Taiwan's post-bubble prognosis
What lies in store for Taiwanese biotechs following a deflated bubble
More than a year after BioCentury chronicled investor enthusiasm for biotechs in Taiwan, the bubble has deflated. It's tempting to blame the downturn simply on retail investors who didn't get up to speed as quickly as hoped. But a closer look suggests that investor expectations were derailed by two late-stage clinical snafus, while a resurgence of interest in Taiwan's technology and IT plays has come at biotech's expense.
The meteoric rise of Taiwan biotech started in 2009. In May 2013, the trade group Taiwan Bio Industry Organization said the market cap for its biotech and pharma sector had grown by 520% over the prior four years.
In January 2014, with stocks still rising, company executives and VCs told BioCentury they expected some correction because local investors were not sophisticated enough to sort good companies from bad, and because the risks inherent to the sector were underappreciated.
The hope was the investor base would mature and any sell-off would set a floor for rational growth.
Six months later, the first clinical failure for a Taiwanese biotech since the run-up began dragged the entire sector down. That news was followed this spring by a report of clinical data by another Taiwan biotech in which a typographical error confused investors, sending the sector down further.
An equal price-weighted index of 12 Taiwanese companies tracked by BioCentury has lost about half its value since the top in mid-2014.
Companies that decide to continue to rely on local investors are hoping to benefit if Tsai Ing-wen wins Taiwan's presidential election in 2016 and enacts industry-friendly policies such as investments in R&D and science infrastructure. The Democratic Progressive Party's candidate previously chaired a biotech that has a breakthrough designation from U.S. FDA.
Other public Taiwan-based biotechs have decided it's time to grow an international investor base and are hoping to benefit from valuations that are below