, is making steady progress. Many companies are involved in producing nutraceuticals and health supplements. In the agriculture sector, producing planting materials using tissue culture methods and molecular breeding technology has created a healthy industry. Oil palm, ornamental plants, forest trees, and fruits are some of the plants explored.

Under the Ninth Malaysia Plan, the government will put in more efforts in order to develop the biotechnology industry as a new driver of economic growth. Focus will be given to the usage of biotechnology in agriculture, health care, industrial activities and bioinformatics. The Malaysian government launched a National Biotechnology Policy (NBP), which outlines the key concepts and measures offered by the government to take Malaysia’s biotechnology forward. The implementation of the NBP encompasses three main phases—capacity building (2005—2010), creating business out of bioscience (2011–2015) and turning Malaysia into a global player (2016—2020). It is intended that by 2020 Malaysia will be a global player in biotechnology and will generate at least 20 global Malaysian companies.

To drive implementation of the NBP, the Malaysian Biotechnology Corporation (BiotechCorp) was established in 2005 to act as the lead agency in facilitating the development of Malaysia’s biotechnology industry. BiotechCorp will help create a conducive business and regulatory environment for both local and foreign investors. The government through BiotechCorp, will award BioNexus Status to qualified biotechnology and life sciences companies, which are able to enjoy privileges contained within the BioNexus Bill of Guarantees and fiscal incentives.

To promote and support the nascent biotech industry, the government has started BioNexus Malaysia— which has somewhere between 100—120 biotech companies. BioNexus is essentially a network of Centers of Excellence throughout Malaysia and has companies that specialize in specific biotechnology sub-sectors.

As a follow-up to BioNexus, the Malaysian government also set up three Centers of Excellence—Institute of Agriculture Biotechnology in Serdang, Malaysian Genomic Institute in the National University of Malaysia (UKM) in Bangi, Selangor Province and National Pharmaceuticals & Nutraceutical Institute in the Science University of Malaysia (USM) in Penang. The job of these centers is to solicit business from companies and research institutes and link them to other allied or related research institutes and companies as part of a bigger collaboration. The government believes this initiative will help Malaysia become a top tier destination for biotechnology research and manufacturing in the region.

According to research reports, the market capitalization of biotechnology and biotechnology-related healthcare companies listed on the Malaysian Stock Exchange is a little over $900 million and will touch the billion mark in couple of years. Biotechnology is expected to generate revenue of $71 billion by 2020. As part of a bigger biotech initiative, BiotechCorp has come out with the NBP that has ‘nine thrusts areas’ that will help Malaysia realize its dream of being a biotech hub.

In the 2008—2009 budget, the government enhanced its funding for the healthcare sector which included supply of medicines, intensifying research and enforcement activities. Besides this, the government further made inroads into promoting public-private sector cooperation.

One cause of concern for Malaysia is the lack of some big domestic companies in either pharmaceutical or biotechnology, although there are many huge plantations and allied companies that have invested in R&D labs. The entire lifesciences industry in Malaysia is dominated by small and medium firms. However Malaysia is one of the world’s 12 mega biodiversity centers making use of traditional plants and herbs as medicines, hence there are opportunities for big pharma and biotech companies for strategic alliances and research partnerships.

The World Bank has upgraded its 2010 growth forecast for the Malaysian economy to 5.7 percent.

The Ministry of Science, Technology and Innovation is seeking more than RM4 billion to be utilized for research and development funding under the 10th Malaysia Plan (10MP).

The biotech market in Malaysia is expected to grow at a CAGR of around 21% during 2010-2012.

Despite the economic downturn, the Malaysian pharmaceutical market posted a 3.4% year-on-year (y-o-y)

growth in 2009, to reach the value of $1.24bn (MYR4.29bn) at consumer prices

Universiti Malaya recently launched $3 mn (RM10 mn) research facility to combat and prevent infectious

tropical diseases like dengue can cut dependence on foreign research labs