Dr Ming Pang, Chairman of World Pioneer Ltd is one of the leading lights of the Hong Kong biotech sector. Here he gives the blunt truth about the outlook for this newly fashionable sector in Singapore, China, Hong Kong and Taiwan.

FA: To start with, what's the difference between life sciences, biotech and pharmaceuticals?

Dr Ming Pang: Life sciences covers the largest area. It can encompass the pharma industry, traditional Chinese medicine (TCM), agricultural products and processes as well as the environmental industry. If agricultural products are not modified they are part of life sciences; if they have been genetically modified they are part of biotech. Life sciences can also cover surgical implements. Biotech is also part of life sciences, and involved genetic and protein engineering - anything to do with the bio-sciences.

How does Asia shape up against the West in the biotech arena?

Biotech started in the US and EU mainly over the last thirty years. It started on the back of a powerful and successful pharma industry, as well as high quality sciences and top schools like Harvard and Cambridge. It's only matured in the last 5-10 years, in the sense that we are seeing approved products, such as the drug EPO, which achieved mega-sales and there are quite a few billion-dollar products now. The pharma industry continues to be dominated by the West, where it's historically very strong and where the biggest markets are located. And the West has very strong Venture Capital.

The role of biotech is to supply the pharma industry with mature or at least semi matured products, since pharma companies are not keeping up with the research demands of the new sector. Pharma companies provide crucial early stage funding and infrastructure to the biotech companies - but Asia does not have an indigenous pharma industry, which harms the prospects of biotech companies.

Interestingly, Japan is the second largest pharmaceuticals market in the world, although it has no top ten products.

How do you see the China biotech market developing?

China is of course the potentially largest market. Hong Kong doesn't have a pharma industry. China has had a strong pharma industry for years. In the last twenty years that market has opened to the West. And you have talent in the form of returning Asians from the Western companies, who are setting up companies in Taiwan and China.

China has got a substantial market, but it's very fragmented. It also has a culture of short term and immediate gain, which contradicts the slow and expensive life cycle of biotech. They want products in one to three years, instead of eight and more. So the market is focussed on generics - copies of drugs whose patent has run out. So they churn out EPO, and within three years you have 20 copies of EPO. So the market crashes. The biotech industry came on stream in the mid to late 90s and it was already in a deep mess by 2000. The product is flooded by me-too drugs. The China market is not a quality market, it's a margin market. Rubbish produces huge margins, and can therefore take care of all the middle people in between - distribution is big problem.

Ethics is also a problem - people cutting corners and no respect for intellectual property rights. Multiple selling of intellectual property rights, for example, before it's been registered. The impact on the biotech industry in China is that the market is not helping good quality research, and so you don't see many successful biotech companies. But, there are also fewer regulatory constraints, so the environment is quite dynamic.

Why does Japan have no top ten products?

Development, sales and marketing and the discovery or invention of new drugs are very different. Discovery is creative, high risk, while development is very disciplined, costly and the know-how is concentrated in the hands of a handful of MNCs. The Japanese have lots of patents, but haven't kept pace with changing the patent into cash.

So the discovery process is cheap?

No, but it's subsidised by the governments, because the universities are at the cutting edge of this extremely complex science. So you have a trend of Western pharma companies moving away from basic research and subcontracting the research to top institutions.

Given the obstacles you've hinted at, why are there so many biotech start-ups in Asia?

The entry barriers are pretty low, since the early cost is born by the government via the education system. A university start up can then try to sell that drug to a bigger company. And look at the alternatives, at least in Hong Kong for the entrepreneurially-minded: property and financial products, as well as the service industries are in trouble. I guess we can't really try space technology in Hong Kong, so why not try biotech! And many of these biotech companies are not really biotech. Often the listed companies were previously restaurant, tourist or real estate companies, but they change to biotech because the market wants some sexy stories. And CK Life Sciences is the big catalyst in Hong Kong. Anything Mr Lee does is the sign for other investors to pile in.

But can these companies successful bring their products to market?

That's the key weakness in Asia. It takes three to four years to discover the drug, another couple of years for pre-clinical drugs and then another four to five years before final approval. That area is what we call chemical manufacturing control and Good Manufacturing Practice. That's not rocket science, but it's very highly regulated and very specialized. That skill set is not widely available in many parts of Asia.

We hear a lot about well-trained, cheap scientists in China. Will that be a major advantage?

Cheap for sure. They're good at basic science. But when it comes to the development of sophisticated drugs for the top markets, no. To my knowledge, there are no finished products that are developed and made in China, and then approved in the West. But India is an exception. The pharma companies have been there for years. Indian companies are powerful in the primary production side, the raw materials, and in the production of drugs. India is a world-class player.

How about on the biotech side?

I mean, on the broader life sciences side. Bio tech is just a tiny window onto the whole sector.

So within the whole life sciences sector, what is the most profitable sector?

Still traditional pharma. Biotech procucts account for less than 20% of total sales. In the US in 2000, just 10% of the total drugs prescribed were of a biotech nature. In China, just 6%. But, it's growing very fast. In the US, there are 200 products in phase 3 of a biotech nature.

Where can Asia compete with the US and the EU in life sciences/biotech?

At the moment, it can't. We have to look for our niche. If you look at the growing demand for alternative products and herbal products, we have a chance on the international arena. Herbs and formulations are a niche area. Some of these have thousands of years of history. Very few have been subject to a scientific and clinical tests, and that's what these products have to be subject to become world beaters.

What do you think of the Taiwan approach to biotech?

Taiwan was one of the first Asian companies to move into good manufacturing practice. They have a very mature generics industry, helped by the large number of US trained people. They successfully develop and manufacture drugs for the US markets - that's unique in Asia. But their concentration on generics shows that they under pressure to produce results fast, so you don't get a real biotech industry - focusing on new products - despite many companies having 'biotech' in their names. Still, they are making progress and there's a lot of private and government money in the sector.

How about Singapore?

Like everything else in Singapore, it's highly organized. They have a long-term plan and a venture capital industry, but no mature domestic pharma industry.

So look what they did: they provided a tremendous incentive scheme for MNCs to set up their research departments. They set up a multi-billion, biotech education plan, an infrastructure to help biotech growth from zero - just as they did with the electronics industry. Potentially, they will go somewhere, but what they probably lack is creativity, basic science and a top-notch university. Although there is plenty of money available, it might take more. Throwing money into research doesn't necessarily work.

Singapore's efforts sounds quite ambitious. They're aiming for genuine new products?

That's a very interesting point. If you look at the drug development cycle, it's discovery, devlopment, manufacturing and marketing. It's difficult for one country to be expert in everything. What we have in Hong Kong, for example, is good academics. But we don't have drug development. In Hong Kong we have good sales and marketing too, but we don't know how to take a product from discovery to the market, and although there is some expertise in China for the cheaper drugs, it's not sufficient for drugs in their finished form for the top US and EU markets. At the primary stage, Hong Kong and especially China have some good chemists producing the raw materials, the drug substances, but downstream we are limited. That's partly because everything is too dependent on producing double-quick returns, which is what the stock market demands.

Do you see Asia as a major biotech player in five years?

I don't think so. More money is coming in, but the barriers to the world market are still very high. We're learning fast, too many companies still cut too many corners. Many companies would be eaten for lunch by the US Food and Drug Administration, for example. Most the countries in the region have some strengths in different links of the production chain, but no country or city combines all the skills, from conception all the way to market approval.