The mayor of London has come up with a scheme to bridge the financial chasm between the U.K. and U.S. biotech hubs. Officials have called Eli Lilly ($LLY), Pfizer ($PFE) and JP Morgan to a meeting to discuss the plan, which entails creating a £10 billion ($15 billion) fund to invest in drugs across the development spectrum, The Financial Times reports.
Boris Johnson, the mayor of London until he steps down next year, has floated the idea of the fund as a way to link the U.K.'s innovative early-stage research scene to the money swilling around its financial center. The idea to get research and finance--two of the U.K.'s core strengths--to act synergistically has been mooted in the past, notably through the ongoing Angels in MedCity project. However, Johnson's plan to make a huge pool equity and debt finance available to young life science companies is notably grander in its vision than what has been discussed in the past.
The challenge, as always, is to convince investors who are wary of putting their money into high-risk ventures to commit cash to the volatile world of drug development. Exactly how the initiative will persuade pension funds and other conservative investment institutions their money is safe in biotech is still up for discussion. Investing in a mix of speculative and relatively safe ventures to spread the risk while espousing the patient, long-term approach that helped Neil Woodford raise £800 million is a possibility.
Talking up the rewards that await smart--or lucky--biotech investors is another angle. "A 'megafund' could bring together investors who would not normally invest in biomedical research and drug development. In return they could have a small percentage of the royalties from successful products or licensing revenues that result," the mayor's office told The Financial Times. Various organizations, from Lilly and Pfizer to JP Morgan, will have an opportunity to chip in suggestions for the scheme at a meeting at City Hall.
If the plan comes to fruition, even in a watered-down form, it will add another significant pool of cash to a biotech financing scene that is starting to look a little healthier. Woodford has led the way with his £800m Patient Capital Trust, a runaway success that suggested U.K. investors will back life science companies when they have faith in the person calling the shots. Since then, the University of Oxford has set up a £320 million investment vehicle.
- read the FT's article