Global Economic Competitiveness Report

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Professor Michael Porter and Principal Associate Christian H.M. Ketels prepared this case with the assistance of Fuad Hasanov and Reda Cherif, both with the IMF. This case was developed from published sources. Funding for the development of this case was provided by Harvard Business School and not by the company. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2018, 2019 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545- 7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.

M I C H A E L P O R T E R

C H R I S T I A N H . M . K E T E L S

Growing a Cluster: The Singapore Biomedical Sciences Initiative

Biopolis was conceived as part of a bold vision to establish the Biomedical Sciences as a key pillar of Singapore’s economy. That vision has become a reality. Today, Biopolis is a thriving eco-system of public research institutions and corporate labs and a vibrant community of local and international biomedical scientists carrying out world-class R&D.1

— Mr Lim Chuan Poh, Chairman of A*STAR and Co-Chair, Biomedical Sciences Executive Committee (2013)

Looking back at the past fifteen years of bioscience development, Singapore’s strengths in basic and translational research capabilities have yet to translate into substantial commercial success.2

— BioSingapore, The Next Lap (2015)

Seemingly out of nothing, Singapore had since the mid-1990s emerged as an increasingly relevant location within the global life sciences industry. Its success in entering this highly knowledge-intensive industry was seen as emblematic of the country’s broader journey from poverty to the highest ranks of economic development. Other emerging economies saw it as an inspiration for how to accelerate development by supporting the emergence of new, more sophisticated activities.

Singapore’s foray into biopharmaceuticals had been supported by large public investments into infrastructure, research capacity, and investment incentives. Biopolis, a biomedical science park providing dedicated infrastructure for biopharma research in a setting that aimed to support collaboration, was a visible incarnation of this approach. Multinational firms and foreign scientists had flocked to Singapore to take advantage of these benefits. The domestic skill base had also grown significantly with a range of support programs targeted at high potential Singaporeans. In the years after the global financial crisis, the stock of inward FDI in the sector had halved. Few local companies had emerged and some of them had left Singapore as their activities matured.

In early 2016, as the Singaporean government convened the Committee on the Future Economy to debate the country’s next move in economic development, the global context in the biopharmaceutical industry had significantly changed. Should Singapore change its approach towards the cluster?

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Singapore: The Emergence of an Asian Tiger Singapore was a Southeast Asian island at the southern tip of the Straits of Malacca, bordering

Malaysia and Indonesia (Exhibit 1). In 2017, its population of 5.6m included 3.5m Singaporean citizens of mainly Chinese, Malay, and Indian decent, 500,000 permanent residents, and 1.6m temporary foreign residents, living on a land area of 720 square km.3 The country had achieved impressive economic growth since gaining independence in 1965. Prosperity had moved from $500 GDP per capita in 1965 to $10,000 in 1989 and $40,000 in 2007.4 By 2017, GDP per capita had reached $53,000, slightly below the level of the United States which it had matched between 2011 and 2014 (Exhibit 2).5

Singapore’s geographical location had historically led to the emergence of a classic entrepôt economy, which funneled exports and imports to a surrounding region. When British colonial rule ended in 1958 and a merger with Malaysia faltered soon thereafter, Singapore had to reinvent itself as a newly independent country and self-sustaining economy. The country adopted an aggressive effort to attract foreign direct investment (FDI), largely as a platform for exports to the rest of Asia. What it had to offer were mainly low wages, but over time, also a sound macroeconomic and legal framework, efficient government regulations, and steadily improving physical infrastructure and human capital. Singapore benefited from a growing interest of multinational firms in setting up operations in Asia, and from the rising trade flows that made its port the world’s fourth busiest by the 1970s.6

In the late 1970s, Singapore shifted towards a strategy of pursuing high productivity. Investment attraction was refocused on capital- and skill-intensive activities, and the push towards creating a local business environment that could enable high productivity was increased. FDI continued to soar. A range of government-linked companies that had initially been created to run key infrastructure became a second key pillar of the economy, achieving success on international markets. 7

By 2000, Singapore was embarking on a new transition, this time towards knowledge- and innovation-driven growth. The government invested heavily into building up the university and R&D system, and refocused its education and human development efforts around higher skills. The huge real estate development around Marina Bay and Sentosa Island in 2010 reflected the increasing role of services and showed a new face of Singapore. By 2017, Singapore was ranked the 3rd most competitive economy in the world (Exhibit 3).8

A distinctive feature of Singapore’s economic development was the way it had organized policy making and implementation. In the initial decades after independence, the Housing Development Board (HDB) and the Economic Development Board (EDB) played a crucial role; EDB in particular had a broad mandate to coordinate and lead efforts around FDI attraction.9 Over time, they were joined by institutions like SPRING Singapore, an agency dedicated to developing Singaporean SMEs founded in 1996, and A*STAR, the Agency for Science, Technology and Research founded in 2002. The Singapore government regularly launched wide-ranging reviews of the country’s competitiveness, starting with the Economic Committee in 1985, and followed by similar efforts in 1997, 2001, 2009, and then the Committee on the Future Economy in early 2016.

