Boom in healthcare private equity investment in Asia-Pacific

But lax IP protection and regulatory compliance could slow down further investment in the region

The Asia-Pacific region is experiencing a significant boom in the volume of private equity (PE) and venture capital (VC) investments in biotechnology, says an analyst at GlobalData.

Adefemi Adenuga, Senior Analyst covering industry dynamics, says countries in the region are being targeted by large pharmaceutical companies seeking to recover their loss of market exclusivity in Western Europe and the US, due to patent expirations and slow growth.

The volume of healthcare PE investment in the Asia-Pacific region increased by nearly 126% between 2011 and 2013. By comparison, deals in Europe and North America declined by 30.5% and 2.5%, respectively.

'Within the past five years, Asia-Pacific has witnessed various pharma deals, including Sanofi’s takeover of India-based Shantha Biotechnics, GlaxoSmithKline’s purchase of a stake in South Korea-based Dong-A Socio Holdings, and Novartis’ acquisition of a stake in China-based Zhejiang Tianyuan Bio-Pharmaceutical,' says Adenuga.

'It is therefore not surprising that PE and VC firms have also caught on to this trend, increasing their focus on the region in the hope that future returns will justify their investments.'

But Adenuga says lax intellectual property (IP) protection and regulatory compliance in Asia-Pacific countries could slow down this investment boom. Pharmaceutical giants Bayer and Novartis, for example, have recently been hurt by India’s weak IP laws.

'Investors are well aware of this situation, but they are in the risk-versus-return business. Ultimately, they have to decide whether the trading reimbursement and other challenges they currently face in developed markets are risks they wish to take in the Asia-Pacific region,' Adenuga concludes.