SINGAPORE (June 18): When Singapore-based Aslan Pharmaceuticals made its debut on the Nasdaq Global Market on May 4, one of its investors, Abel Ang, was confident it would do well despite the fact that it sold less 1.5 million American Depository Shares than originally planned. A month on, shares in Aslan — a biotech firm that develops immunotherapies targeted at Asia-prevalent tumour types — are up 25% to trade at US$8.83 on June 12, and at least four banks are bullish on the stock. Ang, CEO of Accuron Medtech, is now on the lookout for more of such medical technology (medtech) companies.

Formed in October 2014, Accuron Medtech is a business unit of global precision engineering group Accuron Technologies. One of its investors is Temasek Holdings. It makes medical devices — the bestselling of which are urology devices — and generates more than US$200 million ($267 million) annually.

Accuron Medtech also has a medtech incubation arm, which accounts for at least US$30 million in revenue a year. Ang, who spent nearly his entire career in the medtech sector in the US and Asia-Pacific, says the medtech incubator bets on game-changing technology.

“We are looking for category disruptors — not incremental innovation, because you are not going to make money [from that],” Ang tells The Edge Singapore, adding that Accuron Medtech is targeting €500 million ($785.8 million) in revenue within five years.

Over the past three years, Accuron Medtech has invested in more than 10 medtech companies. Two were divested for undisclosed amounts, and one — Aslan — was listed on the Taipei Exchange last year, raising US$33 million.

Last year, Accuron Medtech led an investment of US$11.2 million in Awak Technologies. Awak’s technology regenerates used dialysis fluid into fresh fluid. This cuts the amount of dialysis fluid needed by up to 90% when compared with conventional dialysis machines. This allows Awak to reduce the size of home dialysis machines from roughly the size of a laser jet printer to that of a router box, making it more portable. “If we can commercialise this, and people can do dialysis wherever they are, it will change the game for home dialysis,” Ang says. Awak’s technology is now undergoing human clinical trials in Singapore.

Accuron Medtech does not use a fund structure, giving it more flexibility to back medtech companies. “In deep tech, the environment is very unstable. If you have these notional rules where you can only invest a [certain amount], then you won’t be able to follow [through when] an exceptional opportunity arises,” Ang says. “[We have] free cash flow that we generate from our US$200 million business. We never had a time when we did not have enough for the next round.”

Hard sector to crack

Medtech investment may still be a comparatively nascent area in Singapore, but there are several start-ups trying to improve healthcare here. There are at least 220 medtech start-ups developing healthcare solutions, ranging from robotic operating arms and portable dialysis machines to home diagnostics kits for various ailments. Endomaster, which invented a surgical arm for gastrointestinal surgery, raised one of the biggest amounts in the Singapore medtech world in a US$14.6 million series B funding last year.

But medtech remains a difficult operating environment for investors and start-ups today. The long product development cycles, coupled with the fact that consumers in the region are generally unwilling or unable to spend on expensive treatments, have spelt the end of a few medtech start-ups and discouraged many others, say venture capitalists.

Consequently, the markets of choice have been China and the US. But even before the devices can be commercialised, substantial funding is needed to tide the start-ups through a lengthy clinical trial and regulatory approval process. In China, regulatory approvals can take up to three years and account for more than 30% of development expenses.

“The success of a medtech start-up is defined by the global impact of its products. For us, our solutions are being used by pharmaceuticals [in US clinical trials],” says Gideon Ho, CEO of HistoIndex, a company spun off from the Agency for Science, Technology and Research (A*STAR). HistoIndex is developing a digital device that scans tissue samples with the aim of making liver fibrosis diagnosis more efficient. “We are fundraising a large round for its rapid growth in the US and China,” says Ho.

But even as more medtech start-ups are formed, not all of them are going to get their funding needs met. “The deal flow is quite thin here. A lot of investors do not want to see ‘lab’ research results. They want to see big-scale trial results like in China and the US,” says Isaac Ho, CEO of Venturecraft, a venture capital firm that raised $50 million to fund medtech in 2016. It backed cancer diagnostic start-up MirXes and spectrometer maker Attonics Systems.

“The projects here are mostly in the research phase, as they are funded by government [and universities],” Isaac adds. “Many are not scalable, and the long road for regulatory approvals in major markets also poses another challenge.”

Help on the way

The Singapore government is also fostering collaborations between private and public sectors. “An example would be ThermoFisher Scientific, which engages both MNCs and small enterprises in rapid prototyping of new design concepts as well as sub-system and module designs. Some of these relationships eventually blossomed into mass production of sub-assemblies,” says Ho Weng Si, director of biomedical sciences at the Singapore Economic Development Board.

The Singapore government has said it will invest $4 billion in the biomedical industry. SPRING SEEDS Capital, the investment arm of SPRING Singapore, will also co-invest with private entities in deep tech start-ups. Israel-based Trendlines Group received a grant of $2.2 million from SPRING to help nurture medical start-ups here. Local accelerators have also stepped up, including Zicom Medtacc and Clearbridge Ventures.

Ang believes Accuron Medtech, with its experience and network, will be able to help medtech start-ups through their life cycle, from research to manufacturing and commercialisation. What Ang himself brings to the table is his years of expertise investing in the medtech sector. He worked at the Economic Development Board under Philip Yeo before joining US-based medical device company Hill-Rom. He helped commercialise more than 60 medical devices and equipments. He also served as senior adviser to the CEO of Greatbatch, the largest contract manufacturer for medical devices. “Some things were conceptual, crazy ideas, [but] we took to commercialisation, [such as] a device that hovers patients [who suffer from pressure sores] above the hospital bed.”

In 2014, Accuron Medtech acquired a 51% controlling stake in local medtech start-up Veredus. The start-up made $9.7 million in revenue and $1.6 million in operating profit in 2016. It was divested this year for a reported US$83 million. “With Veredus, we first doubled its R&D team. Then, we transferred their manufacturing line from Italy to Singapore, [which gives the company better control and visibility of its supply chain],” Ang says. “We also helped them break into markets like China. These [overseas] deals can take a long time. In China, [it takes] a minimum period of 12 months. It is a very long sales process and you need to be able to manage [multiple] contact partners.”

Accuron Medtech says it will invest up to $10 million in Singapore’s health and biomedical sector. The investments will be matched by SPRING SEEDS Capital. “We have seven full-time professionals [based in Singapore] to look at deals. At least 80% to 90% of the deal flow here [are seen by us]. We certainly see 50% more deals today than three years before.”

This article appears in The Edge Singapore (Issue 835, week of June 21) which is on sale now. To subscribe, click here