The geography of money in biotech

LONDON--Just how important is geography in the biotech market?

I've been in the U.K. for a few days now, grabbing some meetings along the way after discussing valuations in biotechnology with a group of One Nucleus members at The Babraham Institute near Cambridge. And I've been thinking about this question a lot this week.

In the U.S., a confluence of steady venture support tied to the new biotech stock market boom has been funneling cash to the industry, helping to propel the value of biotech assets. When it's easier to raise money then it's easier to wait for the right deal to come along. Prices rise, particularly after we've been through a 4-year diet of lean-and-mean budgets that ultimately helped make for more of a buyer's market. And right now, companies that are buying don't have the luxury of waiting around for asset values to decline.

But take that same asset, and move it to a U.K. biotech, and it's likely to slide in value. Venture players are typically not that adventuresome in the U.K., or Europe as a whole. Only a few venture groups from the U.S. play in this field. The IPO market here has remained closed--though everyone now wants to see if Circassia can pull off its $285 million whopper. And a series of prominent biotech failures a few years ago--Renovo, Minster and Antisoma in particular--left a bad taste in investors' mouths.

Also, let's face it. Memories are longer in the U.K. Defeats, in particular, are remembered.

There are exceptions to this rule. After working for years and years to become an overnight wonder in immunotherapy, Immunocore, a 2013 Fierce 15 company, has found itself in a sweet spot when it comes to dealmaking. But it's an outlier.

The irony is that geography has never been less important in the industry. An asset here should be looking at the same global market potential as an asset in the U.S. And regulatory demands in the U.S. are just as important to U.K. developers as they are to U.S. companies.

In the meantime, companies like Johnson & Johnson ($JNJ) and Merck ($MRK) have either set up or plan to set up dealmaking shops in London, keying in on the work being done here. You can practically hear the McKinsey-types advocating for pharma deal teams placed strategically around the world. But it will take some prominent pacts to help thaw this market.

Given the kind of prominent science work being done in the London, Oxford, Cambridge triangle, you'd think it would be just a matter of time before things really began to heat up. But the near-term forecast remains rather chilly. -- John Carroll, Editor-in-Chief. Email me at [email protected]

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