The gap between industry and research is closing in Britain's bioscience sector.
It is difficult to fault the inventive skills of British science. The quality of research in our universities can match the best of any other industrialised country. But what we are not good at is turning this scientific cornucopia into saleable, money-making products. The need to overcome this weakness was the dominant theme of the Government's White Paper on science, issued in May. Many of the proposals are sound enough. The Office of Science and Technology, for example, is to be reorganised and 'technology foresight' techniques are to be used to try and identify wealth-creating research.
Improving the institutional framework of scientific research is important but there is no guarantee that the divide between researchers and industrial exploiters will be overcome. There are some areas where progress is being made.
Bioscience, the industrial use of micro-organisms, living plant and material cells to produce substances beneficial to people, is widely seen as having great potential. But until recently its development in this country was faltering. The pattern of events was typically British: a high level of research activity but a poor record of industrial exploitation. Researchers found it difficult to obtain venture capital to exploit their work; the venture capitalists complained that the researchers seldom displayed the necessary management expertise.
American bioscience is one of the liveliest sectors of the stock market. There are 225 companies with a combined market capitalisation of around $35 billion. There have been some disappointments - but some spectacular successes, too. Amgen's drug for treating chronic anaemia achieved sales of $1.2 billion last year and the 12 biopharmaceutical products on the market have achieved aggregate sales in excess of $4 billion. Barclay de Zoete Wedd's (BZW) US biotechnology stock price index shows that over the past decade investors would have enjoyed average annual compound growth of 16.3%, rather better than the Dow Jones industrial index's 11.1%.
The explanation for the difference between the UK and US, says a recent BZW survey, is a mix of cultural and institutional factors. 'What has been lacking has been an entrepreneurial culture equivalent to that found in the US, sophisticated technology transfer arrangements between academics and commerce, and the flexibility within the financial community to allow emerging companies to obtain London Stock Exchange listings.' Quite suddenly this picture is changing. British biotechnology is emerging as a model example of an industry that is getting its act together. The most immediate reason for the change is the Stock Exchange's decision to relax its listing requirements. The rule that companies seeking a listing should be able to show a five-year profit record effectively 15e barred the stock market as a source of capital to all but a very few. What was becoming embarrassing was that some companies, unable to obtain a listing here, were being welcomed in America. Two examples are Cantab Pharmaceutical and Ethical Holdings, and others are contemplating following their lead.
With the Stock Exchange's more realistic rule, a company that has been in existence for three years and has at least two new drugs in clinical trials, even if it has no products on sale, can seek a listing. The results of the change have been impressive. British Biotechnology was the first company to persuade the Exchange to loosen listing requirements for its £150-million quotation last June, and it has just been joined by Anagen. A dozen or more bioscience companies are expected to join them.
The ability to capitalise on developments via the stock market will encourage more venture capitalists to back companies at a very early stage as well as stimulating more entrepreneurialism throughout the sector. The pressure on research funds is also forcing a more businesslike outlook. It is a rare university now that has not formed a company to exploit its scientific research. And more scientists have grasped that profitable exploitation is an important way of feeding funds back into research.
More needs to be done but the technology transfer arrangements between science and industry now look to be better developed here than in any other sector. This has been helped by the number of joint ventures and partnerships between researchers or small bioscience companies and the big pharmaceutical companies. Certainly the alliance between big company marketing and financial resources and creative start-ups is proving fruitful. 'They provide access to top-class research in key areas and introduce different attitudes and cultures that are complementary to our own research activity,' says Dr Richard Sykes, chief executive of Glaxo. Most of this progress has been based on enlightened attitudes rather than any great commitment of resources. There are signs of similar moves, in computer software, too. Certainly the more widely the example of bioscience is copied, the better.
Roger Eglin is associate business editor of The Sunday Times.