(SINGAPORE) With capital- raising becoming more difficult, biotech companies here and elsewhere face the prospect of possible delays in their projects, and therefore need a new focus on using their existing resources more efficiently.

This prognosis came from Ernst & Young LLP head of biotechnology practice in Singapore Tan Swee Ho.

'Even before the current economic downturn, the biotechnology industry has been facing challenges in raising funds, given that it inherently seldom yields quick returns for investors,' says Mr Tan, who is also an assurance partner at Ernst & Young (E&Y).

'Raising capital has now grown more difficult than ever before. While the duration of the path to fruition does not depend on capital access alone, the lack of available funding can cause potential delays.'

Mr Tan suggests biotech firms strike a balanced focus between products that have a lot of promise but require long-drawn research, and products that can be brought to market fairly quickly. Companies should consider monetising some of the products or interim compounds earlier - through out-licensing or sale - to generate funds required for longer-term research.

Some local firms are already taking that approach, as seen by S*Bio's recent licensing deals for two of its drug products. It has received US$25 million for one of them, and if the products prove successful, the deals could rake in hundreds of millions in payments.

In another case, Biosensors International Group negotiated for a higher upfront payment from its licensee Terumo Corp last year. This is in exchange for a reduction of the revenue-sharing provisions related to the sale of a drug-eluting stent by Terumo, which uses Biosensors' proprietary biodegradable polymer technology.

As with every crisis, there is opportunity. Pharmaceutical firms are facing patent expiry and a low drug pipeline, said Mr Tan. This is a space for biotech companies to fill.

On their part, big pharma is also keen to acquire biotechnologies from other firms, going by the deals sealed last year.

According to Ernst & Young's Beyond Borders - Global Biotechnology Report 2009, there were 53 merger and acquisition (M&A) transactions involving US biotech firms last year, with a total value of more than US$28.5 billion. This is a record, excluding megadeals (of over US$10 billion) in previous years, which can skew deal totals, the report said.

Adds Mr Tan: 'The push for universal healthcare coverage in the US, coupled with the tight economic situation, may prompt life sciences companies to look at low-cost locations in Asia that have the required infrastructure and talent pool, and yet offer opportunities to reduce operating costs.' This provides a window of opportunity for Singapore.

But he hesitates to forecast the inflexion year, when biotech investments in Singapore will start to bring in economic returns.

Although Singapore's biomedical sciences drive was launched about nine years ago, he says that 12-18 years is a more appropriate gestation period before returns can be expected.

It does not help that regulatory hurdles have been raised over the years, so even biotech firms in the US and Europe are taking a longer time to turn in profits.

'The path to profitability for biotech companies has grown longer over time,' he says. 'Many biotech companies in the West have taken more than 10 years to mature, even when they are operating in an environment where the market conditions are more favourable and attuned to the biotechnology industry from the outset. In that context, nine years is not considered long for Singapore.'