Singapore’s cluster portfolio had evolved in the course of its development from a narrow focus on logistical services connected to the port to include a range of advanced manufacturing activities as well as business and other services (Exhibit 4). Electronics and Information Technology production remained important, as did petrochemicals and pharmaceuticals. There were large financial and advanced business services activities. Logistics had grown to include air transport, and was related to a growing tourism industry. Singapore also focused increasingly on education services, media, gaming, and other knowledge-intensive services.

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The Evolution of Biopharmaceuticals in Singapore

Antecedents

The first investments into biopharmaceutical plants in Singapore were made in the 1970s, when first Beecham, and then Glaxo built their operation on the island. 10 These activities had been triggered by Singapore’s general drive for foreign direct investment, not as the result of a sector-specific initiative. Singapore offered attractive conditions for capital intensive facilities, and good access to other markets, especially around Asia. At the time, biopharmaceutical production and exports, captured in the statistics within the chemical industry, were at less than 5% of GDP and exports. 11

In the early 1980s biopharma was mentioned by the Singaporean government as an area of potential opportunity for the city state for the first time.12 Following the report of the Economic Review Committee set up after Singapore’s first major recession, Singapore was getting serious about a push towards a more knowledge- and innovation based economy.13 The Singapore Science Park was opened in 1984. At the same time, a leading scientist from the UK, Dr. Sydney Brenner, suggested the creation of an Institute of Molecular and Cell Biology (IMCB) for Singapore to develop research capability and infrastructure.14 IMCB opened one year later and became a cornerstone of Singapore’s biotech research infrastructure.

During the 1990s, the Economic Development Board (EDB) became increasingly interested in biopharma, noticing the growth of the industry. It had launched the National Biotechnology Program (NBP) with a budget of S$40m to fund research, collaboration, and support investment attraction. 15 The Bioprocessing Technology Institute (BTI) was established in 1990 with the mission to pursue innovative and cutting-edge research in bioprocess science and engineering. A new National Biotechnology Committee was created to coordinate these activities. These activities aligned with a broader ramping up of activities related to science and innovation. In 1991, the National Science and Technology Board (NSTB) was formed to drive a significant expansion of R&D capacity and implement a five-year, S$2 billion National Technology Plan in nine technology fields. 16 Research activities in collaboration with the private sector had also started to emerge: Lilly-NUS (LNUS) was established in 1997 by Eli Lilly, a leading global pharmaceutical firms with headquarters in the U.S., in partnership with the National University of Singapore (NUS), and the National Science and Technology Board (NSTB).

Launching the Biomedical Science Initiative (2000–2006)

By the end of the 1990s, Singaporean leaders were getting concerned about the increasing pressure on their existing sectors, in particular, electronics, manufacturing and petrochemicals. Biopharma- ceutical had emerged as a potential alternative; production and exports had steadily grown, and the R&D activities had generated a robust number of patents.

In 2000, the government officially identified biopharma as the “fourth pillar of Singapore’s manufacturing sector.”17 EDB Chairman Philip Yeo and the leaders of key research institutions developed the Biomedical Science Initiative, in its first phase funded with a budget of S$1.5bn earmarked largely for basic research.18 A new Ministerial Committee for the Life Sciences, chaired by Deputy Prime Minister Tony Tan, was created to coordinate efforts across education, research, and industry development.

The efforts to support biopharma were put in a new organizational structure in 2002, when NSTB was reorganized into the Agency for Science, Technology and Research,19 and Philip Yeo became Chairman of the new entity. Over the next five years, A*STAR invested more than S$1bn into research through its Biomedical Research Council, enhancing funding for IMCB and launching four new public research institutes in bioinformatics, genomics, bioprocessing and nanobiotechnology. R&D capacity

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was created across a wide-range of areas rather than focused on specific niches, a decision that later led to some controversy.20 A*STAR also launched a range of well-funded human development programs, both to attract foreign researchers and to develop local talent from Singapore and abroad. It provided close to US$ 50m to Johns Hopkins University to develop a medical research facility in Singapore, and later attracted Duke University to establish a Medical School at NUS. The collaboration with John Hopkins was ended in 2006, with A*STAR claiming insufficient results.21

In parallel, EDB ramped up its activities in biopharmaceuticals, working through the Biomedical Sciences Group and Bio*One Capital. The Biomedical Sciences Group focused on attracting firms and people in support of the biomedical sciences to Singapore, with programs that remain fully in place today. Investors benefited from the attractive tax incentives available in Singapore, and specific contributions to building costs. These benefits were available not only to R&D activities, but to any activity in biopharmaceuticals, including related and supporting industries like logistics. Dedicated instruments were available for manufacturing investments and setting up headquarter functions. EDB often partnered with the foreign investors setting up their R&D activities. Bio*One Capital provided capital; together with the Biomed Sciences Investment Fund it had by 2005 invested S$2.2bn.22 Most of the companies in which Bio*One Capital invested were not from Singapore, but then ended up launching new operations there.

