Britain Biotech: Great Scientists, Great Businessmen

British scientists have taken time out from the laboratory bench to build the biggest and most sophisticated biotechnology industry in Europe. The message is clear—world class knowledge has to be backed by entrepreneurial expertise.

Like a good middleweight boxer, Britain punches above its weight in the competitive world of science. Its researchers have made some of the most significant contributions to the development of science this century, from the discovery of the structure of DNA to the birth of Dolly the sheep. Britons have won more than 70 Nobel prizes for science, second only to the US in the international league table.

British scientific excellence has never been in doubt—as all those international companies that have beaten a path to Britain's door in order to exploit the results will be the first to agree. The jet engine, liquid crystal electronic displays and monoclonal antibodies are just a few of the great British inventions to have been picked up and developed as commercial products by companies based overseas. However, a new entrepreneurial spirit is now abroad in the UK itself, transforming the culture of academic research and particularly that of the biological sciences. Recent developments in biology mean that the emerging field of biotechnology—using modern biological techniques to develop new products and services for human health, agriculture or the environment—could soon become one of the world's biggest industries. The global market for biotechnology derived products is currently growing by 30% each year. The value of the market is expected to reach about $120 billion by the year 2000.

British companies have been quick to recognize the economic and social importance of biotechnology. Since the early 1980s, a steady flow of high quality scientific ideas has encouraged the formation of more than 250 life sciences companies in Britain, and shares in 37 of the biggest companies are traded on the international equity markets. Financial consultancy Arthur Andersen commented in a recent report on the industry: "The UK's bioscience research base is undoubtedly world-class, and the sector's size and rate of development currently gives it a clear lead over all other European countries."

Yet good science alone is not enough to build a successful biotechnology company. Two other factors are equally important. First, sound business skills are needed to guide a company through the lengthy development stages of any biotech product, and—in the case of new medicines—through costly and complex clinical trials. With experienced executives from the pharmaceutical industry moving into biotechnology and the sector itself maturing, biotechnology companies can draw on a pool of talented managers.

Another significant change has been the emergence of "serial bio-entrepreneurs" such as scientist Chris Evans who founded the Cambridge-based company Chiroscience and then helped to establish three more biotechnology firms, Celsis, Enviros and Cyclacel.

Secondly, biotechnology companies need secure financial backing to support them up until the time when their products start earning revenue. There are several sources of capital available to British biotechnology companies, particularly in the very early stages of their development. Through the Department of Trade and Industry, the British Government offers several funding schemes that aim to encourage collaboration between academic researchers and industry.

Venture capital is also available from a variety of sources, including specialist biotechnology funds such as Biotechnology Investments Ltd. and Merlin Ventures. The sector is also an attractive prospect for investors from outside Britain. The British Venture Capital Association says 36% of the funds raised by its member companies from external sources for investment in the British high technology sector last year came from North America. Overall, $55 million was invested in 32 biotechnology companies.

Alliances with major pharmaceutical companies are an increasingly important source of capital for biotech companies. In exchange for rights to the biotechnology firms' discoveries, drug companies can offer expertise in late stage development and marketing the product. A good example is the $40 million deal between Chiroscience and US-based Schering-Plough. The companies will be working together to develop a range of phosphodiesterase IV inhibitors—a potential new treatment for asthma. According to Arthur Andersen, such transatlantic agreements are likely to become more common because the US bio-partnering market is now close to saturation and US (drug) companies may therefore turn increasingly to Europe to acquire promising technology.

It is not always easy for biotechnology companies to raise funds through the public equity markets. Valuations of quoted biotech firms have recently been depressed by the markets' unwillingness to back what they perceive as long-term, risky investments. However, market analysts Credit Suisse and Flemings both released reports in October 1998 concluding that several British biotech companies were significantly undervalued and offered a highly attractive prospect for investors.

John Sime, chief executive of the BioIndustry Association, is confident: "The coming year will see the first of the UK-researched and developed products entering the marketplace, representing a giant step towards maturity."

For more information: Nicola Walsh, communications manager, Invest in Britain Bureau, Dept. of Trade and Industry, One Victoria St., London SW1H OET UK. Tel: +44-171-215-2501. Fax: +44-171-215-5651. Email: invest.britain@iibb.dti.gov.uk.