Singapore's Deputy Prime Minister Visits China, with a Special Focus on an AI Pharmaceutical Company

Singapore's Deputy Prime Minister and Minister for Economic Policies, Heng Swee Keat, recently visited China, where he placed special emphasis on an AI pharmaceutical company, as reported by Yaozh News. This visit signifies a significant step towards strengthening the ties between Singapore and China's pharmaceutical industries. The article explores the deepening collaboration between the two countries and the potential opportunities and challenges faced by Chinese innovative pharmaceutical enterprises in Singapore.

During his visit from April 7th to April 12th, Deputy Prime Minister Heng Swee Keat stopped in Shenzhen and visited four companies, including CrystalTech, an AI pharmaceutical company. The partnership between CrystalTech and Singapore dates back to 2022 when they established a strategic collaboration with Singapore's Experimental Drug Development Centre (EDDC), a national drug research platform. Their cooperation was further solidified last year through the signing of a memorandum of understanding, expanding their joint efforts in automated synthesis experiments and the application of large language models in drug discovery. Singapore has become a strategic gateway for CrystalTech's expansion into Southeast Asia.

CrystalTech is not the only Chinese innovative pharmaceutical company interested in expanding its presence in Southeast Asia. In recent years, companies such as WuXi AppTec, GenScript, and Junshi Biosciences have also shown interest in Southeast Asia through activities like constructing factories, making investments, and entering into license-out agreements. This raises the question of what makes Singapore an attractive destination for these Chinese companies and how they can thrive in Singapore's competitive landscape.

Singapore offers inherent advantages for Chinese companies venturing into the Southeast Asian market. The geographical proximity and cultural affinity between China and Singapore provide a natural advantage for Chinese companies expanding into the region. Additionally, Singapore provides attractive policy-level incentives. Biopharmaceutical companies that establish their international or regional headquarters in Singapore can benefit from corporate tax incentives as low as 15%. Qualified capital expenditures for construction, renovation, or expansion of qualified buildings or structures are eligible for initial 25% tax exemptions and subsequent annual 5% exemptions. Furthermore, the presence of multinational pharmaceutical companies in Singapore has led to a clustering effect in the biomedical industry. Global pharmaceutical giants such as GlaxoSmithKline, Merck, Novartis, Pfizer, and Roche have invested in Singapore and established large-scale innovation research bases, creating abundant collaboration opportunities throughout the industry's value chain. Singapore's pharmaceutical regulatory system aligns with international standards, making it an attractive factor for Chinese biotech companies. The Health Sciences Authority (HSA) of Singapore, as a core member of important international organizations such as the International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use (ICH) and the Pharmaceutical Inspection Co-operation Scheme (PIC/S), facilitates mutual recognition of GMP inspections and evaluations among member countries. Singapore's HSA, being the world's first regulatory agency to achieve a maturity level four rating by the World Health Organization (WHO), sets high standards, ensuring quality and rigor that surpass the ASEAN and Asia-Pacific regions. Consequently, drugs approved in Singapore may undergo faster registration in other Southeast Asian countries, facilitating the rapid translation of research achievements. Singapore's advanced manufacturing capabilities, particularly in the gene and cell therapy (GCT) industry, provide strong quality endorsements for Chinese biotech companies. Singapore serves as an ideal launchpad for Chinese innovative pharmaceutical enterprises to tap into the Southeast Asian market and beyond.

However, Chinese innovative pharmaceutical companies also face challenges as they navigate Singapore's landscape. One key challenge is the high cost associated with Singapore's expensive housing and land prices, which result in significant costs for establishing manufacturing centers. For example, pharmaceutical giant Novartis has already invested over one billion US dollars in Singapore, with a recent expansion project in March costing 256 million US dollars. Similarly, leading contract research and development organization (CRDMO) WuXi AppTec invested 1.4 billion US dollars in building an integrated service center in Singapore. For Chinese biotech companies operating in a capital-constrained environment, such substantial investments require careful evaluation of the return on investment and cost-effectiveness.

Another challenge lies in the diverse preferences and purchasing power across Southeast Asian markets. Market research and adaptation efforts are necessary due to variations in market preferences and payment capabilities among different countries. For instance, Indonesia and Thailand are the largest pharmaceutical markets in Southeast Asia, with over 90% drug import rates in both countries. However, their public healthcare systems differ significantly. Thailand has a relatively stable public healthcare system, with over 90% of the population covered by government medical insurance, while self-pay medical expenses and over-the-counter (OTC) drugs account for only around 20% of the market. On the other hand, Indonesia, as the world's largest archipelago, faces challenges related to complex distribution channels, with the market focus being in remote areas.

In conclusion, Singapore presents attractive opportunities for Chinese innovative pharmaceutical companies looking to expand into Southeast Asia. The geographical proximity, policy incentives, presence of multinational pharmaceutical companies, regulatory alignment, and advanced manufacturing capabilities contribute to Singapore's appeal. However, challenges related to high costs and marketpreferences and purchasing power need to be carefully considered and addressed. With proper strategies and adaptations, Chinese biotech companies can thrive in Singapore's competitive landscape and tap into the vast potential of the Southeast Asian market.