The UK BioIndustry Association (BIA) has laid out its strategy for turning the United Kingdom into a biotech cluster to rival those in California and Massachusetts. And while the plan has many components, a comparison of the three regions today shows the main area the U.K. needs to improve: financing.
|BIA CEO Steve Bates|
BIA tallied up how much private investment flowed into biotechs in each region from 2010 to 2012 in the form of venture capital rounds, IPOs and follow-on offerings. The gap between the U.K. and the two U.S. states is huge. On average, California pulled in £2.67 billion ($4.13 billion) a year and Massachusetts snagged £1.45 billion. U.K. businesses managed to raise just £250,000 million. The situation in the U.K. has picked up since then--Circassia's (LON:CIR) IPO alone raised £200 million last year--but California and Massachusetts are still way out in front.
If the U.K. is to fulfill BIA's vision of being recognized as as peer to Boston and the San Francisco Bay area, it will need to find a way of closing the funding gap. BIA's goal is for U.K. companies to attract £1 billion a year in VC investment by 2025, with a further £1.8 billion being raised in IPOs and follow-on offerings. BIA has a slew of ideas about how the U.K. can move toward its ambitious goal and in all likelihood several of them will need to take off. The first task is to persuade legislators of the need for the changes.
Possibilities mooted by BIA include making it easier and more tax-effective for U.K. biotechs to list on Nasdaq, a shift that would allow more companies to sidestep the reticence of local investors to back high-risk R&D-stage businesses. Israel already has such legislation in place and consequently Nasdaq is an obvious option for many of its biotechs. BIA also wants to improve the situation at home by encouraging a JOBS Act-style reform of London's AIM exchange. Financial trade groups are pushing for similar changes to stock exchanges across Europe.
Collectively, the removal of barriers to listing on Nasdaq and AIM could increase access to public investors and provide a clearer route to returns for financiers of privately held startups. However, the issue of who will invest in such biotechs remains. BIA suggests the pool of potential investors could be expanded by clearing charities to back companies working in areas linked to their operations, setting up schemes to raise money from the super rich and allowing pension funds to broaden the scope of their portfolios.
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