Another critical input was the availability of suitable physical sites. The construction of Biopolis, a S$500m investment to create a physical hub for biomedical research, started in 2001, with the first phase finished in 2004 (Exhibit 5).23 Biopolis was designed to provide meeting spaces and other facilities to encourage collaboration among researchers. Initial anchor tenants included some of the public research institutes funded by the Biomedical Research Council, joined by R&D centers that were partnerships between EDB and multinational biopharma companies. JTC, a government entity specialized in developing industrial sites, developed phase 1 while subsequent phases were developed by private developers. Other sites like the Tuas Biomedical Park were, in the meantime, focused on housing biopharmaceutical manufacturing activities.

Singapore ensured a stable regulatory environment that met international standards. A robust IPR protection system existed, embedded in Singapore’s strong overall legal framework. In 2000, the Bioethics Advisory Committee (BAC) was created, reacting to international discussions about the use of stem cells. Singapore adopted a more liberal approach than others, especially the U.S.24 Strict adherence to international standards allowed Singapore to attract research activities in stem cells not possible in the US while still enabling research efforts that used stem-cells from Singapore to be eligible for funding by U.S. government entities. 25

Output from biopharma manufacturing quadrupled between 2000 and 2006. Biopharma became the largest FDI sector in the Singaporean economy by 2004, outstripping electronics. 26 Global biopharma companies started to place R&D activities in Singapore. Biopolis was soon fully occupied, and further extensions were made in 2006, 2011, 2013, and 2014. Research output measured in publications and patents also sharply increased. 27

Phase 2 of the Biomedical Science Initiative (2006–2010)

The ambition of phase two of the Biomedical Science Initiative was to translate the knowledge created through the expansion in research into products. A new Biomedical Sciences Executive Committee was created to coordinate efforts that would build the necessary capabilities in translational and clinical research. A total budget of $1.5 billion was mobilized through A*STAR, the National Research Foundation, and the Ministry of Health. 28

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A*STAR funded two new public research institutes: The Singapore Institute for Clinical Sciences (SICS) was established to expand Singapore’s clinical R&D capabilities, while the Centre for Molecular Medicine was repositioned as the Institute of Medical Biology (IMB) to facilitate translational research29. The Experimental Therapeutics Centre (ETC) was set up in 2006 as a center of excellence to advance and accelerate drug discovery.

Within the health care system, too, efforts were made to bridge the gap between research and care delivery: Clinical research was explicitly included in the mandate of the Ministry of Health (MOH), and the National Medical Research Council (NMRC) under MOH significantly increased funding for clinical research by the healthcare sector. NMRC launched flagship funding efforts in five disease areas to support translational and clinical research (TCR). The Academic Medicine Centers at Kent Ridge Campus (NUS) and the Outram Campus (Duke-NUS GMS) both started operations in 2007. The NUS-Duke Graduate Medical School (GMS) had been established in 2005, having a research-intensive curriculum.

Across these different entities, the government promoted a number of consortia that brought researchers together around specific issues. They included the Singapore Cancer Syndicate, the Singapore Bio-imaging Consortium, the Singapore Stem-Cell Consortium, the Singapore Consortium of Cohort Studies, and the Singapore Immunology Network. The consortia funded joint research, offered joint educational programs, and helped link the respective communities in Singapore with global peers. Human development programs were aligned with this new direction. Scholarship and funding programs offered by A*STAR helped medical doctors to become clinical scientists, attracted foreign exports in clinical research, and supported local talent in this area.

These steps were taken within the context of a broader upgrading of Singapore’s innovation system. Reviews of the academic system conducted between 2004 and 2006 led to a significant increase in funding for academic research, the setting up of an Academic Research Council, and the establishment of five Research Centres of Excellence (RCEs), including the Cancer Science Institute of Singapore (NUS) in 2008.30 The Research, Innovation, and Enterprise Council was launched with the Prime Minister as the chair, and the National Research Foundation was created within the Prime Minister’s Office to execute the strategy.

Phase 3 of the Biomedical Science Initiative (2011–present)

The next phase of the Biomedical Science Initiative aimed to create further economic impact and ensure that innovation was made available to the Singaporean health care system. The focus of new programs shifted increasingly towards services and activities that were important for local start-ups, less so for multinational pharma firms.

Biomedical sciences accounted for about 20% of the total funding dispersed through the Research, Innovation, and Enterprise (RIE) programs, the largest individual share by sector in the overall budget. Funding had been increased by about 20% from the 2015 to the 2020 program, reaching S$4.0bn for the 2016–2020 period covered by RIE2020.31 It included many of the programs to support research as well as attracting foreign and upgrading local talent launched in the past. EDB and Workforce Singapore had also developed workforce programs like the Attach-and-Train Program for Biologics and the Local Biologics Skills Training (BOOST).

