$64bn goes to the Americans
An arthritis drug called Humira is one of the best-selling drugs of all time, totting up $64bn in sales.
It was based on breakthroughs made in Cambridge during the 1990s. One of the leading researchers explained that:
“Provided such research is intelligently exploited, it can pay handsome dividends for medicine, UK industry and human health.
It can also generate considerable royalty income, which ploughed back into science will help generate the medicines and industries of the future.”
All of which is true… except for one thing.
Humira did not pay especially ‘handsome dividends’ for UK industry. The drug was bought by the USA’s Abbott Laboratories in 2004 and most of that $64bn has landed in bank accounts on the other side of the Atlantic.
This story neatly illustrates both the excellence of UK science and our failure to exploit it. As a new biotechnology boom gathers pace, will it be different this time?
Light summer reading
I have been predicting a revival of UK biotech ever since I started writing this newsletter. It has taken a while for UK investors to follow the lead of their counterparts in the USA but the ball is now rolling.
The British Biotech Association is enthusing. It describes ‘a huge wave of optimism sweeping the UK biotech sector.’ Biotech companies raised £408m through stock market listings in 2014, more than the previous 8 years combined (although the year 2005 raised £279m alone). A further $430m was raised from venture capital investors, the best for at least 10 years.
The BIA also has figures that show the UK putting more venture capital money into biotech than any other European country. The $2,394m fed to the industry in the last decade beats Germany’s $1,983m Switzerland’s $1,600m and France’s $1,164m. But this is still chicken feed compared to the colossal USA equivalent figure of $36,983m, and this is the comparator that really bothers UK industry.
The home of medical science
Nobody doubts the level of scientific expertise in the UK. Oxford and Cambridge, Imperial College and UCL are amongst the top rated universities for medicine. Numerous other research organizations such as the Sanger Centre, the Babraham Institute and the London School of Hygiene and Tropical Medicine, to name but three, are leaders in their respective fields.
The UK is an attractive place for medics from overseas, we have numerous charities that support medicine both at home and overseas, and through these and other international agencies we have excellent connections throughout the world. With the benefit of the English language we publish two of the top four medical journals – The Lancet and The British Medical Journal – while Nature magazine is the top ranked science journal. Add in the public asset that is the National Health Service and the UK has all the ingredients to be a world leader.
Of more practical interest for investors is the need for industry funding. Medical progress is time-consuming and very expensive and USA is seen to have an advantage not just in terms of the amount of money flowing into biotech, but the motivation of its providers.
Whereas UK investors are seen to focus on the likely financial return, discounting very heavily any promises that stretch into distant years, US money is more philanthropic. Bill Gates and others can well afford to spend billions on health projects regardless of financial returns, US universities are famously well-funded and US companies with nothing more than an early stage research project can raise tens of millions of dollars.
These are tough issues for the UK biotechnology industry, and they have existed for years. It is great to see the upsurge of interest in biotechnology. I am thrilled that people are finally starting to recognize a revolution based on deep molecular understanding of biology.
I am delighted that investors, the Government, charities, universities and the Health Service are supporting the industry. But we cannot escape the reality that biotechnology innovation is hugely risky.