The Business of British Biotechnology

Alongside finance and high-tech computing, biotechnology can be thought of as one of the few sectors where Britain is still globally competitive. The British pharmaceutical industry, for example, receives 10% of global research and development funding, despite having only 3% of global sales. But this year has seen a variety of worrying developments: Pfizer, previously the country’s fourth largest investor in pharmaceutical research, announced the closure of its R&D site in Kent, resulting in the loss of 2,400 jobs; AstraZeneca continues to shed jobs, citing patent losses, as well as GlaxoSmithKline and Novartis; and start-ups complain of continual difficulties in securing venture capital. So is the UK unique in its suffering, and what successes, if any, has the year seen?

Certainly, the UK is not the only country to see job losses in this sector. In the US, the global leader of the pharmaceutical industry, Johnson & Johnson is still going through the round of huge job cuts announced in 2009, and the Swiss giants Roche and Novartis find themselves in a similar situation. In fact, the latter is planning to cut 2,000 jobs whilst setting up operations in Taizhou (intriguingly dubbed “China’s Medical City”), due to there being an emerging market and reduced labour costs. It could be argued that any present malaise among the British is one afflicting the wider western biotechnology sector, and it is not out of step with the global economy.

But to some extent, biotechnology here faces its own problems. For instance, companies and start-ups in the UK have been complaining about the difficulty of securing risk capital for years. Nearly two-fifths of biotechnology companies here have been unable to obtain any finance over the past year, with many biotechnology specialists reluctant to invest. This highlights a longstanding gap in funding for those who are about to enter promising drugs into the costly early-stage testing in humans, where approximately £10 million is needed to support the company prior to generating results which will be of interest to larger investors or pharmaceutical companies.

A malaise afflicts the wider biotech sector, and it is not out of step with the global economy ...

This has been assuaged somewhat recently by two developments: tax credits have been increased for research and development enterprises; and Richard Sykes, a former rector of Imperial College, is chairing a new venture fund aiming at new British biotechnology companies freshly spun out of academia. The Deepbridge Innovation Fund is planning to raise $250m by next year to invest in companies predominantly based in the UK, and will specifically target those with a promising drug, but without proof of relevance.

... but biotechnology here faces its own problems

Brits might complain alongside most Europeans that the legislative and regulatory environment isn’t conducive to research. Recently, the European Court of Justice ruled that no methods to derive embryonic stem cells could be patented, setting us apart from the US and Asia. Although this does not totally condemn companies here (they can still patent their inventions abroad), there is fear that this will stifle commercial investment, and research in the area is more likely to be exploited abroad. This reflects the feelings of many plant scientists and genetic engineers, who have had trouble commercialising their publicly-funded basic research due to European regulations.

The year hasn’t been all bad, however. Some companies have seen great success in securing funding. Oxford Nanopore, for example, raised £25 million to develop its next-generation DNA sequencing technology, making it a contender to win the Genomics X Prize, awarded to the first team to sequence the human genome for under $10,000. Such an achievement would be able to revolutionise personal healthcare. Assisted by Imperial Innovations, Circassia completed a £60 million round of funding in April, to develop allergy treatments and autoimmune therapies for the treatment of conditions such as arthritis and psoriasis. Towards the high end of the biotechnology sector, Shire Pharmaceuticals continues its trend of success from last year, posting strong profits and 24% growth this quarter due to its focus on ADHD medicines for sale in America. Also, GlaxoSmithKline is investing in a research park in Stevenage, Kent, which is estimated to create 5,000 new jobs, and has proposed the creation of a new biopharmaceutical plant in the north of the country.

Should we be particularly worried about the state of biotechnology in the UK? Perhaps not. Beyond the success of the above companies, this is home to four out of ten of the world’s top universities, and eight in the top thirty. Consequently, there is a wealth of scientific talent to draw upon across the country, which continues to be attractive to those looking to set up operations here. Also, the introduction of the patent box late last year – a lower rate of tax levied on patent-related incomes – has been credited with an increase in investment in the country’s research and development base, according to GSK’s chief executive Andrew Witty. Despite the global economic downturn, the British biotechnology sector appears to be in bullish health, with many interesting projects in the pipeline.

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