Economic situation

In comparison with other European countries, the UK biotech sector is considerably more developed. According to the British BioIndustry Association (BIA), of the altogether 457 Biotech companies in the UK, 48 are on the stock exchange, eclipsing every other country in Europe. The industry is particularly concentrated on the fields of health and medicine, accounting for more than half of all British biotech companies. According to auditors Ernst &Young’s figures for 2005, the listed companies have at present approximately 200 drug candidates in their pipeline, of which 36 are in the last phase of clinical development, and seven already seeking approval. The turnover of UK biotech companies was around 4 billion Euros in 2004, clearly declining when compared to 2003, which saw figures top 5 billion. In 2005, the British biotech industry was proudly showing off its first blockbuster product: Humira, the monoclonal antibody from Cambridge Antibody Technology (CAT), used for the treatment of rheumatoid arthritis, has achieved a turnover of more than one billion Euros, a first in the UK.

Table 1: Essential economic figures for the UK biotech sector

Source: Critical I (2006)

Table 2: Drug pipeline of listed companies in 2005

Source: Ernst & Young 2006

Financially, the British biotech entrepreneurs are traditionally better off than their European colleagues abroad. The companies in the UK have benefited for a long time from the largest financing rounds, the most IPO’s and the largest stock exchange volumes. This is particularly because of the weighty VC market, the highest in Europe. In May 2004, a study by the European Venture Capital Association identified the UK, Ireland and Luxembourg as the most favorable for investments due to their favorable tax setups. Nevertheless, the times seem to be changing, albeit slowly. As shown by Ernst & Young’s figures for 2005, for the first time less risk capital (approximately 250 million Euros) was invested in British companies than in German biotech companies. Analysts attribute this to the fact that Germany still has a much less developed biotech sector and therefore needs a greater amount of funds in order to grow. However, the European market analysis from Critical I also notes in its current study that, on average, VC rounds in the UK are, at10,16 million Euros, lower than the European average (10.6 million Euros). Germany’s average is 12,89 million Euros. Nevertheless, it was a British company who achieved one of the highest VC rounds of 2005 – Oxygen, with 46 million Euros. A similar story looks set to be the case in 2006: Chroma Therapeutics has recently secured 43 millions Euros in a series C financing.

Unlike most other countries in Europe, financing has precedence over the stock exchange in the UK. However, UK companies also have to do ever more in a varying capital market. For instance the ProStakan Group, with an IPO volume of 57 million Euros, occupies second place in the European stock exchange Top Ten in for 2005. However, the company had originally announced that it would receive 141 million Euros. A further six companies made the leap onto the stock exchange in 2005, compared to 8 in 2004. Two went to the London Stock Exchange (ProStakan, Ardana) and four chose the AIM (Alternative Investment Market) - among others ReNeuron PLC and Angel Biotech. Other companies, for example Cyclacel, pulled back from their stock exchange plans and used a reverse merger as a back door IPO. Altogether, four companies already listed could acquire further capital in 2005. Alizyme, with 46,8 million Euros, secured the largest follow-on investment.

More than anything else, mergers and acquisitions shaped 2005. Antisoma bought Aptamera, Celtic Pharma united with Xenova Group and Trigen merged with Germans ProCorde. The large Pharma companies were also in the mood for consumption: AstraZeneca bought KuDOS in 2005 and CAT this year.

Table 3: Selected Financing Rounds in 2005

Source: Ernst & Young 2006

Table 4: Selected IPOs in 2005

Source: Ernst & Young 2006

Most Biotech companies in the UK have developed as spin offs from the large research institutes such as Oxford, Cambridge, Imperial College or Manchester University. There, resident incubators support young start ups in the search for investors or with patent-related matters.

Table 5: Start-ups in the UK biotech sector

Source: Critical I

Also strongly engaged are the businesses angels - there are altogether 20 such networks in the UK, among others the Oxfordshire Investment Opportunity Network. Founded in 1985, it is one of the most successful in Europe today.

In addition, the state invests strongly in the establishment of young entrepreneurs. New companies receive substantial tax breaks (see legal standards) and just this summer, two new funds were announced, which, in co-operation with private investors, are to help innovative small and medium-sized enterprises with financing in the first year of their existence. One of these funds - The Midlands Enterprise Capital fund – has a war chest of approximately 43 million Euros, and the other - The Dawn Capital fund – has approximately 54 million Euros at its disposal. The British government has contributed 57 million Euros to the scheme, to be distributed between the funds.