19 October 2021
It is already 20 months since the Department of Business, Energy and Industrial Strategy (BEIS) launched its much-anticipated Industrial Strategy. At its heart is a goal to boost productivity, with a focus on five foundations, one of which is to become the world’s most innovative economy. More pointedly was an ambition to become the world’s leading tech-hub by 2030.
Ambitious? Yes. Achievable? Well, despite some good progress in areas such as R&D and C&G therapy, already the Government’s plans look more aspirational than achievable when observing the lack of political advancement in recent years and the economic and geo-political headwinds that lie ahead.
Nonetheless, the UK’s life sciences sector forms the engine room for the government realising the fundamentals of its Industrial Strategy, and Cambridge sits at the epicentre of the UK’s capability in this space.
Cambridge is booming
A recent report by AstraZeneca claims that the city’s life sciences cluster could create an additional 6,000 jobs and contribute an extra £1bn a year to the UK economy by 2032 – a major contribution to a growing sector worth £30bn in the UK.
Thanks in part to discoveries by Cambridge researchers, life sciences are entering a golden age of breakthrough and commercial exploitation.
The global sector is now expected to grow 25 per cent to $2tn by 2023. Cambridge is well placed to leverage this opportunity and shape this golden age, but the future may have its limitations due to the UK’s indifferent record of scaling up global businesses.
Entrepreneurial vitality is flourishing in the fenland city and wider UK tech hubs including Manchester and Edinburgh, but that verve is not matched by funding principles that do not lend themselves to how bio-tech innovations want and need to operate in the long term.
The city, and companies including Kymab, F Star, Mission Therapeutics and Bicycle Therapeutics are leading the way in technologies and personalised medicine. With bespoke, tailored cancer treatment more sought after than ever, technological advances in specific medicine are putting the city in the spotlight.
But in a city where innovation is everywhere, money does not necessarily follow
With the exception of a small handful of ventures who have successfully secured more significant longer-term funds, on the whole it tends to take 10 years on average to get tech products or treatments to a point of value-realisation. The added pressure is that during that decade long journey it is a bit like painting the Forth Bridge. These burgeoning start-ups can only secure a years’ worth of funding (or up to two years at best) and so must start all over again by reapplying each year en route to reaching that value-point.
Of course, contra-argument exists. Investors would argue that these are milestone-led funding rounds drive the companies to translate or commercialise the ideas more effectively.
But one of the consequences of short-term funding is that bio-techs are forced into a somewhat blinkered approach as they do not have enough cash to focus on more promising wider sciences as they can only afford to focus on funded projects that are based around reaching milestones – there’s no time to ‘play around’ and explore other avenues.
It’s a tough environment in which to operate. So, it’s no wonder we are seeing three trends in the bio-tech world in Cambridge.
- a move away from the main markets into AIM, as the latter by its very nature offers less rigour and more flexibility, although these ventures should proceed with caution if looking to maximise shareholder growth.
- a move from bio-tech companies, particularly in Cambridge, to raise bigger funds through the NASDAQ. The provenance of these two trends lie in the UK’s inability to offer a longer-term outlook.
- a near-dormant IPO market driven primarily by the uncertainties presented by Brexit. However, whilst the market is quiet, prospects look healthier for secondary fundraisings and the pipeline is growing for the fourth quarter of 2019 and beyond for IPOs.
So, considering the undeniable strengths of the UK’s bio-tech sector whilst appreciating the challenges it faces, can Cambridge really start to go toe-to-toe with its biggest competitors?
Cambridge is widely seen as one of the world’s most significant global life sciences clusters. At some point in the near future, it could realistically start to challenge the San Francisco bay area and the undisputed number one, in and around Greater Boston, Massachusetts. But we should by no means underestimate the gap. In life sciences, as in software, San Francisco is an ecosystem on steroids, pumped up with venture capital (VC) and the most ambitious of entrepreneurs. The Massachusetts cluster employs 70,000 people in biopharma, nearly five times as many as in Cambridge.
The opportunities are limitless when considering what Cambridge has to offer, but without the ability to scale truly significant companies, Cambridge’s horizons could be narrowed. In moving the Industrial Strategy forward, we should recognise that the most ambitious and gifted entrepreneurs, investors, business development executives and commercially-minded scientists might see Cambridge as a stepping stone to somewhere with bigger dreams.
While entrepreneurs and business leaders hold the determination and resourcefulness to succeed and put Cambridge on the map, the big question remains - will UK policy makers give them the tools they need to finish the job?
If you would like to discuss any of the issues raised in this article or have any questions about Bio-tech funding, please contact Graham Bond or Laragh Jeanroy.