These were the opening questions posed by Andrew Ward, pharmaceuticals correspondent at the Financial Times who chaired the final panel session, ”The Recipe for Success”, at our recent UK Bioscience Forum. Expertly eliciting candid responses from the panellists, the session navigated its way through some of the critical considerations faced by biotech CEOs.
First up was the subject of the changing relationship between biotech and pharma, with all agreeing that the environment is undoubtedly more collaborative than it was a decade ago. Big pharma’s attitude was deemed to have become far more supportive, with pharma companies now working collaboratively with biotech companies and the finance community to get products to a stage at which pharma can ultimately acquire them, and turn them into medicines for patients.
Leading on from this, the benefits of having a corporate venture fund as an investor were highlighted as being uniquely positioned to ask the right questions and access vast amounts of skills and expertise to develop products. Evergreen funds were seen as critical to the future growth of the industry, with this recycling of capital into the system creating a longer-term view and improving the chances of creating UK champions.
Another stark change in the environment which was noted was the emphasis investors and licensing partners are now placing on reimbursement, which is now as a big a factor as likelihood of approval. Ultimately if a product is not going to achieve reimbursement, it will not be invested in. Stratification of patient population was referenced as one way of addressing this, to achieve an improved effect.
Inevitably the question of a UK versus US listing was debated, and the responses emphasised that this decision must be founded on the company’s individual situation and that there is no simple answer. Whilst there was recognition of a larger pool of specialist investors in the US, the challenges of managing dual reporting requirements and the considerable costs associated with US compliance were also considered key factors. The favourable UK tax regime and impact of the patent box were also cited as important considerations for maintaining a UK domicile.
The panellists agreed that US investors are increasingly looking at opportunities in Europe, but that more is needed at the early stage. Most of these are later stage investments, with Adaptimmune being an exception attracting a number of cross-over funds to its recent series A raise. Transnational syndicates were viewed positively as they open more opportunities later on.
Another strategic challenge discussed was getting the balance right between partial licensing and going it alone. On the one hand, getting a deal done is seen as validation and can provide access to knowledge, assays, and chemistry libraries for example, but having two or three agreements in place can increase the difficulty of a trade sale later down the line. The ideal solution proposed was to have one or two really committed strategic partners whilst retaining seventy-five per cent of the opportunity to sell further down the line.
A strong UK-based pharma industry was viewed as critical for small companies to get access to skills and people, both at a management and technical level. Finding experienced management continues to be viewed as a specific UK challenge, and an area where the UK falls behind centres like Boston, where there are more options for setting up and exits for companies. Pharma company experience trains people to understand how to develop a product and make it into a medicine, and creates and maintains the UK’s technical expertise. This critical mass of skilled scientists was viewed as tremendously important, and led to a discussion on the importance of having the right team, and changing the team at the right time, as was the need to remunerate scientists more competitively to compete with US salaries.
On the policy side, the view was that government measures in life sciences were doing well, but must be maintained and could always be improved, for example by greater provision of incubator space or increased funding of the BioMedical catalyst. The Biomedical Catalyst was viewed as a huge success, as the match funding represents validation, making award winning companies far more attractive to VCs, and also providing great non-dilutive capital for smaller companies. The vital importance of R&D tax credits were also highlighted, with one panellist having received over £2.5m in these credits over the last four years.
The session closed with some reflections on the UK biotech sector as a national success story, with medical research viewed as one of few areas where the UK will be able to export. The panellists praised the UK environment and UK opportunities as outstanding against European peers.
Many thanks to the panellists for their contributions, and to Andrew for chairing the session on the day. For more information on the BIA’s recent policy work, please see our latest Policy Update.