Dolly the sheep may have put Scotland on the biotechnology map, but it will take manpower and money to keep it there.
According to a newly released report, the country’s biotech industry has grown nearly 20 pecent in the two years since the nation unveiled plans to become a biotech powerhouse by 2020.
The Young Company Finance Special Report: Life Sciences in Scotland said the industry now employs about 30,000 people in 590 research institutions and companies – up from the 26,000 employees and 500 organizations cited by Scotland’s economic development ministry, Scottish Enterprise, when it unveiled its strategy in 2005.
The report, produced by he Life Sciences Industry Advisory Group, warned that over the next few years Scotland must “address the potential barriers to the growth of the sector, primarily people and money.”
“We need to encourage people with sound, relevant, international industry experience to join us and share their skills with the Scottish life sciences community,” according to report authors John Brown, chairman of Scottish Biomedical, a Glasgow pre-clinical drug discovery-services company, and David Bowie, an executive with Aircraft Medical, a company specializing in miniaturized camera and optoelectronic technologies.
“We need to develop a whole new set of commercial skills, as well as the scientific expertise, in order to make our aspirations real,” they wrote. “We also need to work with companies and the wide range of financial investors, at home and abroad to bridge the gap between company ambition and making it a reality.”
To help reach these goals, Scotland is working to develop both funding and talent for the biotech industry, said Ken Snowden, director of Scottish Enterprise’s life sciences team.
On the funding end, Scottish Enterprise has teamed up with private VC firms to invest a total ₤70 million ($139 million) in early-stage companies through its Scottish Venture Fund.
Launched in October 2006, the fund invests between ₤500,000 and ₤2 million with at least as much in matching private investor funds for companies seeking up to ₤10 million in financing.
Around ₤20 million currently remains in the fund, Snowden said.
Scottish Enterprise is also engaging investors from inside and outside the country in hopes that they will invest more money in Scottish companies.
“It’s an area which we think needs to be strengthened, and we’re supporting the industry to do that,” Snowden said.
An observer of Scotland’s biotech industry agrees.
Luke Charleton, a director with Ernst & Young, said SE’s venture fund plays an important role of growing early-stage companies. While Scotland has several strong networks of angel investors, there are fewer private-equity firms in Scotland than in the UK’s other biotech hotspots of Oxford and Cambridge that can support more mature companies.
And early funding rounds are smaller than for companies in the US, he added.
“There’s just not a large volume of Scottish-based venture [capitalists]” Charleton said. “However, there are a strong number of players who are more prepared to look outward [from] their small geographic area. There are venture [capitalists] in Cambridge who will look up here and do investments and others who might look within the region.”
One bright spot for Scotland’s venture industry came last year when the private firm Scottish Equity Partners raised a total ₤120 million for companies in biotech and other industries.
Snowden said Scotland’s biotech investment effort also enjoyed some success late last month when Scottish Enterprise drew more than 600 venture capitalists to Glasgow for BioEquity Europe 2007. It was during the event — Europe’s largest life sciences investor conference — that the report on Scotland was released.
On the employment front, Snowden said Scottish Enterprise has worked to identify and retain talent for the country’s biotechs through pair of programs. SE is a partner in Globalscot, an international network of more than 900 business leaders either from Scotland or trained in the country.
SE also funds and manages Talent Scotland, a Web site with job listings and industry information about life sciences and other sectors of Scotland’s economy. And its Fresh Talent: Working in Scotland program links university students to jobs in Scottish biotechs such as Cyclacel Pharmaceuticals, a cancer drug developer spun out of Dundee University.
Cyclacel illustrates the ups and downs of biotech financing. From its founding in 1996 through January 2004, it was the first European university spin-off company to raise more than the equivalent of $100 million in venture capital. But later that year, the company pulled back from a planned initial public offering on NASDAQ and the London Stock Exchange, citing worsening market conditions.
Cyclacel received ₤5 million from SE the following year as part of a ₤10 million public-private investment. Cyclacel went public in December 2005 following a reverse merger with Short Hills, NJ-based Xcyte Therapies. Cyclacel — now headquartered in Berkeley Heights, NJ, with a primary research facility in Dundee — has since raised $45 million in April 2006 via one private stock placement and warrants, and $36 million in the first quarter of this year via another.
“The big challenge is the relationship between management and money, so the management can actually drive businesses forward,” Snowden said. “We actively support the industry to recruit both in Scotland and also overseas, to bring expertise back into Scotland.”
Scotland’s biotech cluster generates enough research to require and attract talented university students, Charleton said – but much of that talent goes to research institutes as private businesses ramp up for future growth.
