London's mayor suggests quick $15B fix for financially ailing biotech sector

Boris Johnson

The general consensus about the U.K.'s place in the biotech world can be summed up in a few words: Great science, world-class academic centers and way too little cash to finance promising new companies. But London Mayor Boris Johnson has come up with a radical idea to fix the funding gap virtually overnight, suggesting that the country leverage its place as a leading global financial center to create a $15.7 billion (£10 billion) megafund that could finance a fast biotech revolution.

That proposal--not the first of its kind--puts a bright spotlight on the mayor's meetings today to highlight the role of the new MedCity to act as a catalyst for the Golden Triangle, knitting together an R&D infrastructure that spreads from London and connects to Oxford and Cambridge.

"If we want to develop another GSK or AstraZeneca, if we want to get a full return on the investment we put into our research base, and if we want better therapies more quickly, this is an issue we have to address," says Eliot Forster, executive chair of MedCity, according to a report from the Financial Times' Andrew Ward.

How would it work? The fund would patiently invest in drugs at various stages of development in exchange for a royalty stream from any money generated by new treatments. And by spreading its bets it would attract cautious investors like pension funds.

The proposal highlights an awkward phase of development for the country's biotech industry. A few years ago a string of high-profile R&D failures chilled the U.K.'s investment community. As a result, the U.S. biotech boom over the last two years made Wall Street a more likely place for Europeans to find the kind of money needed to grow a company--a lesson that wasn't lost on up-and-coming companies like Oxford-based Adaptimmune, which completed its IPO on Nasdaq.

In the meantime, Invesco vet Neil Woodford has set up his own new publicly-traded trust to invest in a blend of biopharma companies, while some venture groups--such as New Enterprise Associates--have been more willing to make the transatlantic trek to connect with a few of the more promising companies in the region.

The MedCity initiative and today's radical plan, though, underscores the considerable frustration that biotech centers in Boston/Cambridge and the Bay Area around San Francisco are booming while the Golden Triangle still languishes far behind.

- here's the story from the Financial Times

FierceBiotech is rounding up some industry reactions to this idea from both sides of the Atlantic. We'll be adding comments through the morning.

Atlas Venture partner Bruce Booth

Bruce Booth, Atlas Venture: I'm skeptical that a Mega-Fund concept can be practically deployed in an efficient manner, even in great scientific environments like the Golden Triangle.  Further, $15B would be something like 30x more than the annual venture capital deployed in the U.K. It would obviously flood and potentially even crowd out market-driven private sector investment, and would almost certainly lead to artificial price and funding dynamics that always seem to end poorly. Other more market-oriented strategies to stimulate the sector in the UK seem smarter--long-term investment tax preferences, R&D tax loss trading, small business investment incentives, etc. In addition, seeding a broad range of smaller, focused venture efforts with the right market incentives feels like a better strategy for cultivating a healthy sustainable emerging biotech ecosystem.

David Grainger, Index Ventures: Creating new sources of capital, of any size or kind, pre-supposes that the limiting step in creating "success" is availability of capital. I certainly don't see any evidence that there are more fundable opportunities than available capital in the UK right now. To the extent that the UK "Golden Triangle" languishes behind Boston and the Bay Area, that has more to do with differences in entrepreneurial culture and experience of management teams than either quality of science or availability of risk capital.  Unfortunately when politicians and governments get involved, they mix up inputs and outputs - believing that the size of the enterprise somehow reflects its value. Perhaps at a macro-level to governments thats true: what a life-sciences megafund undoubtedly would do is secure more local, high-value jobs (at least for a while, like any other stimulus).  But its doubtful whether that would in turn translate into more real successes (revenues from selling healthcare products themselves) over the longer term.

Image removed.MIT's Robert Langer

Robert Langer, MIT, biotech entrepreneur: On the positive side, I applaud the fact that he wants to put funds into biotech. On the negative, I agree w the pts made by Bruce+David +would add that some of the funds should be used to support basic research at universities (where so many of the discoveries, eg, monoclonal antibodies, structure of DNA) that led to the biotech industry were made. I'd love to see more discoveries like that enabled by research funding. It would be crucial to develop some very well thought out plans for how 15.7B could be optimally utilized.

Anja Koenig, Novartis Venture Fund: The golden triangle is one of the best biotech environments we have in Europe. How can it get even better? In the more fragmented European context it is tough to match US clusters like Boston where there is a critical mass of science, entrepreneurs and management and a sophisticated financing community, all of which has evolved in decades. One of the greatest gaps we have in European biotech is the lack of a European stock exchange that could support biotech IPOs on the level we are seeing in the US. Here London could play a leadership role for Europe, beyond even just Britain. 

Asthika Goonewardene, Bloomberg Intelligence: Availability of funding is a positive step, but it's only part of the fix required to reinvigorate the British Biotech movement. The "Golden Triangle" has ample talent - just as Boston and the Bay Area does, but it will need to create an entrepreneurial culture to spur biotech start-ups. This includes having things like incubators and lab space to give the scientists what they need to go from a PowerPoint deck to set up an actual LLC. Private investors will also need to not be spooked by previous failures, and have a bigger appetite for risk. Lastly, local, established companies will need to help build the community, much like companies like Genentech and Biogen etc have played a role in the two big hubs across the pond.