Given that, it is hardly surprising that Wong himself produced the first draft of the Act for the Development of Biotech and New Pharmaceuticals Industry. (The legislature passed the act in June 2007.) "I spent at least three years planning the contents of that bill," says Wong.

That is, Wong was already thinking about how to further the development of Taiwan's biotech industry when he was running the Academia Sinica's Genomics Research Center, and even before that, when he held a chair in chemistry with the Scripps Research Institute in La Jolla, California.

Wong spoke with Taiwan Panorama in August about Taiwan's biotech development strategy. That interview follows:

Q: Right now, our nation's biotech industry produces less than 1% of global biotech output by value. But in an interview published in the July issue of Nature, you stated that Taiwan's biotech production would account for at least 5% of the global market within a decade. How did you arrive at this figure?

There are thousands of ways to compound drugs. Once researchers have settled on a possible drug target, they have machines make it. Academia Sinica has Asia's only high-speed drug-screening robotic arm. The arm screens up to one million drugs per day, and has a success rate for pairings about 100X higher than a standard robotic arm.

A: Globally, biopharmaceuticals production is worth about US$800 billion per year. Producers are concentrated in North America and Europe, but one-third of the market is in Asia. So I asked: How much of the global market "should" Taiwanese biotech account for? Ethnic Chinese account for one-fourth of the world's population. We are the world's largest group of consumers. With the world's Chinese as our market, surely our biotech output can exceed 1% of the global total.

This is especially true with the biotech industry trending towards a future focus on disease prevention and personalized medical services. Genes are crucial to these endeavors, and ethnic Chinese all have similar genetic makeups. We therefore need to be thinking about how to gain a niche in the vast mainland market.

Q: What do we most need if we are to achieve the 5% goal within 10 years?

A: We need to figure out how to move from contract manufacturing to innovation and invention, to bring knowledge-economy industries into being. That's our greatest lack. Over the long term, firms aren't comfortable building their businesses around high-risk products that require long-term R&D. We don't control original technologies, we just refine extant ones. But if you're producing something for which there isn't much market demand, your production doesn't amount to much.

Also, market share isn't the same as profit margin. For example, while Taiwan controls 60-70% of the global IC market, our profit margins are probably in the single digits. But even though our IC industry is focused on contract manufacturing, it still has to compete in the international marketplace.

Q: Given that we need to move into the international market, should our biotech industry adopt the model of the major American and European pharmaceuticals companies?

A: We don't necessarily need to adopt the large-scale, high-volume model of the American and European companies. We don't have that kind of experience or capability. On some levels, many of the major US firms fail to innovate; they support their growth by pouring huge amounts of money into buying the intellectual property of small biotech firms or even the firms themselves.

Most Taiwanese firms are small- and medium-sized enterprises that would find it difficult to compete with major pharmaceuticals manufacturers. But we can go the route of small firms, developing products to a certain stage, then seeking alliances with big international firms, or granting them licenses that let them manufacture the products and take them to market. Either approach is feasible.

Q: Currently, Taiwanese R&D seems stuck in the upstream phases, at academic and research institutions. What's your view on this?

A: Academia Sinica certainly conducts truly upstream and cutting-edge research, but no one knows whether this research has market value. We therefore need to design a set of evaluative mechanisms, "translational research," that connects upstream researchers with downstream manufacturers.

Our biotech industry has long failed to invent and innovate, and for this reason has also lacked the ability to follow up on the results of upstream research. There's a tremendous technological gap between industry and academia. In the past, the industry did only simple contract manufacturing work. It's now advanced slightly to doing "precision contract work" that uses precision equipment to do more exacting work. The industry's next step is to innovate and invent.

Clinical trials are the key stage in "innovation" by new drug companies. Products go to market only after completing these trials. If our companies are able to come up with a few unique products that have explosive market potential, the value of our biotech production could rise very quickly.

What I mean by "products with explosive potential" are new drugs, especially those targeting several important diseases. For example, current treatments for rheumatoid arthritis address only the pain, not the disease. Other examples would be things like cancer vaccines and early detection techniques.

Taiwanese schools and research institutions aren't the only places to acquire new drugs with development potential; we could also acquire licenses to the results of preliminary clinical trials conducted abroad and continue to develop these drugs. We would then resell these licenses later in the development process, form a strategic partnership with a major international firm, or even finish development ourselves. The last approach would be the most difficult, but has the potential to generate the greatest profits.

The problem is how to accommodate the industrial infrastructure. Our current laws are long out of date, and don't provide any encouragement to firms that innovate. In fact, they treat companies that haven't produced a product for two or three years as troubled, making it impossible for them to issue stock or borrow money. But R&D takes a long time. Companies that don't yet have a product may well be accumulating patents and know-how that increase their value. Unfortunately, Taiwan's venture capitalists, bankers, and investors have yet to come around to the correct way of evaluating such firms and estimating their intangible assets.

Q: The domestic pharmaceuticals industry is still focused on the manufacture of out-of-patent generic medications. But the government, with both the Act for the Development of Biotech and New Pharmaceuticals Industry and the Diamond Action Plan for Biotech Takeoff that kicked off in March, is focusing its efforts on biotech and new pharmaceuticals. There's almost no connection to the industry as it currently exists. How do you explain the discrepancy between the government's policy expectations and the actual state of things?

