The United Kingdom: Europe's Biotechnology Hub

UK science expertise, backed by increased government funding, has led to a thriving bioscience industry, distinguished by the energy and creativity of its entrepreneurs." These words are not mine but those of Lord David Sainsbury, the British government's science and innovation minister. The facts more than confirm the accuracy of Lord Sainsbury's assertion.

The United Kingdom is home to the largest biotechnology industry in the world outside of the United States. The biotechnology market and related industries are currently estimated at $13 billion and include almost 300 dedicated biotechnology companies and more than 450 companies involved in bio-related activities. The British government spends nearly $1 billion annually on bioscience research, and charities such as the Wellcome Trust also provide significant funding. The pharmaceutical sector spends more than $2.7 billion per year on research and development (R&D), making it the largest user of modern biotechnology.

Furthermore, the UK is characterized by an abundance of technically qualified and highly skilled personnel in its academic institutions, industries, and hospitals, as well as excellent education and training structures to ensure that this supply of talent is ongoing. In the past 50 years, British scientists have earned more than 46 Nobel prizes, two-thirds of which were for advances in medicine, chemistry, and physiology. The UK has discovered 15 of the world's current 75 best-selling drugs, and British companies account for 62% of the products in late-stage clinical trials in Europe. The UK is home to a significant number of world-leading research institutes including the Sanger Center and the Roslin Institute; international research establishments such as the European Bioinformatics Institute; and regulatory bodies such as the European Agency for the Evaluation of Medicinal Products and the Medicines Control Agency.

The UK presently funds approximately 4.5% of the world's science, produces 8% of all scientific papers, and receives 9% of the citations - all with only 1% of the world's population. In short, British academic institutions and UK-based companies remain firmly on the frontlines of biotechnology research. They do not simply compete on a global scale; they lead the way.

The UK–US Biotech Relationship

The UK's biotechnology industry is unrivalled in Europe and continues to spawn companies that rival those of the US. The biotechnology communities in the UK and US have been inextricably linked since the UK's Francis Crick and James Watson of the US demystified the double helix 50 years ago.

For example, Eli Lilly plans to spend more than $350 million over the next four years to expand its UK operations. The investment includes $112 million to improve manufacturing operations in Southeast England. Eighty million dollars will support overall UK operations, including the Erl Wood research site in southeast England, where a further $64 million is committed to a neuroscience research center. An additional $72 million is dedicated to adding capacity at its Merseyside manufacturing facility, and $24 million is set aside for UK business support.

British and American Joint Ventures

Another American biotechnology company investing in the UK is Genzyme, one of the top five biotechnology companies in the world. Genzyme has recently completed a plan that included $88 million to expand its facilities in East Anglia. Two large-scale, state-of-the-art plants were officially opened in August 2002, enabling a tenfold increase in production capacity of the active ingredients for the kidney disease drug Renagel and doubling staffing levels to more than 200.

The UK's Biotechnology "Clusters"

The idea of biotechnology clusters may be valid in a country as vast as the US, but the UK is so geographically compact that, especially from the perspective of US business, it can be considered one "cluster" - one that can act as a transatlantic stepping stone into continental Europe. Within the UK cluster, there are hubs of special expertise, often growing out of the particular strengths of local universities.

Expert advice is abundantly available to help individual investors identify the right location for their business proposition. For many investors, the first port of call has been UK Trade & Investment, which provides free and confidential advice to both potential and current investors. UKT&I works closely with the government's science and technology team that has representatives based in consulates around the US. It works hand-in-glove with the 12 development agencies directly responsible for England, Northern Ireland, Scotland, and Wales.

Biomanufacturing in the UK

Companies established in the UK support all aspects of biopharmaceutical production, from development and manufacturing of active ingredients, to formulation and delivery. The UK biomanufacturing marketplace is diverse and deep and includes specialist third-party contract manufacturers such as Avecia (Billingham), CAMR (Salisbury), Cobra Therapeutics (Keele), Excell Biotech (Edinburgh), and Lonza Biologics (Slough); contract testing and research organizations such as Q-One (Glasgow); and manufacturing facilities (such as PowderJect, Eli Lilly, Avecia) for vaccines and biologics. Also present are the in-house process development organizations of "big pharma" and biotechnology firms such as AstraZeneca, Celltech, Cambridge Antibody Technology, Delta Biotechnology, GlaxoSmithKline, Merck, Pfizer, and Protherics. Leading academic institutions such as University College London's Advanced Center for Biochemical Engineering, Aston Academy of Life Sciences, and the University of Cambridge support the entire sector.

