UK keen to mimic German venture scheme
Nature Biotechnology, June 2001 Volume 19 Number 6 p 495
John Hodgson, London
Date accessed: 6 June 2001
Preempting UK Prime Minister Tony Blair's call for a general
election at the beginning of May, the UK's BioIndustry
Association (BIA; London) published it's "Manifesto for
Biotechnology" on April 26th. In it, the BIA highlights several
specific areas for government action such as animal testing,
stem cell technology, and gene patenting. The BIA has also
looked enviously across to Germany's juvenile biotechnology
sector whose youthful growth spurt has been stimulated by
"soft" government money and has called for UK authorities to
match venture investment in early stage companies with
low-interest loan finance. Critics feel, however, that although
such easy money might boost the number of young UK
companies in the short-term its main benficiaries would be
venture capitalists and not corporate bioscience.
Under its scheme for government "soft loans," the BIA proposes
that venture capital companies would undertake normal due
diligence on prospective investment opportunities and, when a
decision to invest was made, the government would make low
interest unsecured loans available to the company. Under the
similar German scheme, such funds doubled or tripled the
effective amount of the venture investment; the BIA wants "loans
structured to produce up to 3:1 matching of venture capitalist
funds."
Paul Drayson, CEO of one of the UK's leading companies,
PowderJect (Oxford, UK) and currently the chair of the BIA,
estimates that a loan scheme worth $300 million over three
years "would make a real difference." The German scheme has
"catapulted" its biotechnology industry from nowhere to a
position where its revenues (786 million) equal those of
French industry (757 million), he says. (UK is 2066 million.)
Reaching for the UK government's hot-button, he claims that "if
Germany carries on at its current growth rate, it will overtake the
UK in a few years." Ernst & Young's latest survey of European
biotechnology companies (see "Fragmentation is industry
obstacle in Europe") indicates that Germany already has more
companies than the UK although UK companies are, on
average, much larger. UK companies also account for more
than half the products that European biotechnology have in
clinical development while Germany's share is less than 2%.
Critics believe that soft loan schemes distort venture capital
activity, tending both to reduce the amount of each investment
made and to lower the quality threshold. Drayson concedes that
"no scheme is perfect" but he believes that the greater maturity
of its industry means that such schemes will work better in the
UK. "You are putting that money in the hands of seasoned
people. We are battle-hardened here. We know what works and
what doesn't and we won't waste the money." Crispin Kirkman,
the BIA chief executive is even more bullish. He says that given
the combination of UK science and a financing scheme that
generates commercial confidence, it is "unquestionable" that
the UK would produce "a whole raft of really worthwhile young
companies that would go far beyond that anywhere else in
Europe."
The BIA, of course, has consulted widely in government circles,
particularly with the Department of Trade and Industry (DTI).
Although the government has not yet made any official response
to the BIA proposals, the director of biotechnology at DTI,
Monica Darnborough, acknowledges an interest in boosting
early investment in biotechnology. "There is still clearly some
potential [in UK bioscience] that we haven't unlocked and we
are looking at getting investment from venture capital and other
investors from overseas into UK science."
The other big issue on the BIA manifesto is to resolve the issue
of animal testing during drug development in the UK.
Huntingdon Life Sciences (HLS; Huntingdon, UK), a BIA
member, is a pre-clinical research company that has been the
focus of continuing protests and vicious attacks from animal
rights activists. The company's managing director, Brian Cass,
was beaten with baseball bats outside his home. The company
was deserted by its bankers as they, in turn, were threatened by
protestors. In March, the offices and laboratories of the UK
operations of HLS clients such as Bayer, GlaxoSmithKline, and
Eli Lilly were attacked. Protestors also staged demonstrations
outsided the homes of directors from Roche and Pharmacia.
The BIA, working in collaboration with other UK science and
industry bodies such as the Wellcome Trust (London) and the
Association of the British Pharmaceutical Industry (London),
has asked the government to alter the law on the disclosure of
company directors' addresses and to strengthen the police
response to violent animal right activism and harassment. "We
want to have better communication of ethical issues from
scientists to the general public," says Drayson," but
understandably company people will not speak out if they are
going to get a letter bomb for doing so."
One of the ironies of the BIA manifesto is that its call for soft
loan funding for start-up companies is likely greatly to assist
such companies as Citibank, Dresdner Kleinwort Wasserstein,
Credit Suisse First Boston, Barclays and West LB—the very
institutions that skipped away from HLS as animal rights'
activists extended their protests to the financial community.
Category: 58. General Biotechnology Information