The Biomedical Sciences Industry Partnership Office (IPO) was created jointly by A*STAR, EDB, and the NMRC to enhance collaboration across the different activities within research, business development, and health care. The NMCR launched two new TCR programs in Cardiovascular Disease and Lung Cancer that extended activities into new disease areas. The RIE programs 2015 and then 2020 provided funding to public research institutions, health care institutions, and universities.32 The

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A*STAR Drug Discovery and Development Unit (D3) was launched in 2011, with activities focused on preclinical development and clinical trials that led to proof-of-concept in humans. It worked closely with ETC, which focused on the upstream steps of the development process. The Experimental Biotherapeutics Centre (EBC) was to be launched later in 2017.33

SPRING, a government agency focused on developing local industry, provided a range of programs to link academia, clinicians, and technology providers to create new companies. A new startup development program was announced in 2017: The Singapore Exchange (SGX) and A*Star’s Exploit Technologies (ETPL) arm granted promising startups access to A-STAR’s R&D capabilities, and provided access to public or private growth capital. Especially in health-related data analytics, an area with incumbent locals and multinationals, significant new firm activity was emerging.

The Singapore Biopharma Cluster in 2017

Profile

Manufacturing was the traditional core of biopharmaceutical activity in Singapore. Initially, the focus had been on primary manufacturing of active pharma ingredients (APIs). Singapore was one of the first locations outside of the group of advanced economies that had managed to attract these activities. It still accounted for a significant part of production by 2017, with companies like Aventis and GSK.34 Over time, more advanced operations in secondary manufacturing, the tableting and formulation using APIs, had been added. Firms like Wyeth and Merck have operations in this field on the island. A third group had more recently become the biologics production of therapeutic proteins, done by companies like Genentech and Lonza. A fourth group was the production of medical devices, including cardiovascular implants, in vitro diagnostics, and ophthalmic devices, including 10% of the world’s contact lenses. 35 All of these operations were highly capital intensive.

R&D Centers had become a second key pillar since the early 2000s, reflecting the new direction that the cluster took after the launch of the Singapore Biomedical Sciences Initiatives. The Eli Lilly Center for Drug Discovery and the Novartis Institute for Tropical Disease (NITD) were the first such investments made by global pharmaceutical firms in 2002. Such centers were often launched as joint initiatives with the EDB. While these two first centers had closed down by 2017, others followed over time, including investments from MSD, Roche, GSK, Bayer, and also from consumer goods giant P&G, which had located its Singapore Innovation Center in Biopolis.

A third pillar was the regional and global business unit headquarters from multinational pharma and medtech companies. Singapore had been an attractive location for regional headquarters in many industries, supported by targeted tax incentives as well as a strong legal framework, infrastructure, and skill base. Firms that had recently moved headquarter activities for Asia to Singapore included Actavis (2014), Takeda (2015), GSK (2105), Ferring (2016), Quintiles (2016), and iNova Pharma, a Valeant company (2016).

A fourth, still much smaller, pillar was the group of local biotech and small- and medium-sized medtech companies. Biotech start-ups had emerged through spin-offs from public research institutes, or through the attraction of start-ups from other countries.

The cluster had seen the emergence of a robust set of related and supporting industries and organizations. Manufacturing activities had access to specialized infrastructure like the Tuas Biomedical Park, specialized logistics provider, and dedicated HR training providers. Headquarter services found a deep pool of advanced business services at their disposal. R&D activities, often themselves joint initiatives with government agencies, had linkages to the rich set of public research institutes and hospitals. They

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could draw on the physical infrastructure and platforms for connection available in Biopolis. Contract research organizations like Covance, Quintiles and ICON have located in Singapore to provide support for clinical trials. Biopharma start-ups, too, could tap into this innovation system available to the R&D centers of multinational pharma companies. There was also a small emerging local risk capital industry with a focus on life sciences, as well as other related business services.

Supporting the cluster was a set of specialized government agencies, primarily the EDB’s Biomedical Sciences group, A*STAR, and the National Medical Research Council. Spring Singapore and the National Research Foundation in the Prime Minister’s Office also had specific programs for the biopharma and health industry. In the private sector, BioSingapore was created in 2004 as a networking organization for the private sector.

Singapore’s health care system included about 12,000 doctors and 26 hospitals and specialty centers, eight of which were government-run. 36 Health care spending in the universal coverage system was at roughly 4% of GDP, low compared to many other advanced economies. Singapore regularly achieved high ranks in terms of health outcomes and the efficiency of its health care spending.37

The cluster combined activities that were elsewhere not co-located: In the U.S., for example, production took traditionally place in locations like Puerto Rico (or offshore in Ireland), headquarters were strongly represented in New York City and New Jersey, and research activities were traditionally strongest in Boston, the Bay Area, San Diego, and the Research Triangle in North Carolina.

Size and Performance

The Biopharma cluster had grown to be one of the largest in the Singaporean economy. Growth had been robust but production slumped during the global financial crisis between 2007 and 2009.