A: With the passage of the Act for the Development of Biotech and New Pharmaceuticals Industry, there are now more than 20 firms [ed. note: 23 developing new pharmaceuticals. We also have more than 20 drugs currently undergoing clinical trials. These are proof-positive of policy's power to get things moving.

We've never been able to compete globally in generic drugs in spite of how long we've been making them. We've now fallen behind even India and Korea. This state of affairs exists in large part because of the small scale of our manufacturing operations.

When a medication goes out of patent and becomes available as a generic, it becomes far less profitable to make and major firms typically cede its manufacture to smaller drug makers. But drug manufacturing is subject to stringent regulations and safety considerations. As a result, drug production has to remain centralized even when drugs are manufactured under contract. Taiwan has 160-some GMP-certified pharmaceuticals manufacturers, all of which are quite small, cannot cut costs, and have no ability to develop major markets. This makes it nearly impossible for them to get large orders from the major international pharma firms, and, as a result, the industry as a whole has languished.

Drug manufacturing accounts for more than half of that US$800 billion biotech market, over US$500 billion. High-end and low-end medical devices account for another 20% or so, and agricultural biotechnology and health foods together amount to another 10%. Drugs still make up the bulk of the market, and new drugs are the most profitable segment. We should therefore, on a structural level, encourage firms to undertake new drug development, which is high-risk endeavor. It's the only way we'll get an innovative industry.

Q: What parts of the biotech infrastructure and legal framework still need improvement?

A: I think we've waited too long to develop our infrastructure. We've also moved too slowly on our legal framework.

With regard to infrastructure, one example is the construction of industrial parks... most of our technology parks were designed for the information technology industry. There are as yet no biotech park clusters. The Executive Yuan approved the Hsinchu Biomedical Science Park in 2003, but progress has been delayed for years. Moreover, it's aimed at biomedical devices, not new drugs. The Nankang Biotech Park is too small. The park is to be situated on the nine-hectare site of the former "202 Arsenal," most of which is land that Academia Sinica uses for research purposes. There's too little land available to firms and to the startup incubation center. The Nankang park simply doesn't have the scale of an industrial park.

With regard to the legal framework... the biotech industry makes products that affect people's health. If we are to sell to the international market, we need a legal framework that meets international standards. That means we have to strengthen ours.

The Biotech Takeoff policy currently consists principally of the promulgation and promotion of the Act for the Development of Biotech and New Pharmaceuticals Industry and the establishment of a Taiwan Food and Drug Administration (TFDA) [modeled on the American Food and Drug Administration and expected to come online at the beginning of 2010]. I believe the TFDA needs to be strengthened further, primarily by making sure it accords with international standards. We don't want to design a drug evaluation system, even one that is the most comprehensive in Taiwan and the most stringent in the world, that fails to be internationally recognized.

The US still constitutes the largest segment of the global pharmaceuticals market, and its FDA therefore sets the standards. Right now, the US, Europe and Japan are discussing the harmonization of their drug evaluation and certification regulations. If the TFDA and China's State Food and Drug Administration follow their lead and emulate the FDA standards, we will then have the opportunity to open up the cross-strait market and break into the international market.

Q: Taiwanese businesses have been successful in the international marketplace in part because they foster cooperation among up-, mid-, and downstream firms and compete collectively. What do you see as the ideal blueprint for Taiwan's biotech industry? How many firms should we have?

A: I don't think that the number of firms is all that significant. The problems of domestic biotech firms are that they are too small and have too few personnel. If there were a lot of firms, they'd have even more difficulty finding personnel. Our current number is sufficient [Taiwan currently has about 140 biopharmaceuticals companies]. At issue are the scope of their operations and the numbers of their personnel.

Most of Taiwan's biotech firms have a capital base of NT$100 million or less, whereas small newly formed firms overseas are raising capital at every stage of the process. By the time the latter hold their initial public offering or begin manufacturing a product, most have capital bases in excess of US$100 million. That's more than NT$3 billion.

Though this is a large amount of capital, the market for a new drug is typically in excess of US$200 million (NT$60 billion) and sometimes as much as US$1 billion (NT$30 billion). These markets are long lived, and manufacturers enjoy patent protections for 15-20 years, which is to say that new drugs generate profits for an exceptionally long time.

While developing new drugs, we can also encourage the growth of the medical devices industry. I regularly cite AstraZeneca, the Swedish developer of Prilosec, as an example of how this can be done. The company introduced Prilosec to treat stomach ulcers in 1989, but even before the drug's release, its affiliates were laying the groundwork by rolling out test reagents, isolation techniques, and related medical devices. Sweden's biomedical engineering has become quite advanced.

Taiwan is an important electronics-industry hub, which raises interesting possibilities for linking up electronics firms with biotech and medical firms. Possibilities include things like devices that enable remote treatment, in-home care, or even in-home self-administration of injections. Advancements in integrated circuits and information systems will undoubtedly foster more effective use of medications. But the value chain in the biotech and new pharmaceuticals industries is extraordinarily long. Inventions won't necessarily be commercialized immediately. Product development takes patience and large amounts of capital.