An excellent example of the UK's commitment to biomanufacturing is the recent announcement of the creation of a $50 million National Biomanufacturing Center at Speke, Merseyside. The center is the first of its kind in the UK and is expected to open in 2005. It will focus on biotechnology business development and the manufacture of innovative biological medicines, including vaccines. Also, the center will provide advice, services, and trained personnel to biotechnology businesses throughout the region. Its program is designed to support start-up companies spinning out of area universities and should provide a crucial bridge between academic innovation and commercial biomanufacturing development.

In addition to the Eli Lilly and Genzyme expansions, other recent developments on the biomanufacturing front include the following:

• Abbott Laboratories is investing approximately $50 million to create 125 new, highly skilled positions in biomanufacturing, taking the total employed at its Dartford facility to more than 400. The investment will be for the production of advanced biological reagents for use in diagnostic testing equipment.

• PowderJect, which was recently acquired by Chiron, is investing a further $140 million at its Merseyside site.

• A $166 million biomanufacturing center, BioCampus, is to be created in Edinburgh. This fully serviced 25-acre site will be home to specialist biotechnology companies engaged in the manufacture of their own products.

Universities and Tech Transfer

The dynamism of the UK biotechnology industry is founded on Britain's outstanding universities and research institutions, which remain at the forefront of global research. "The past decade has seen a dramatic change in UK universities with the recognition that our research base is developing knowledge that has a value beyond its scholarship and additional to its traditional output in publication," says Sir Richard Sykes, Rector of Imperial College London. "Today, more and more universities are looking to exploit their intellectual assets in ways that more directly bring income and rewards to fund their work. Investors have faith in technologies based on high quality research and UK universities have a strong and credible track record in supplying it. Markets may swing up and down but there will always be a place for inventions that address healthcare, quality of life, or quality of environment needs and concerns."

In the UK, as in the US, technology transfer is often overseen by university-owned companies such as ISIS Innovation, which is wholly owned by the University of Oxford and provides the university's researchers with commercial advice; funds patent applications and legal costs; negotiates exploitation and spinout company agreements; and identifies and manages consultancy opportunities for university researchers. ISIS is just one of many similar UK organizations spearheading technology transfer.

According to Maire Smith, chief executive officer of the technology transfer group Manchester Innovation, "The key to technology transfer is having a body that understands the bridge between the university world and the commercial world. It is essential to have staff with commercial management experience who can visualize a market requirement for a technology or area of research." Another primary focus is nurturing entrepreneurialism. "The incubator helps, as it shifts a researcher's mentality from academia to business," Smith says.

Part of this shift comes through introducing the entrepreneurial researcher to experienced management, venture capitalists, and business angels. These groups frequently take on both a financial interest and a business mentoring role in any new company. UKT&I recently organized its second annual Biotech VC mission in which nearly 30 US venture capitalists met with British biotechnology companies that were looking to raise R&D funding.

One established venture capital group is Global Life Science Ventures (GLSV). It closed its first $110 million biotech fund in 1996. Although GLSV had a global investment focus - the bulk covered Germany and Switzerland, with a third going to the US - it has expanded its focus to include the UK. From new offices in London, the VC group closed a second fund of $237 million in autumn 2002. Although the group will consider any European or US investment, it will only take a lead investor role where it has a base. "In the rest of Europe there are good deals, but we need direct dialogue and frequent interaction to mentor a company properly," explains Philip Morgan, managing director of GLSV. "It made sense for us to come to the UK. It's significant in terms of the number of life science companies and there are managers who have been through the biotech process before," he says. "The UK has a substantial interest in biotech and a large unquoted sector. There is also a good group of VCs in the UK that we are interested to syndicate with."