By 2017, Singapore was home to 50 manufacturing plants with 19,000 employees38 (Exhibit 6).39 Seven of the ten largest global pharmaceutical companies have production facilities in Singapore. In a global list of the top 1,000 biopharmaceutical manufacturing plants, Singapore had eight entries (vs 9 in Taiwan and 20 in Korea), but ranked higher than many peers in an aggregate score summarizing production capacity, breadth, and employment.40 Roughly one-third of the employment was in pharmaceutical production, the remainder in medtech. The total value of production was around S$30bn, with a value added of S$15bn, putting it just behind electronics.41 Medtech production accounted for less than half of total, and less than that for value-added.

Singapore’s biopharmaceutical exports reached $11.2bn in 2015, making it the 13th largest exporter in the world with a market share of 1.82% (see Exhibit 7). For medical devices, exports were at $5.2bn and a market share of 2.15%. The country’s overall global export share was 2.4%, compared to IT and Analytical Instruments exports at $144bn and a market share of 8.2%.42

The value of the inward FDI stock in the pharmaceutical industry was $23bn in 2016; less than 50% of its record value in 2007 and now at 13% of all inward manufacturing FDI versus 43% in 2007 (Exhibit 8). The returns on investment for pharmaceutical FDI has in the meantime, soared to close to 2.5 times the level of all manufacturing investments.43 In terms of inward FDI flows, Singapore ranked 2nd in a global assessment of Biotech FDI inflows to regions over the last 15 years, beaten only by Shanghai.44 Forty-four investments were made in Singapore, creating more than 3,500 jobs and representing investments of more than $2.3bn. A more comprehensive earlier study had found Singapore to be the top three recipient country of biopharma FDI between 2000 and 2010.45 Between 2007 and 2010, China surpassed Singapore in terms of total inflows, while India came close to matching Singapore. 70% of Singaporean inward FDI in biopharmaceuticals went into manufacturing, compared to less than 50% for China and India.46

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Singapore was home to 50 R&D centers. In 2013, total biopharma R&D spending accounted for S$1.4bn, with annual growth rates of more than 15% since 2011 (A*Star, 2014). This represents about 0.75% of global biopharma R&D spending. Basic research accounted for 35%, applied research for 40%, and experimental development for 25% of the total. Two-thirds of the R&D spending related to the public sector, the rest to private companies. Two-thirds of the private R&D spending came from foreign firms; they were heavily focused on applied research and experimental development while local firms, especially SMEs, focus on basic research. As a share of revenue, foreign firms in the sector spend 1.1% on R&D; for local SMEs it was 3.1%. Around 5,000 researchers were employed in the cluster by 2013.47 The private sector accounted for about 20% of all researchers, with a significantly smaller share of PhDs than in the public research institutions. Foreign firms employed about three times as many researchers as local SMEs.

Singapore accounted for 0.8% of all biotechnology patents awarded globally between 2010 and 2013, ahead of Ireland but behind regional peers like Taiwan (2.0%) or Australia (1.3%)48. Its national patent portfolio was among the most biased towards biopharma, only Chile and Estonia were equally or more specialized. Foreign firms owned two-thirds of the patents held in Singapore, local SMEs one-third. A*Star institutes alone were awarded close to 200 patents between 2010 and 2014. Over the same period, 238 IP licensing agreements were recorded. Singapore registered 1,518 academic publications in medical sciences in 2014, Australia had around 12,000, Korea 9,400, and Thailand 1,30049.

Around 30 regional headquarters from multinational pharmaceutical and medtech companies were located in Singapore. 50

By 2017, 79 biotechs companies were active in Singapore, a quarter of which were A*STAR spin- offs. At least 60 of them had been incorporated since 2010, three times that of the preceding decade from 2000 to 2009.51 Local SMEs in biopharma were by 2017 reported to account for close to 40% of all private sector R&D expenses in the cluster.52 Two of the first biotech start-ups, S*Bio and Merlion, had in the meantime left Singapore.53 The first IPO of a Singapore founded biotech company took place in early 2017, when Aslan Pharmaceuticals floated 15% of its stock on the Taiwan Stock Exchange. 54

Cluster-specific Business Environment Conditions

Manufacturing operations could draw on excellent physical infrastructure in dedicated sites, in particular the Tuas Biomedical Park. Skilled employees were provided through dedicated skill development programs offered by the Singaporean government with local educational institutions, and the BTI research institute offered specialized knowledge on bio-manufacturing processes. Ownership of these capital intensive operations was secure in Singapore’s strong legal system. The advanced and internationally respected regulatory framework allowed products from facilities in Singapore to be sold in foreign markets. Singapore’s trade agreements with many other countries kept these markets open. Tax incentives and the willingness of Singaporean authorities to co-invest enhanced the financial attractiveness of Singapore for these activities. 55

Headquarter activities, too, benefited from the physical infrastructure, here mainly the world-class transportation and communication infrastructure. The labor market was open and attractive to foreign talent, with a high quality of life, low taxes, and a strong education system. It also provided a well- developed cadre of local executives that had worked in multinational or large local companies. Special tax incentive schemes were available for these operations.

