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Bright ideas but little money for Singapore's medical tech startups

Small new players hope their innovation translates overseas

EndoMaster's robotic surgical arm uses joystick-like controllers. (Photo courtesy of EndoMaster)

SINGAPORE The medical technology field may not have deep roots in Singapore, but the country has been fertile ground for innovation, with local startups producing everything from the world's first portable kidney dialysis machine to a robotic surgical arm that can be operated like a video-game controller.

The hurdles to success are high, however. Developing new products can be prohibitively expensive, and inadequate funding threatens to hold the sector back. Still, these smaller players have been steadily attracting more money, mainly from foreign investors, and forging links with overseas companies and medical organizations to help develop and bring their products to market.

Representing this new breed is Clearbridge BioMedics. The startup is one of the early movers in the cancer diagnosis field of liquid biopsy, a noninvasive method of separating cancer cells from normal cells via a blood sample.

"The advantage of liquid biopsy is that it is less invasive," said Michael Paumen, chief executive of Clearbridge BioMedics. "The normal process usually starts off with a CT scan. Sometimes it is immediately clear from a CT scan that someone has cancer. It requires a follow-up analysis, typically a tissue biopsy. For example, if you had lung cancer, you would find a lesion in a lung. And in order to obtain a tissue sample, someone will need to insert a needle to take a sample from that tissue."

Taking tissue samples for lung cancer is often painful for the patient and has a failure rate of 25-30%, Paumen said. While liquid biopsy is not expected to completely replace tissue biopsy, Paumen predicts it will become standard for the new tests to be run alongside conventional methods in a few years.

Awak Technologies' portable dialysis machine can be carried on a belt or in a bag. (Photo by Wong Yi Wei)

Clearbridge BioMedics has obtained regulatory permission to run clinical trials in Europe, China and the U.S., in addition to its operations in Singapore. The startup has already partnered with the Beijing Genomics Institute, China's leading genomics company, to gain access to the country's liquid biopsy market. BGI will help Clearbridge BioMedics distribute and market its machines in China. The company has also signed research partnerships with the John Wayne Cancer Institute in the U.S. and the Institute of Cancer Research in the U.K.

"CRITICAL MASS" "Singapore does a very good job of bringing expert human resources into the country and fostering the development of its own workforce here," Paumen said. "So there is what is needed to start a critical mass here, no question. The funding situation is fairly positive and favorable. At this point in time, we are pursuing further funding for our series C [financing round]." Paumen said he wants to raise $15 million. A previous round raised $6.5 million.

The company's staff has grown from five employees in 2009 to 30 today.

While the overall research sector is well-funded, medical startups attract only a fraction of the money flowing in from venture capital companies. That has forced some companies to look abroad for funding, where the pool of money is bigger.

EndoMaster, which developed a robotic arm for gastrointestinal surgery, in March attracted $14.6 million in its second round of financing, one of the largest amounts ever raised by a local medical startup. Chief executive Goh Seow Ping credited overseas investors with the successful round, saying "only a handful" of local private investors were interested in medical technology.

He also tipped his hat to the government. "What the Singapore government is doing now is reducing regulations to allow for more international investors to enter the market," he said. The investors in that second financing round were Japan's Hoya Group and Shanghai Runkun, a Chinese venture capital fund, Goh told the Nikkei Asian Review.

The company claims that its robotic arm, which can be operated with joystick-like controllers, can reduce the time needed for surgery from six hours to less than one, cut complication rates from 30% to 5% and reduce hospital stays from nine days to less than one. Surgeons can become proficient in operating the arm in just a few days, according to the company.

EndoMaster aims to begin selling the product in Europe by 2018 and projects annual sales of S$100 million within five years of its launch.

CLOSE TO HOME While most startups in Singapore want to hit global markets right out of the gate, some prefer to test the local waters first. In the latter group is Awak Technologies, which broke new ground with its portable machine for peritoneal dialysis.

Awak aims to launch its dialysis machine in Singapore before considering other markets. "Awak will help Singapore to cope with the rapidly rising number of dialysis patients by taking the load off the dialysis centers and moving patients into home dialysis," said Jasmin Wong, the company's general manager. The device is small enough to be worn on a belt or carried in a bag, and can be operated by the push of a button.

Accuron MedTech Group, which is backed by Singaporean government wealth fund Temasek Holdings, led an $11.2 million funding round for Awak. Although Awak is sticking to the home market for the peritoneal dialysis machine, it does have overseas aspirations. It has signed an alliance with the Dutch Kidney Foundation and Debiotech, a Swiss medical device developer, to launch in the Netherlands a portable machine to enable hemodialysis -- a different form of dialysis -- at home.

The global kidney dialysis market is worth $54 billion, according to Wong, who said Singapore has one of the world's highest rates of diabetes-related kidney failure. That comes with a large financial burden, with each new dialysis center costing Singapore's National Kidney Foundation at least S$2 million a year to operate, Wong said.

While these companies show promise, many investors appear to be waiting for a true Singapore success story before committing their cash. Ong Jeong Shing, investment director at Venturecraft, a venture capital company that recently launched a S$50 million fund for medical technology, said the sector is still in the learning phase.

"It is maturing a little bit, but there needs to be fundamentals in place. First of all, [as a startup] you need to know that the market is not in Singapore. It is either in the U.S. or China. These are the biggest health care markets. We should learn from similar markets such as Israel and Taiwan. Right from day one, they know their country is not the right starting market, so they capitalize on their historical and cultural linkages with Israelis overseas. Similarly, Taiwan has historical and cultural linkages with China."

Ong said that development costs can be prohibitive. A failed product trial means scraping together between S$500,000 and S$1 million to fund another round of tests.

Singapore is strong in science, Ong said, but the industry needs more people with the business savvy to take projects from the research phase to the market. He said he envisions this happening only after another generation or two of PhD students -- more focused their than predecessors on getting products to market -- have graduated.

FAST FORWARD To speed the process, the government will invest S$4 billion in the biomedical industry between 2016 and 2020. As part of that push, a number of local accelerators have opened, including Zicom Medtacc, Clearbridge Ventures and Venturecraft. The government has also brought in internationally known incubators. One of them is Israel-based Trendlines, which has partnered with German medical company B. Braun to form Trendlines Medical Singapore, an incubator that will help local startups find overseas markets.

Trendlines has received a grant of S$2.2 million through the Incubator Development Program administered by Spring Singapore, a government agency that deals with enterprise development. Trendlines and its ilk will help nurture medical startups with product development and provide regulatory expertise and commercialization strategies.

"Spring has a couple of equity and co-investing programs through the Spring Seeds Capital [scheme]," said Celine Tan, an investment manager at the agency. "It used to be capped at S$1 million, with Spring matching dollar-to-dollar, but now the cap has been raised to S$4 million in total."

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