So we all know about the amount of biopharma investment going into places like China and India - right? But it's important to keep the categories straight. There's manufacturing, which is its own thing, and there are service organizations, which are a very large part of the market. But neither of those are doing their own R&D. What part of the investment in these countries is going to what we'd think of as traditional venture capital and local research?
There's an article in Nature Biotechnology that tries to answer this question (and it's not an easy one). Here's the take-away:
. . .data on sources of venture capital (VC) that are supporting such innovative biotech startups are unclear because existing investment metrics include not only innovative enterprises but also manufacturing or service firms lacking R&D capability. The quality of published data is also poor, with only one study on healthcare VC activity in China providing data for a single quarter in 2008
and it does not separate innovative ventures. Here, we present a data set of life sciences VC in emerging markets to inform government innovation policy and VC investment strategy. Our data suggest that life sciences VC activity is low in the emerging economies we studied, despite growing levels of activity in that sector and in those regions.
The authors are basing their conclusions (on China, India, Brazil, and South Africa) largely on their own fieldwork, rather than relying on what's in the press, which is probably a wise decision. They found 116 firms backed by 148 financing deals, which may sound like a lot, but the total amounts aren't too impressive yet. Their estimate is that since 2000, about $1.7 billion has been invested, which (by comparison) would be considered a strong quarterly figure in the US. Most of these firms (about 70) are Chinese, and most of the rest are Indian (Brazil and South Africa are round-off errors). The outfits doing the fund-raising are also quite concentrated; there are some big players in both countries, and there's a scattering of everybody else. A lot of the money is from home as well. The great majority of these firms, as it turns out, are targeting oncology (a full 90% of the Chinese ones, for example).
So what are we to make of all this? These numbers are about as good as anyone is going to see, but they're probably still incomplete. At any rate, it seems clear that the amount of money going into new biopharma companies in these countries is still very tiny by industry standards. There are surely several reasons for this - lack of a "startup culture" being a big (albeit vague) one. That covers a lot of ground, including physical infrastructure and fewer experienced investors. It's not like India and China have a long history of funding small new medical research firms - it takes a while to get the hang of it, for sure (assuming that anyone ever does!)
One possibility is that the innovative research being done in these countries is being done more inside the walls of the large international firms that have set up shops there. What I think people have been waiting to see is whether these will eventually lead to more smaller companies spinning out. And then there's the other source of many startups in the US and Europe, academic labs. My impression has been that the academic research culture is very different in China and India from what we're used to in the US, and this is surely having an effect on the whole venture-capital-based world there, too. Eventually, though, the combination of the universities and the talent pool from the larger companies might cause something to happen.
But since no one's quite sure how to make a Boston/Cambridge or San Francisco Bay, it's hard to say what these countries should be doing differently, or whether any such recommendations would even be feasible. Efforts in the developing parts of Asia to make such things happen by fiat have not gone well - does anyone remember Malaysia's big push into the area? Here's a 2003 story on it - "Biovalley" was going to be the next big thing. Just a few years later, it was clear that it wasn't quite working out, and current information is rather hard to come by. India and China (and their investors) surely don't want to go through that experience. Letting things develop on their own, without too much over-targeted encouragement, might be the best course.