R&D activities could draw on the specific type of infrastructure they needed, dedicated research facilities and others available at sites like Biopolis. A key asset was the strong network of academic research institutes that had been systematically developed. World-class scientists had been recruited, and both local and foreign talent systematically developed. The National University of Singapore

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(NUS) was ranked 20th in a global assessment of academic excellence in life sciences, behind only two Australian universities in the Asia/Oceania region. 56 The universities and hospitals had in education and health care delivery been opened up for research as well. The internationally accepted regulatory environment made R&D and clinical trials undertaken in Singapore useable in key pharma markets around the world. As for manufacturing, dedicated tax incentive and co-investment schemes were available. Interview evidence suggested that significant barriers in behavior continued to hamper collaboration and open innovation. 57

Biotech companies had access to a strong R&D system in the universities and public research institutions. The risk capital market was nascent, with very few specialized private VC firms active in the industry.58 The local equity market was not seen as well equipped for IPOs of high-growth firms. The pool of executives with the experience to start and scale new companies was small.59 For top research talent new firms had to compete with leading pharma firms and well regarded public research institutes. Tax incentives existed, but had traditionally been directed towards large multinationals. Public programs were starting to offer services in product conception and development more relevant to start-ups.

Looking Ahead By 2017, the global biopharmaceutical industry had experienced significant changes since the

Singapore Biomedical Science Initiative had been launched in 2000. An increasing share of global pharmaceutical demand was coming from emerging markets, especially in Asia.60 Asian countries, led by China and India with their huge size, had made several important changes in their business environments that made them viable locations for the activities of multinational pharma companies. Setting up intellectual property rights (IPR) regimes that multinationals could accept was one element, the large number of science graduates was another.

The industry structure that had supported high profitability for pharma companies was under strain. Governments, often the core payers in health care systems, were concerned about pricing and looked for several ways to reduce costs. There was a growing shift towards generics, pharmaceuticals that had moved out of patent protection. The research expenditures needed to arrive at a new “blockbuster” drug increased dramatically,61 while the political risk of exploiting such new patented drugs through high prices grew. Pharma companies responded through restructuring their R&D activities, focusing more on late-stage development while relying on equity stakes and buy-outs of science-driven start-ups to fill their product pipeline. There was also a significant degree of mergers and acquisitions in the sector, further fueling the pressure to streamline existing operations.62

The biotech revolution had meanwhile opened up new ways to develop and manufacture pharmaceuticals. While chemical-based pharmaceuticals continued to dominate, there was an increasing share of biological products entering the market.63 This had implications for both the focus of R&D investments and for the nature of manufacturing facilities required. The development of manufacturing process for biologics products required a closer connection to R&D. The connections to the chemicals industry were in the meantime less important.

What was Singapore’s value proposition going to be in this shifting market environment? And what role was biopharmaceuticals going to play in the future Singaporean economy? The discussions in the Committee on the Future Economy had increasingly focused on how industry transformation had redrawn the boundaries of many sectors. What would that mean for biopharmaceuticals, and for the policies Singapore should deploy to support their growth?

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Exhibit 1 Southeast Asia and Singapore

Source: University of Texas Libraries, http://www.lib.utexas.edu/maps/middle_east_and_asia/southeast_ asia_pol_2013.pdf, accessed October 2017.

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This document is authorized for use only by Bowen Zheng ([email protected]). Copying or posting is an infringement of copyright. Please contact [email protected] or 800-988-0886 for additional copies.

718-428 Growing a Cluster: The Singapore Biomedical Sciences Initiative

12

Exhibit 3 2016 Singaporean Global Competitiveness Index Profile (selected countries and components, ranks in set of 135 countries)

Source: Created by casewriter based on analysis of WEF Global Executive Opinion Survey using the methodology

in Delgado et al. (2012)

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71 8-

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718-428 Growing a Cluster: The Singapore Biomedical Sciences Initiative

14

Exhibit 5 Biopolis and Tuas Biomedical Park

Biopolis

Source: “Fusionopolis, One North, Singapore” Flickr user yeowatzup, https://www.flickr.com/photos/yeowatzup/

3291994957, accessed March 2018.

Tuas Biomedical Park

Source: http://wtpartnership.asia/our-team-experience/epicentre-at-tuas-biomedical-park-singapore/, accessed November

2018.

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Growing a Cluster: The Singapore Biomedical Sciences Initiative 718-428

15

Exhibit 6 Snapshot of the Singapore Biomedical Sciences Cluster

616 companies in manufacturing, research, supplies and logistics plus cluster-related institutions and government agencies.

Source: Marshall Cavendish Business Information, pharmbiosingapore.com – accessed November 2018; authors’ analysis by Richard Bryden, HBS.

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718-428 Growing a Cluster: The Singapore Biomedical Sciences Initiative

16

Exhibit 7 Biopharmaceutical Exports by Country, 2014, ICCP (ISC)

Source: Created by casewriter using the International Cluster Competitiveness Profiles, (2017), ISC: Boston.

