A ‘wargame’ set up to examine the funding problems facing the biotechnology sector claims to have “clearly demonstrated” that the UK lags significantly behind its US counterpart “in delivering value creation and business success”.

The game, commissioned by the Bioscience Futures Forum, simulated two companies, Sim BioPharma from the UK and Sam BioPharma from the USA which competed against each other in a bid to become a company with a market capitalisation in excess of £1 billion or $2 billion. Both began as university spin outs whose lead product was “a potent, selective, specific and orally administered treatment for solid tumours”.
The assessors said that the UK biotech team did not achieve the objective of the game and in comparison to the US team, it attracted significantly lower investment at each stage of business development and never pursued indications from more than one molecule in clinical trials. Other conclusions were that Sim BioPharma was forced to develop a business that aimed to sell out to pharma, sold out early at a low value, though it was able to survive a setback with its lead candidate.

The key findings from the BFF game were that the “limited ambition of UK biotech management which was compounded by investors’ much lower risk appetite. Also the limited size of the UK market meant that to generate significant returns, access to and success in the US markets were crucial, something that was delivered by the team from across the Atlantic.

The assessors of the wargame concluded that as UK biotech requires funding beyond what investors are currently willing to commit, “more needs to be done to diversify the range of funding options available”. They said it is clear that, in the short-term, significant reform of pre-emption rights (ie the rights of stockholders to be offered any new issue of shares before they are offered to outsiders) would need to take place to attract outside investors into the sector.

Added to this, they propose the creation of “specialist collective investment funds that would be tax incentivised and encourage longer term investment”. Also, they suggest significant adjustments be made to the listing requirements on AIM in London “that would see stronger, more advanced asset-rich biotech companies come to the market”.