“The question is what comes first: money or talent? The opportunities are definitely being created here. The infrastructure is being created. There is funding available. One hopes the key talent will recognize that and be attracted by that,” Charleton said.
For Scotland, he said, the science generated by companies is strong, yet commercialization of science still lags behind Oxford and Cambridge, where spin-off companies from their namesake universities have driven business growth.
Last year Scotland announced an effort to build both its public research and private science when it joined with Wyeth Pharmaceuticals to announce a Scottish Translational Medicine Research Collaboration with the universities of Edinburgh, Aberdeen, Dundee, and Glasgow. The project is projected to cost ₤50 million.
Another sign of progress on the commercial front may emerge over the next few years. SE last month selected Alexandria Real Estate Equities of Pasadena, Calif., to co-develop Edinburgh BioQuarter, formerly the Center for Biomedical Research. SE plans to break ground on the first phase of some 1.4 million square feet of new life science space — 900,000 square feet of commercial space, the rest academic and institutional — planned for the 100-acre life-sciences campus.
“We need to develop a whole new set of commercial skills, as well as the scientific expertise, in order to make our aspirations real.”
The first phase will consist of a 30,000-square-foot building primarily for R&D for multiple tenants to be built near the 870-bed Edinburgh Royal Infirmary. It is set to start construction early next year. Additional phases are projected to be built over the next 15 to 20 years, Snowden told BioRegion News last month [BioRegion News, May 14, 2007].
A professor who has long followed the growth of biotech in Scotland said the industry has grown not only due to headline-grabbing research like the cloning of Dolly in 1997, but the ensuing, and much quieter, development of stem-cell research at the Roslin Institute in Edinburgh where Dolly was created.
Joyce Tait, director of the ESRC Centre for Social and Economic Research on Innovation in Genomics, said that research should blossom in future years following the announcement last year of a ₤2 million collaboration between Roslin and the University of Edinburgh to create human stem-cell lines from donated eggs and embryos for research and clinical use.
Tait said Scotland’s biotech industry still faces several hurdles to growth. Ethical reviews have delayed clinical trials enough for Scottish authorities to consider a new law to speed them up. Also, Scotland has a sparse number of direct flights linking Glasgow to other top cities worldwide compared with London’s Heathrow airport and other airports in Europe. And until lately, growing life sciences companies found few places where they could expand.
“In some cases, planning constraints have caused problems,” Tait told BioRegion News. “We have quite rigorous planning in the UK, and it can often take some time to get things developed. But we have a lot of research parks that have been set up by local authorities, so I don’t think that’s so much of a problem.”
As for closer air links, just how important those are can be seen in the recent expansion into Scotland of a New York company specializing in databases for the pharmaceutical and biotechnology industries.
Robert Merold, CEO of Cognia, said direct flights linking Edinburgh with Newark Liberty International Airport in New Jersey is one key reason why his company has found Scotland an attractive place to do business: “Practically speaking, it’s easier to get to Scotland than it is to get to California.”
Cognia opened its Development Center in Edinburgh in March 2005 as part of a text-mining program for life sciences developed with the University of Edinburgh. Cognia sought to draw on the university’s strength in natural-language processing.
As it needed to hire more IT professionals, the company outgrew its first office and moved to a business park in the city’s outskirts before returning to Edinburgh. During a second expansion of that office, the company explored offshoring before concluding that it made more sense to grow in Scotland. The cost of that expansion, Merold said, was less than would have been in the US.
“We saw both the quality of the work force and the ability to hire were such that we stepped it up to about 25 [employees] by the beginning of this year,” Merold said.
Cambridge’s bio cluster has proven attractive enough for Cognia to also explore expanding there as well, he added. But the university program proved attractive enough for the company to grow in one location so far.
“We could have gone to Cambridge. We could have gone to Northern Ireland. But Scotland had at least equal to if not better skill sets and resources for all the other things we needed,” Merold said. “You have a world-class caliber of skill sets and universities. Second you have English as a primary language. That has very important dimensions for our business.”
Last March, Cognia announced plans to expand its Scottish operations by creating a new operations center in Edinburgh that would commercialize and deploy text mining systems allowing PhD-level curators to analyze and extract information from large quantities of scientific text.
Cognia now has about 50 employees in Scotland – about half of whom were hired for the operations-center project, announced last March. The remaining 25 new employees are due to be hired by the fall. Scotland has a large pool of PhDs in molecular biology – a skill especially sought by the company.
“The biggest challenge for Scotland is to learn how to continue to learn how to support and promote small businesses,” Merold said. “Governments tend to look at, ‘Can I do a big deal with a big company which means tons of jobs?’ But it’s really the small companies that do the bulk of the job creation.”