This document is authorized for use only by Bowen Zheng ([email protected]). Copying or posting is an infringement of copyright. Please contact [email protected] or 800-988-0886 for additional copies.

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This document is authorized for use only by Bowen Zheng ([email protected]). Copying or posting is an infringement of copyright. Please contact [email protected] or 800-988-0886 for additional copies.

718-428 Growing a Cluster: The Singapore Biomedical Sciences Initiative

18

Endnotes

1 “Singapore’s Biopolis: A Success Story,” MarketWatch, October 17, 2013.

2 “The Next Lap: Biosciences in Singapore 2025,” Economist Intelligence Unit, December 3, 2015.

3 Statistics Singapore, http://www.singstat.gov.sg/statistics/latest-data#16 accessed September 2017.

4 Statistics Singapore, “GDP per Capita at Current Market Prices,” http://www.singstat.gov.sg/stats/themes/ economy/hist/gdp.html, accessed November 2009.

5 Economist Intelligence Unit, EIU Country Data, February 2010.

6 T. J. S. George, Lee Kuan Yew’s Singapore (London: Andre Deutsch Ltd., 1973), p. 95.

7 Ramírez, Carlos D., and Ling Hui Tan. "Singapore Inc. versus the Private Sector: Are Government-Linked Companies Different?" IMF Staff Papers 51, no. 3 (2004): 510-28

8 World Economic Forum (2017), Global Competitiveness Report 2017-2018, WEF: Geneva

9 Lawrence Wong, “Development Strategy: Designing Markets & Growth,” World Bank, March, 2007.

10 Thampuran, Raj, Kong Hwai Loong (2016), The Biomedical Sciences: Research for Better Health, in: Chieh Hang, Chang, Teck Seng Low, and Raj Thampuran (eds.), The Singapore Research Story, World Scientific Publishing: Singapore.

11 Economic Change in Singapore, 1945-1977.” Southeast Asian Journal of Social Science, vol. 7, no. 1/2, 1979, pp. 81–113. JSTOR, www.jstor.org/stable/24490038.

12 Gelfert, Axel (2013), Before Biopolis: Representations of the Biotechnology Discourse in Singapore, East Asian Science, Technology and Society, Vol. 7, No. 1, 107.

13 Poh, Lim Chuan (2016), From Research to Innovation to Enterprise: The Case of Singapore, in: Soumitra Dutta, Bruno Lanvin, and Sacha Wunsch-Vincent (eds.), The Global Innovation Index 2016, Cornell University, INSEAD, and WIPO: Ithaca, Fontainebleau, and Geneva.

14 Tan, B., Lim, H., & Phua, K. (2016). 50 years of science in Singapore (World Scientific series on Singapore's 50 years of nation- building). New Jersey: World Scientific.

15 Gelfert, Axel (2013), Before Biopolis: Representations of the Biotechnology Discourse in Singapore, East Asian Science, Technology and Society, Vol. 7, No. 1, 106.

16 “National Science and Technology Board is Formed,” History SG, Singapore Government, http://eresources.nlb.gov.sg/history/events/9addb3d8-62eb-420a-a10a-3727f790259c.

17 Speech by Dr Tony Tan Keng Yam, 2000 April 15, Singapore Government Media Release.

18 Van Epps, Heather L. “Singapore's multibillion dollar gamble.” The Journal of experimental medicine vol. 203,5 (2006): 1139- 42. doi:10.1084/jem.20060895

19 A*STAR (2015), National R&D Survey of Singapore 2014, A*STAR: Singapore.

20 “Singapore’s Elite in Biomedical Project Row,” Financial Times, February 14, 2007.

21 Singapore pulls plug on US collaboration, Nature, Vol. 442, August 2006, page 493

22 Yeoh, KC. J Commer Biotechnol (2008) 14: 141. https://doi.org/10.1057/palgrave.jcb.3050083

23 Kermani, Faiz and Rebecca Gittins, “Where Will Industry Go to For Its High-Calibre Staff.” Journal Of Commercial Biotechnology. Vol 11. No 1. 69. October 2004

24 Reubi, David (2010), The Will to Modernize: A Genealogy of Biomedical Research Ethics in Singapore, International Political Sociology 4, 152.

25 Finegold, D., P.K. Wong and T.C. Cheah (2004), Adapting a foreign direct investment strategy to the knowledge economy: The case of Singapore’s emerging biotechnology cluster, European Planning Studies, 12(7): 921-941.

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Growing a Cluster: The Singapore Biomedical Sciences Initiative 718-428

19

26 Lim, Hank, Lim Tai Wei (2010), Sustainable Development Impacts of Investment Incentives: A Case Study of the Pharmaceutical Industry in Singapore, International Institute for Sustainable Development: Winnipeg.

27 Ibid.

28 Hang Chang Chieh, Low Teck Seng, Thampuran Raj (2015),The Singapore Research Story, World Scientific Publishing, Singapore, p. 105

29 Wong PK., Ho YP., Singh A. (2010) Industrial Cluster Development and Innovation in Singapore. In: Kuchiki A., Tsuji M. (eds) From Agglomeration to Innovation. IDE-JETRO Series. Palgrave Macmillan, London.

