Big pharma is hungry for UK biotechnology companies, with more acquisitions already in the first three months of this year than in any year for the past decade. But what does this mean for the biotech sector’s long-term health, both as an independent industry and a jewel in the crown of the UK economy?
Speaking last week at a policy update organised for the South Cambridge biotechnology cluster by Chesterford Research Park and the BioIndustry Association, Martyn Postle, chairman of Cambridge Healthcare and Biotech, suggested the dream of a UK biotech making the full transition to an integrated niche pharmaceutical company is now all but over. Instead, the spin-offs of a productive UK research environment are invariably ending up as the research departments of pharmaceutical multinationals.
This trend clearly has its own rewards. What worries Postle, though, is that many of these acquisitions are by companies based overseas. This year, for example, Solexa – actually headquartered in California but with substantial operations in Cambridge – went to Illumina of the US, GeneMedix to Reliance Life Science of India and Paradigm Therapeutics to Japan’s Takeda.
It is not only the need for mainstream pharmaceutical companies (under pressure from shareholders) to stuff their research pipelines that is driving them to grab at the low-hanging biotech fruit – even if it is sometimes cheaper these days to buy the company than license in the product. Postle quoted Dr John Patterson, executive director for development at AstraZeneca, to the effect that pharmaceutical companies would like to license promising drugs, but if the biotechnology company is controlled by a venture capitalist, the latter “immediately sniffs an exit and starts an auction”.
Running parallel with this trend, Postle noted, is a tendency for biotechs to license out products at an increasingly early stage of development. It used to be received wisdom that a biotechnology company should put its product in the hands of Big Pharma around the time of Phase II clinical trials. In the last few years, though, this has been happening more at more at Phase I or even the preclinical stage.
Heading for the exit
This propensity to head for the nearest exit belies the fecundity of the UK’s biotechnology sector and the acknowledged support and encouragement it is receiving from government, through initiatives ranging from the Department of Trade and Industry’s (DTI) Technology Programme and the R&D Tax Credit to the implementation of the Cooksey review, the UK Clinical Research Collaboration or the clampdown on animal rights extremism.
As Sam Myers, head of biotechnology at the DTI, pointed out at last week’s meeting, the UK’s medical biotechnology sector is the most mature in Europe and second only to the US, representing 40% of public biotechs in Europe and 43% of new biotechnology drugs in Phase III clinical trials.
The BIA is also trying to address the growing rate of attrition, particularly now that countries like France and Korea are making a concerted bid to move their own biotech industries up the global rankings. Access to funding is “the top issue” for BIA members, said the association’s public affairs director Laura Gilbert. The centre of gravity for investment has moved away from the UK while investors in general are looking at lower-risk options such as the property market, she noted.
Among the strategies BIA is discussing to mitigate these trends are shared government investment in early-stage clinical trials, a proof-of-concept support fund (as is already available in Scotland), a US-style Small Business Innovation Research programme or adjustments to the R&D Tax Credit reflecting new EU concessions on state aid to so-called Young Innovative Companies.
For the moment, though, the ‘funding escalator’ that should transport innovative and high-quality private biotechnology companies into the public markets appears to have broken down, Postle observed. Increasingly, pharmaceutical companies – the majority of them based outside the UK – are stepping in to take up the slack.
The danger, he warned, is that ‘invented in Britain’ will no longer mean ‘commercialised in Britain’, and the UK economy will miss out on most of the financial returns from the research it is so keen to cultivate.
