How does the biotech garden grow? Not well
Sunday, 11 March 2007
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Sir Chris Evans, the founder of Merlin Biosciences and one of the leading backers of UK biotechnology, has blamed the industry's worsening cash crunch on British investors who lack ambition and don't understand the sector.
"We have a 'sick garden syndrome' in the UK," Sir Chris said. "We keep pulling the flowers up every six months to look at the size of the roots, and ram them back in the ground wondering why they struggle to grow."
In a strongly worded attack, Sir Chris, who has helped finance some the the sector's biggest successes, including Vectura and Ark Therapetuics, blamed the industry's problems on a skittish market. "Everyone wants a larger, higher-quality biotech sector, but this hasn't happened and can't happen easily in the UK because there is a series of disconnects all over the place. The London market just doesn't get biotech.
"Nasdaq gets it," he added. "US biotech teams are vastly more creative and entrepreneurial by comparison. They can recognise huge value potential in projects when the UK often sees little."
The industry is now in worse shape than at any time this decade, according to numbers compiled by VentureOne, a research firm. Venture capitalists invested just €245m (£166m) in 37 biotech start-ups across the UK in 2006, the lowest level since 1999. That is also well off the peak in 2001, when investors shovelled €558m into the sector.
The comments by Sir Chris, who is one of the businessmen embroiled in the cash-for-honours furore, will be embarrassing for the Labour Government, which has long praised the industry as one the UK's most important.
"The fact that we can get the best people in from around the world to work in the UK is an enormous strength," Prime Minister Tony Blair said at the opening of a new research centre by American giant Amgen earlier this month. "Now is the moment for a big push" to improve the environment for this vital industry, he added.
But Sir Chris argued: "You are not going to see [home-grown] Amgens in the UK. It's just not going to happen. There's no point in flogging a dead horse."
The dearth of early-stage funding - vital in the creation of new companies as others go out of business or are bought - starts a vicious cycle which leads to companies being starved of the funds needed to develop. That decreases investor returns and leads to the abandonment of the sector as venture capitalists look for more hospitable places to plant their money.
Several UK biotech firms have been taken out in high-priced acquisitions over the past year, including Cambridge Antibody Technology, Neutec Pharma, Kudos Pharmaceuticals and Domantis. Yet the funding environment is still deteriorating.
Stephen Bunting, the managing director of Abingworth, Europe's largest life science investment firm, said: "There's a shortage of seed money, a shortage of early-stage money, a shortage of late-stage money and a shortage of money from public markets." Mr Bunting proposed last year that the Department of Trade and Industry establish a £500m government fund to aid the develop ment of young life science firms. "I never heard back," he said.
Washington provides $4.5bn (£2.3bn) annually in research aid to the industry, a crucial element that is missing in the UK. according to Aisling Burnand, the chief executive of the Bio-Industry Association, the British trade group. "We are worried. In the US, the funding model works. The funding model here doesn't," she said. Strengthening co-operation between the NHS and company researchers, for example, is something that has often been talked about but is yet to be acted upon.
