Going for Gold

Maybe it is the post-Olympic glow or Andy Murray winning a grand slam , but perhaps it is time to be thinking about how biotechnology in the UK can help lead the country from recession to prosperity in the next ten years? To continue the sporting analogy, there are many entrepreneurial biotechnologists working away on extremely limited resources, committed to developing their drug, device or service for the good of the UK and the wider community, yet Britain’s success in the sporting arena has been won with the help of significant funding across a wide range of sports and the billions committed to the events, where is that funding for biotechnology?

George Freeman in an earlier comment in this series said “The UK’s Life Science sector generates over £50 billion in turnover a year, accounts for 165,000 jobs and 4000 companies from GSK to a myriad of start-ups. At a time when we badly need sustainable growth, I believe our Life Science sector provides an unmissable opportunity for UK plc. Seismic changes in the pharmaceutical sector are changing the way medicines are discovered and developed.”

Recent initiatives such as the Technology Strategy Board’s Biocatalyst fund are steps in the right direction but much more is needed to ensure that development continues and we can build a UK based industry.

Reading “The Emperor of All Maladies” (Siddhartha Mukherjee, Scribner, 2010) I was struck by a feeling that the breakthroughs in diseases such as cancer and autoimmune are not so far away, that the flow of genomic data is revealing pathways and regulatory DNA that we only hypothesised as recently as ten years ago and that the resultant opportunities for new medicines are as great as they have ever been.

Meanwhile, back in the real economy, investors are seeking real returns on capital, with interest rates on the floor and property seeming to be unstable at best. Warren Buffet is often quoted as saying the time to invest is when others are staying away.

In contrast to other economies, the UK does not have a strong track record in venture finance, while schemes such as EIS have encouraged those with tax benefits in mind it is still complex and there is a need for a new scheme which gives some security to investors while encouraging capital and investment in early stage projects.

Recent announcements from the BIA talk of encouraging individual investors to invest in biotechnology, perhaps it needs some innovative thinking to get this movement to kick start, hopefully with other ideas it might happen. At the same time banks such as Santander are launching growth funds for SMEs which offer mezzanine financing at 10% over LIBOR which may be a way to bridge the financing required for the profitable SME.  Something is needed though to encourage that long term, risk based investing required for development of medicines.

What I have in mind is the underpinning of investment through interest payments while the investor puts a certain amount of capital at risk. Let us say that £100,000 is invested, a government backed scheme could give interest only at say 4%, costing the government £4,000 per year on the investment.  This interest payment could be guaranteed for a period of ten years.   Hence the capital is earning interest while the investment fuels potential reward from the investee company.  Interestingly, this could be of interest to retirees seeking income over capital retention, increasing the interest rate to 5% would match current annuity rates and it could be a fascinating investment to watch!

Written by Keith Powell, Chairman, Domainex Ltd, October 2012

The One Nucleus blog is written by individuals and is not necessarily a reflection of the views held by One Nucleus.

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About onenucleus

The One Nucleus blog is written by individuals and is not necessarily a reflection of the views held by One Nucleus.
This entry was posted in October 2012. Bookmark the permalink.

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