Life sciences businesses in Scotland should throw off the shackles of the early exit strategy fixation and look at how they can expand and grow globally through mergers and acquisitions.
That’s the view of Julia Brown, who believes greater growth ambition could be a game-changer for the sector in Scotland.
“The start-up phase is good, the innovation piece is good and we get a strong pipeline of companies through the early rounds of funding – but in later funding rounds, we still struggle,” says Brown, who leads on life sciences for Scottish Enterprise.
“Nucana is one company that has done brilliantly, raising $10 million in series A funding (including £2m from the Scottish Investment Bank), followed by $57m series B and $114m through an IPO [Initial Public Offering].
“This demonstrates that investors will back companies with the right technology and a strong management team with a growth ambition. We want to see more Scottish companies achieve that level of maturity.”
Brown argues that it’s “a marker of success” when international organisations come to acquire Scottish businesses – but wants more. “An acquisition brings access to markets, new money and fresh talent. A great example is Scottish company ProStrakan that was acquired by the Japanese business Kyowa Kirin in 2011. Since acquisition, Kyowa Kirin has further expanded its Galashiels headquarters, planning to increase staff numbers there from 150 to 200.
“However, I’d like to see more Scottish businesses looking at who they can acquire. I’d like more businesses to come to Scottish Enterprise asking for support for mergers and acquisitions – I really want to see more businesses with that level of ambition.”
While Scotland is “rich with great scientists, clinicians and researchers”, Brown says it needs more “business-savvy teams” looking at all avenues for growth including acquisitions.
“The optimum expansion path might not be the acquisition of a whole company, it could be a single product or intellectual property,” she says. “If we could do more of that, rather than growing from scratch and looking to sell, it could be a real game-changer for the sector.”
So how can we do that? “There are a number of things. We need patient and supportive investors who are investing for growth and not just quick returns.
“Businesses tend to look at an exit in five years or so, which is driving certain types of behaviour. We need businesses to be outward-looking and make the right international connections to support an ambitious longer term growth plan. We can provide support to build these relationships through SDI (Scottish Development International), the Global Scots network and through Life Sciences Scotland.”
However, Brown suggests, it is about more than advice and support. “It’s about creating a different mindset,” she says, “not looking at a business plan which says ‘We want to be bought by big pharma in 5-8 years’, but one which looks at investment, developing IP and seeking opportunities.”
Brown says: “Scottish Enterprise is here to help all ambitious businesses invest in R&D and innovation. We have sufficient budget to help businesses in these fields, but not enough companies are coming forward. I want to change that.”
So why does Brown think businesses are not coming forward in sufficient numbers? What is holding them back? She mentions the B-word for the first time: “Maybe Brexit is having an impact in terms of appetite for risk. In these uncertain times companies need to be even more competitive. R&D and innovation is where resources need to be deployed if businesses want to grow – and now is the time to invest to put yourself in the best position to compete come next year.”
“Scottish Enterprise has got behind the innovation centres to stimulate this kind of activity. By supporting investment in R&D and innovation, in partnership with the innovation centres and industry, we can really crank things up.”
Brown also wants the industry as a whole to show ambition and to come together to deliver what she calls “transformational projects” – such as the Medicines Manufacturing Innovation Centre (MMIC), which she describes as “a real success story, which will put Scotland on the global map.”
She sees MMIC as an exemplar of what can be achieved, with public money from Scottish Enterprise (£15m) and Innovate UK (£13m) supporting the construction and early stages of the project, and private money coming in behind it – £7m each from GSK And AstraZeneca initially.
“We want more projects like this,” says Brown, “where we see the involvement of the research base and the private sector and where the outputs of the project can really transform businesses. We want to build on existing areas of strength, show global relevance and grow our international profile.”
So what excites Brown about the next 12 months? “We are already seeing the level of private business interest in the MMIC increasing and although it will be 2020 when it is up and running, the R&D projects will start soon in conjunction with the University of Strathclyde.
“We need to see our investments have an impact on the business base across Scotland. When we achieve that, we become the first movers rather than waiting for others outside Scotland to step up – we become the country with real ambition.”
For more information, visit www.scottish-enterprise.com