The thriving drug counter culture

May 7, 1999

Entrepreneurs with a science background are taking the biotechnology business by storm, reports Kam Patel

More than a quarter of the companies responsible for the European biotechnology industry's "robust growth" originated from universities, according to an annual survey by consultant Ernst and Young.

The study reveals that in 1998 the industry comprised 1,178 companies, 14 per cent up on the previous year, and employed 45,000, a 17 per cent rise. The growth in jobs is likely to continue. Eighty per cent of chief executives surveyed expect to hire a "significant" number of employees this year.

Individual enterprise was marked. Nearly half the firms were set up by entrepreneurs. Fewer than a quarter were the result of spin-outs from established firms.

Jurek Sikorski, chief executive of Cambridge-based Cantab Pharmaceuticals, specialising in treatments for genital diseases, said: "People who start biotech companies are usually entrepreneurs.

"They may have a science background and are usually the right people to drive growth of the company from inception. In terms of developing those companies into mature, successful, profitable businesses, the best people for the job are likely to be entrepreneurial scientists."

Key findings of the Ernst and Young survey include:

* Britain continues to be home to the largest numbers of biotechnology companies, with 0, many based in Oxford, Cambridge and Scotland. It is closely followed by Germany which has 220 in its "bioregions".

* Total revenue for the biotechnology sector in 1998 was up 36 per cent to E3.7 billion (Pounds 2.5 billion) and investment in research and development rose by 22 per cent.

* Venture capitalists maintained support for the sector with firms raising E380 million (Pounds 250 million) in private funding, the same as for the previous year.

* The sector reached a milestone with the United Kingdom's Chiroscience registering its first biotechnology product, Chirocaine, a long-lasting local anaesthetic.

The report also suggests that big pharmaceutical firms are heading for a shakeup in their activities.

A number of major pharmaceutical companies will see a significant proportion of their drug sales when their patents expire post-millennium.

For instance, more than half of Lilly's sales come from products whose patents will expire by 2003.

"To maintain momentum, pharmaceutical companies need to replenish their pipelines with additional products," says the study.

"The answer has been to step up internal efforts with year-on-year increases in R&D spending budgets."

This is complemented by greater outsourcing of technological requirements and tapping into the development of new drugs by smaller biotechnology firms.

To justify the rising spending levels on R&D, big pharmaceutical firms will look to produce more new drugs. If the Glaxo-Wellcome and SmithKline Beecham merger had been completed last year, the resulting behemoth would have been expected to get five new drugs to the market every year.

Increasingly, big companies will aim to drive internal drug discovery more effectively and opportunistically, forging new alliances, joint ventures and mergers.

Ernst and Young expects the pharmaceutical industry to earmark up to a maximum of 30 per cent of its drug discovery budgets for external collaborations.

The survey is based on data gathered from chief executives of 462 companies in the biotechnology market segments that include therapeutics, diagnostics, environment and food processing.

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