The Interview: Can Merlin's chief cast his spell on investors again?

Sir Christopher Evans Chairman, Merlin Biosciences
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The Independent Online

"Rumour has it there is a 40lb carp in the private lake here. I've been chasing it for weeks. I get on a mission. I've got two rods set up in different places, and I'll have three set up by Sunday, and I'm rushing from rod to rod, because I just want to catch it. I love the challenge. It's like a deal, you stalk these things and finally land it in the net."

With a spot of fishing, talks aimed at creating a transatlantic neurology company, and an interview with The Independent to talk up the flotation of a stem cells company from the Merlin stable, all before elevenses, Sir Christopher, still only 47, has lost none of his remarkable energy.

He is going to need it if he is to persuade a sceptical City to back the flotation of ReNeuron and to stump up the £10m it needs to continue its pioneering drug development work. On paper it looks a tough sell. The company, which Merlin set up in 1997, has already been on the stock market once, and investors at the last float lost 95 per cent of their money when Merlin bought it back in 2003. Much scientific progress has been made since, but the company is still more than six months away from beginning the first human trials of any of its drugs. The odds are against it succeeding in creating a marketable drug, and it isn't likely to turn a profit until well into the next decade even if it does.

It is a risky bet, as all bets should be, Sir Christopher says, but the potential rewards are much greater than just doubling your money. Of all the Merlin companies, ReNeuron is the one which makes Sir Christopher most excited, most animated and most colourful.

"It's because it's new. I've got 191 new medicines being developed in Merlin, of which three are stem cell projects in ReNeuron. The others are all very exciting, but you know the process of research and development, and there is venture capital and City money available for the right project. It's a tried-and-tested formula. But stem cells are not just trying to treat something, but trying to regenerate something, a damaged part of the brain, part of the pancreas, part of the eye. No pharmaceutical tablet is going to restore eyesight to a blind child, whilst I can see immediately that retinal stem cells could be developed, injected into the eye and - bang - the child can see."

Stem cells are the "master cells" inside the body, capable of growing into all sorts of human material. Harvested from foetal tissue, placenta or bone marrow, ReNeuron is now mass producing them in its laboratories in Guildford, and it believes that by injecting them into the brains of stroke victims it will be able to cure the brain damage that causes paralysis.

Britain likes to think of itself as having a head start in this field, thanks to the federal ban in the US on funding stem cell research that uses specially created embryos. But individual states are finding ways round this, while so-called "adult" stem cell research - using foetal or other tissue - is not so constrained. The US has about 10 times as many companies working in the field of stem cells than Europe.

"I personally am dead against the mass production of natural embryos - an embryo formed from a sperm and an egg. You can't have billions of those things being produced and destroyed to produce stem cells, but there are other ways of doing it. What I'm trying to do is cultivate a stem cell culture here. We are supposed to be the best in the world in stem cell research and we probably are the leader in terms of number and variety of stem cell projects going on, but we aren't going to be No 1 for very much longer. The Americans are trying to run the race with one leg, but when George Bush finally succumbs - which he will - they are just going to run riot."

This is the reason Sir Christopher set about creating the UK Stem Cell Foundation, aimed at attracting £100m from business, charities and the Government to fund the work needed to turn stem cell science into products ready for testing on humans.

"The people who normally do this sort of work are companies, not academics, because it's a very boring two or three years of safety testing and scale-up of cells, methodically done and professionally documented, costing £1m to £3m. The Government has traditionally not put much into that area, venture capitalists put nothing into that area, the City puts nothing into that area. So how do drugs get into clinical trials? The answer is they don't. But I thought, stop standing on the sidelines shouting - get on the pitch. I got on the pitch. I've had hundreds of flattering letters about the foundation because someone has laid their finger on one of the problems."

ReNeuron's fundraising is being marketed, in part, as an opportunity to help build a national champion. Sir Christopher says it would have no problem raising cash from business angels and venture capitalists in the US, in return for its headquarters moving across the Atlantic. "But we thought we should try the British stock market now. If it wants it, the company will stay British and the country could have a world-leading, flagship success."

The performance of Merlin's funds, particularly those raised and invested at the peak of the biotech boom in 2000, have been patchy. It has managed to exit some of those investments in the past couple of years, with the flotations of Ardana, Ark Therapeutics and Vectura (the only one of those three to be above its issue price) among the largest. It is not expecting a big valuation uplift from ReNeuron, hoping only for a valuation of £15m compared with the £12m it has spent on the company to date. However, Sir Christopher insists Merlin has established itself as a significant and successful player in the biotech world.

And for all the tub-thumping nationalism, Sir Christopher also talks of a "trend to America" that is altering the ambitions of the UK biotechnology industry - and of his own venture capital business.

Rather than creating major UK biotech companies, the UK's scientists and early-stage companies are more likely to act as a "conveyor belt of quality medical projects to sell to America". The companies created by Merlin in the future are likely to employ US scientists and managers and establish a presence there earlier in their development. "Designed and built in Britain to grow in America," may become the biotech motto, Sir Christopher says.

More immediately, though, there is that fish. "Merlin is part of my destiny. The other part is to go back and get that carp. I'll let you know if I get it."

In the cells

Born: 29 November 1957.

Wealth: Estimated at £158m, putting him at number 298 in the Sunday Times Rich List.

Science: First in microbiology, doctorate in biochemistry and research fellowship in molecular biology.

Business: US biotech research positions from 1983-87, when he founded his first company. Most successful creation was Chiroscience in 1992, which merged to form Celltech and was sold to UCB of Belgium for £1.5bn last year. Founded Merlin Ventures, his first private equity group, in 1996.

Personal life: Married with four children. Hobbies include the electric guitar, watching rugby, collecting fast cars - and fishing.

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