Investment Environment

Even while the global economy remains soft and difficulties abound for companies seeking funding, the British biotechnology sector is growing and managing to attract significant investment. Within Europe, the UK is still attracting the lion's share with around $528 million in public and private investments in 2002, approximately half of the European total for the year.

More than half of the investment funds raised came from private venture sources, making 2002 the second best year ever for private equity infusions into British biotechnology. According to Keith Binding, director of Critical 1, a life sciences intelligence group, "This demonstrates that VCs are prepared to back UK biotech with large sums of money."

Why do VCs find these companies so attractive? "The UK has sailed a fairly steady course, as its companies are more mature and product focused. UK companies are therefore more attractive to venture capital than other European companies as venture capitalists are looking for products," explains Binding.

The UK's public markets are also offering biotech companies increasing opportunities. "Last year there were only nine biotech IPOs in the world. Three of those were UK companies, and one was Canadian but listed on the London Stock Exchange. In the public markets, it's clear that London has re-emerged as the European market best able to support bioscience companies," Binding says. Today, some 56 British technology companies are publicly traded, the largest number of any European nation.

In addition, the British government serves as a significant source of funding for the biotechnology industry. In partnership with the Wellcome Trust, the government has committed $1.5 billion for the renewal and modernization of the science base infrastructure in the UK. Furthermore, the UK National Health Service (NHS) spends in excess of $17 billion per year on goods and services and is one of the few healthcare systems in Europe currently increasing its expenditure. The government estimates health-related expenditure growth of 7.5% annually for the next five years.

Legal and Regulatory Framework

The UK has created a climate for biotechnology in which regulatory requirements aim to be

• proportionate to the risks involved

• scientifically based

• simple

• flexible and responsive to advances in scientific knowledge

• sympathetic to innovation while maintaining appropriate safeguards.

The UK has practical and effective arrangements in place for the clearance of products, such as novel foods, through the Advisory Committee on Novel Foods and Processes (ACNFP), and diagnostics, through the Medical Devices Agency (MDA). The Gene Therapy Advisory Committee (GTAC) has taken a pragmatic and sensible approach to controls on gene therapy. The Advisory Committee on Releases to the Environment (ACRE) provides advice on genetically modified organism (GMO) consents.

The UK established the Agriculture and Environment Biotechnology Commission (AEBC) to consult widely on biotechnology issues and the environment. The Human Genetics Commission (HGC) has been set up to look at genetic technologies and their impact on humans, providing strategic advice to the government. The Food Standards Agency (FSA) has taken responsibility for the assessment of genetically modified (GM) foods and the development of new policies.

The European Medicines Evaluation Agency (EMEA) is responsible for fast-track approval of biotechnology-derived pharmaceutical and veterinary products throughout Europe. It provides a single EU-wide license valid in all member states. The UK Medicines Control Agency (MCA) provides approval of other medicinal products and has a strong international reputation.

In 1999, the National Institute for Clinical Excellence (NICE) was established as a Special Health Authority for England and Wales. Part of the National Health Service, NICE provides health professionals and the general public with authoritative, robust, and reliable guidance on current best practices. NICE produces specific guidance on the use of new and existing medicines, clinical guidelines for specific disease treatment, and the safety of interventional procedures. It also funds studies on improving the quality of patient care.

One particular area in which the UK has been successful in adapting legislation and regulations to changing circumstances is in the use of embryonic stem cells, where the UK is now in a leading position internationally and attracting top scientists from around the world.

Looking Ahead

Against this backdrop it is hardly surprising that more and more leading biotechnology companies are committing to the UK. Researchers and businesses alike are assured not only of a world-class environment today but also into the future. To close - as I opened - with words from David Sainsbury: "The UK government sees bioscience as a key industry for the future and is determined to create the best possible environment for the industry to grow and flourish."

Investment Opportunities

For UK Trade and Inward Investment Opportunities, contact:

UK Trade & Investment USA

Hannah Morris, Life Sciences and Healthcare Analyst

British Consulate General

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Cambridge, MA 02142

Email: hannah.morris@fco.gov.uk

Tel: 617-.245.4500

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