Life science chiefs warn cuts will hurt sector

Leaders of Britain’s life-sciences sector have warned ministers that cuts in government support for the industry would imperil a renaissance in UK biotechnology.

Financing for British life science companies hit a record high in 2014, according to data published on Thursday, a trend that has continued this year.

But biotech entrepreneurs are worried the sector could be squeezed in next month’s spending review as Sajid Javid, business secretary, looks for savings among the range of measures introduced by the past two governments to support high-tech industries such as life sciences.

Mr Javid is known to be more sceptical of interventionist industrial policy than his Liberal Democrat predecessor Vince Cable and has called in consultants from McKinsey to help find the 25-40 per cent cut in departmental spending demanded by the Treasury.

Steve Bates, chief executive of the BioIndustry Association, an industry group, said schemes such as the Biomedical Catalyst, which uses public money to attract match funding from the private sector, had been crucial to the investment rebound.

“The UK life science sector is flying but it’s vital that the rug is not pulled away from the industrial policies that have made this success possible,” he told the Financial Times.

Biotech leaders are trying to strike a balance between celebrating the sector’s recovery from a long funding drought without fuelling the arguments of critics who question why it still needs government support.

UK biotech companies raised £1.2bn in public equity and venture capital in 2014, more than double the previous year and by far the highest figure in the 15 years that data has been measured, according to research for the BIA by the consultancy EY.

The tally accounted for 31 per cent of all capital raised in the European biotech sector last year — well ahead of second-placed France and up from 22 per cent in 2013.

The UK remains far behind the much bigger US biotech market, but Mr Bates said Britain had a chance at becoming a third major global cluster in the sector after New England and the San Francisco Bay area.

He credited supportive government policies, such as tax breaks on research and development, with helping unleash a new generation of UK biotech companies in emerging fields such as regenerative medicine and cancer immunotherapy.

This has been reinforced by a growing pool of capital focused on the UK sector from investors including Neil Woodford, the high-profile fund manager whose £800m Woodford Patient Capital Trust has bet heavily on biotech.

“There is now a solid group of evergreen funds that are able to take a long-term view on investment in life sciences,” said Dan Mahoney, a healthcare fund manager at Polar Capital.

Examples of successful fundraisings include the $320m raised by Immunocore, an Oxford-based cancer drug developer, in July — the biggest private financing on record for a European biotech company. Mr Woodford was among the backers.

But conditions have got tougher in recent weeks as a sharp downturn in the previously booming US biotech market reverberated across the Atlantic. The recent collapse of a planned initial public offering by Shield Therapeutics, a Newcastle-based drug developer, highlighted the turbulence.

Alison Clough, acting chief executive of the Association of the British Pharmaceutical Industry, said big drugmakers would also be worried by an attack on investment incentives. “We have built a positive ecosystem in the UK with industry, academia and charities working together but it does need a strong signal from government that it is prepared to support it, otherwise investment will go elsewhere,” she said, citing research indicating that every £1 of public funding for the sector led to a rise of up to £1.60 in private investment.

The Department for Business, Innovation and Skills did not immediately respond to a request for comment. People who have dealt with Mr Javid said he was “less inclined than Vince Cable to pick industrial winners” and felt the complex range of support mechanisms for business should be streamlined.