30 National Research Foundation, Singapore Government, updated February 4, 2019.

31 “Research Innovation Enterprise 2020 Plan: Winning the Future through Science and Technology,” Nation Research Foundation, Singapore Government, 2016.

32 Ibid.

33 “Biotech Sector Poised to Deliver More Health and Wealth,” Agency for Science, Tehcnology and Research, July 27, 2019.

34 “Future-Proofed Pharma,” Economic Development Board, June 6, 2018.

35 “Singapore Dazzles as a World Leader in Medical Manufacturing,” Economic Development Board, April 13, 2018.

36 MOH Ministry of Health (2017), Our Healthcare System: Healthcare Services and Facilities, https://www.moh.gov.sg/content/moh_web/home/our_healthcare_system/Healthcare_Services.html accessed September 25, 2019

37 https://www.bloomberg.com/news/articles/2016-09-29/u-s-health-care-system-ranks-as-one-of-the-least-efficient and http://www.thelancet.com/journals/lancet/article/PIIS0140-6736(17)32336-X/fulltext?elsca1=tlpr

38 Poh, Lim Chuan (2017), Biotech Sector Poised to Deliver more Health and Wealth, A*Star, 29 July 2017.

39 Other studies report significantly lower numbers. IFPMA (2017) reports for 2014 8,000 employees and exports of $6.3bn for Singaporean pharmaceuticals.

40 Bioplan (2017), Top 1000 Global Biopharmaceutical Facilities Index™, http://www.top1000bio.com/ accessed September 18, 2017.

41 Poh, Lim Chuan (2017), Biotech Sector Poised to Deliver more Health and Wealth, A*Star, 29 July 2017.

42 The International Cluster Competitiveness Profiles, (2017), ISC: Boston.

43 Statistics Singapore (2017), Data on Foreign Direct Investment In Singapore By Industry, http://www.tablebuilder.singstat.gov.sg/publicfacing/selectVariables.action accessed September 25, 2017.

44 Mullan, Cathy (2017), Shanghai wins out as 2017 biotech FDI hotspots are revealed, fdi intelligence, http://www.fdiintelligence.com/Sectors/Biotechnology/Shanghai-wins-out-as-2017-biotech-FDI-hotspots-are-revealed accessed September 18, 2017

45 JLL Jones Long Lasalle (2011), Global Life Sciences Cluster Report 2011

46 Ibid.

47 A*Star (2015). Poh (2017) a lower number of 2,100; an earlier EDB presentation reports 4,300 (EDB, 2014).

48 OECD, Key Biotechnology Indicators, http://oe.cd/kbi, October 2018.

49 UNESCO (2015), UNESCO Science Report towards 2030, UNESCO: Paris.

50 “Singapore Transformers into Pharma and Medtech Hub,” Pharma Logistics Editor, October 26, 2017.

51 A*Star (2018), Annual Report FY 2017.

52 A*Star (2018), National Survey of R&D 2017.

53 Sandstrom, Anna, “Singapore – Aiming to Create the Biopolis of Asia,” Vinnova Analysis , VA 2009:13, April 2009.

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718-428 Growing a Cluster: The Singapore Biomedical Sciences Initiative

20

54 “Biotech Sector Poised to Deliver More Health and Wealth,” The Strait Times, July 29, 2017.

55 Lim, Hank, Lim Tai Wei (2010), Sustainable Development Impacts of Investment Incentives: A Case Study of the Pharmaceutical Industry in Singapore, International Institute for Sustainable Development: Winnipeg.

56 QS (2017), QS World University Rankings by Subject, https://www.topuniversities.com/university-rankings/university- subject-rankings/2017/life-sciences-medicine, accessed September 21, 2017.

57 Giest, Sarah. (2017), The Challenges of Enhancing Collaboration in Life Science Clusters: Lessons from Chicago, Copenhagen and Singapore, Science and Public Policy, Vol. 44, No. 2, pp. 163-173.

58 Chan, Jonathan, “Easy Access to Capital a Big Draw for Biotechs Listing in Taiwan,” S&P Global Market Intelligence, June 19, 2017.

59 “Making the Cut,” Asia-Pacific Biotech News, Vol 27, No 07, July 2013.

60 Tannoury, Maya, and Zouhair Attieh. “The Influence of Emerging Markets on the Pharmaceutical Industry,” Current Therapeutic Research, Clinical and Experimental, Vol. 86 19-22, April 18, 2017.

61 PhRMA (2016), 2016 Biopharmaceutical Research Industry Profile, Pharmaceutical Research and Manufacturers of America: Washington, DC.

62 Philippidis, Alex, “5 Biopharma Trends to Watch in 2019,” Generic Engineering & Biotechnology News, December 30, 2018.

63 Walker, Nigel “Biologics: Driving Force in Pharma,” Pharma’s Almanac, June 5, 2017.

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