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Drivers for Healthcare R&D Investment in Asia-Pacific : Rise of the APAC R&D Giants

  • January 2015
  • -
  • Frost & Sullivan
  • -
  • 12 pages

Summary

Table of Contents

Introduction

Investment in Research and Development (R&D) is the key to sustaining innovation and promoting growth in the healthcare industry. This report broadly tracks the events and crucial reasons that have transformed the APAC region into a preferred R&D investment destination. We highlight four countries—China, Singapore, South Korea, and Taiwan—which showed the highest increase in R&D investment between 2009 and 2012. Driven by healthcare market growth in the region, these countries have emerged as hotspots for R&D investment as a result of improved Intellectual Property (IP) regimes, governments’ promotions and incentives, and increased research capabilities.

Executive Summary

For over a decade, investments in R&D have been waning in Western countries and steadily making their way into the APAC region. A large number of companies have set up R&D bases in Asian countries either to specifically cater to the local markets or to develop products that withstand market dynamics in both developed and emerging markets.
Riding the wave of growth in Asia, multinational companies such as Merck (US) established its Asia R&D headquarters in Wangjing Park, one of Beijing's rapidly expanding science and technology parks in 2011. In Singapore, attractive government co-investments have encouraged companies like GSK and Lonza to build substantial production capabilities in the country. Likewise, the Taiwanese government has recognized the importance of supporting the biotechnology industry in recent years and has created new initiatives such as the National Development Fund under the Executive Yuan. These efforts have prompted companies including Progen Pharmaceuticals (Australia) to tie up with local manufacturers such as Medigen Biotechnology Corp for their R&D activities to develop the PI-88 anti-cancer drug.
The shift in R&D investments is attributed to favourable government policies and regulations in Asian countries that collectively create an environment conducive for innovation. However, not all countries are as appealing when it comes to R&D spending. Within the APAC region, R&D investments appear to be moving from traditional to emerging R&D hotspots, with Australia standing out as an example of a conventional market struggling to retain R&D investments in the past few years.
Many APAC markets are competing as viable alternatives for cost-effective R&D and providing attractive commercialization opportunities. Countries that do not have the comfort of a large market size like China will need to enhance areas within their control, such as regulatory and tax environments, in order to continue drawing in funds for R&D.

Asia: An Emerging R&D Hub

Innovation in any industry, let alone healthcare, is improbable without investments in R&D. A minimum threshold of R&D is expected to drive healthy innovation across companies, countries, and regions. Not only does R&D investment fuel the development and growth of new products and technologies, but it also sparks curiosity, enthusiasm, and essential characteristics for a progressive and productive workforce. R&D expenditure is considered to be an essential criterion that reflects national development. It is influenced by a number of factors including political climate, fiscal policies, resource availability, and regulatory regimes.

Globally, there has been a decline in R&D spending, including in the healthcare industry. Even though healthcare has been more resilient on this front when compared with other industries, this trend is expected to reverse with the growing need for improvements in cost and quality of care across almost all countries and regions in the next few years. Between 2007 and 2012, total investment in healthcare R&D increased at a compound annual growth rate (CAGR) of only x %. The significant drop in global healthcare R&D spending in 2009 was a result of the recession as well as cuts in healthcare expenditure across developed markets, as a part of austerity measures.

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