Big money injections a boost for life science

THE pipeline has been painfully slow, but the wait promises to be worth it. The life sciences industry is now officially in rude health as levels of revenue and investment soar. When big four accountancy firm Ernst & Young took the sector's temperature in its 2006 Global Biotechnology Report, it found revenues of publicly-traded biotech companies had topped $60 billion (£32bn) for the first time in the sector's 30-year history.

"The global biotechnology industry's revenues are growing at strong rates; product approvals are bringing innovative drugs to market, and the long- elusive goal of profitability is quickly approaching," said E&Y's Donn Szaro, leader of global biotechnology and pharmaceutical sectors.

Scotland is home to one-fifth of all biotech companies in the UK, and is growing faster than the rest of Europe, with recent flotations including Ardana, Cyclacel, ProStrakan, IDMoS and Stem Cell Sciences.

Scotland's life sciences cluster features more than 560 companies and research organisations employing 27,500 staff and attracting around 410 million of research funding - an impressive 13 per cent of total UK funding, despite Scotland boasting less than nine per cent of the total UK population.

Scientists in Scotland are recognised leaders in fields including oncology, cardiovascular, diabetes and reproductive biology and contribute up to 40 per cent more research per head north of the Border than the national average.

The 600m public and private investment in Edinburgh's new Centre for Biomedical Research, a 100-acre site at Little France dedicated to the commercialisation of biomedical research, will reaffirm Scotland's reputation as a world-leader in science and technology as it nears completion in 2008.

A 2m project at the Roslin Cells Centre will position Scotland as a world leader in the commercialisation and clinical use of stem cell technology to treat diseases such as leukaemia, Parkinson's disease and diabetes.

The South Korean government has committed 12m to biomedical collaborations with Scottish companies through the Korea Health Industry Development Institute. And 50m is being invested in the creation of a new Scottish Translational Medicine Research Collaboration with the Philadelphia-based pharmaceuticals giant Wyeth. The flagship initiative includes the universities of Aberdeen, Dundee, Edinburgh and Glasgow, Scottish Enterprise and NHS Scotland Grampian, Greater Glasgow, Lothian and Tayside, and will focus on using protein-based "biomarker" tests that can measure the progress of diseases or treatments in blood samples or X-rays of patients.

"The scale of this collaboration and the fact that it involves the NHS and four universities is really exceptionally encouraging," said Ken Snowden, director of life sciences at Scottish Enterprise. "To put that together in Scotland is pretty impressive, given that Wyeth tried to do it in other research centres across the world and failed - not because of the research base but because the level of collaboration wasn't there. This shows not only that we can collaborate, but also that we can pull in some of the best scientists in the world."

The rapid growth and maturity of Scotland's life sciences sector has been acknowledged with the launch of a national identity for the sector under the Life Sciences Scotland brand. It was unveiled in April by the Life Sciences Alliance, formed in 2005 by 20 public and private sector organisations.

"Scotland is a small country in a rapidly globalising world," said Dr Simon Best, Alliance chairman and co-founder of reproductive sciences specialist Ardana. "It is crucial we play to our strengths and work together across the sector to build on our expertise.

"As individual companies and organisations we have a proven record of success, but closer collaboration within the community will open up new opportunities for us all."

Connect Scotland, the technology business and investment network, will help a number of new biotech firms raise growth funding at the tenth Connect Investment conference in November. Managing director Andy McNair said: "I think we've probably punched beyond our weight in the last two to three years with the number of flotations in life sciences. The challenge now is where the next group of Scottish public companies in the sector is coming from. We need to be looking for those coming through the pipeline and making sure we have a system that can support them. Perhaps we need to be bundling our teams together and consolidating the company base we have, so we have much stronger assets in the company at as early a stage as possible. This in turn will help attract the management with real international product experience to come and help them shape that commercial proposition."

The conference is tipped to have much more of a European focus, involving not only Scotland's ambitious technology companies pitching for growth funding, but also their peers from the wider Connect Europe network.

Ernst & Young's latest European Venture Capital Report recorded a 45 per cent increase in capital investment in the information technology sector to 583.6m (393m) in the second quarter of 2006. This was the highest spend on IT investment since the second quarter of 2002, boosted in particular by increased activity in the internet-heavy information services segment. The average investment round was also up to 3.1m (2m) from 1.2m (800,000) in the same quarter of last year.

"These larger, early-stage investments enable European start-ups to compete on the global stage much sooner in their life cycle," said Gil Forer, global director of E&Y's Venture Capital Advisory Group. "The predominance of early stage deals this quarter is also a sign of a healthy innovation pipeline in Europe that will generate potential market leaders in the years to come."

CASE STUDY

Bank's expertise shines on SME

IN ITS first year of operation, Glasgow-based laser designer M Squared, which develops new laser technologies for a variety of commercial, scientific and biomedical applications, won two funding awards from the Scottish Executive that will help secure its growth.

In September 2005, the firm got a grant worth up to 210,000 under the Regional Selective Assistance scheme, which finances industry and assists projects that create jobs in designated areas. M Squared predicts that, as it grows, it will create a total of 17 jobs.

In September 2006 the firm received a 50,000 SMART award, intended to help small businesses improve competitiveness. M Squared will use the funds to develop the next generation of deep ultraviolet laser sources.

Chief executive Dr Graeme Malcolm was especially pleased to win the award, explaining: "SMART funding appears only to be awarded to projects that represent a significant technological advance for the UK industry concerned."

It is well placed to develop and grow. The five-member management team has a combined experience of over 100 years in the industry, and Malcolm and managing director Dr Gareth Maker have enjoyed previous entrepreneurial success.

In 1991, they co-founded Microlase Optical Systems, seen as one of the most successful Scottish optoelectronic start-ups. The duo grew this into a business with 3 million of annual sales. In 1999, they sold it to Coherent, a US laser company giant.

With the support of the Bank of Scotland's emerging business team, M Squared has already built a presence in the European, Japanese and US markets. Malcolm said: "The bank's understanding of what is involved in funding early stage businesses has been really refreshing."