DR PHILIP WRIGHT, DR ALEXANDER DUNCAN AND DR GILL SAMUELS

TUESDAY 19 NOVEMBER 2002

  520. Would science parks or clusters help in that you need access to capital and workforce?
  (Dr Duncan) Certainly most of the growing biotech companies are centred around good universities, and having those clusters works in a sense that this is quite a high risk industry, so if you are going to attract good people into it they need to feel fairly secure that if they lose that particular job—because the company goes bust or is taken over or whatever—then they will be able to get other jobs. I think clusters perform quite a good service in that sense. I think there are a few infra structural growth problems with the clusters we have at the moment because they tend to react to what is required rather than being pro-active and thinking forward about things and actually providing that environment for growth in the first place.

  521. Do you think there is anything the Government can do that it is not doing now to help smaller companies?
  (Dr Wright) I will not necessarily answer that directly. Picking up from what Dr Duncan has just said, for me there are probably two key aspects that you have to consider in terms of the environment. There is the regulatory environment. The burdens are bad enough on the larger companies and they seem to be getting worse. The impact of that on smaller companies is probably even harder. I think there is also the aspect partly picked up by this clustering of and access to people; it is actually access to skills and knowledge. Unless you can get that right then it is going to be difficult in the future. But I think the point you are specifically asking about is could the government do more? I think if anything it is about not looking just at the startups, but looking at how you can retain those growing companies as they get bigger, and also look at how the UK is in terms of being an attractive place to come, work and invest compared to globally. It is not one thing, that is the trouble. If you are competing globally you have to get everything right; you have to get one bit after the other right. It is not an easy question to say that if we tick that box it will be sorted. If we gave that message it would be wrong.

  522. One of the difficulties for the Committee is that every trade association that comes before this Committee has a shopping list of things it wants the Government to do, a remarkably similar shopping list. Usually quite independent of the nature of the industry, but it is the usual things like skills training, investment support, deregulation, et cetera, et cetera. In your case, though, the biotech industry is the most rapidly growing industry in the UK as your memo points out. In many respects it is incredibly successful, and yet you still have a very heavy shopping list of things you want the Government to do. Is this because you think that the industry—and I think perhaps you suggest this—is to some extent failing to fulfill its earlier promise in the UK? And if that is so, there must be some specific reasons—specific to this industry—why that is happening, and I wonder what they are.
  (Dr Wright) I think you have to put it in context: the risk and how long it takes and the attrition rates of getting new products through to the market place. If you look at large companies they will have portfolios of products in their pipeline. When you start looking at small companies, they cannot have that, but the investors would have portfolios of companies. It is undoubtedly true that some companies will not get their products through; they will fail at one point or another. But that is part of the normal business; the attrition rates are high; it is to be expected. It would be interesting, actually, to note and compare what the failure of startup companies in the sector was with entirely different sectors, and I wonder if they would be significantly different anyway. But, in particular in the pharmaceutical industry, you are talking about 10 to twelve years after identifying a new chemical entity. You probably have between one in a hundred to one in a thousand chance of getting it through out of phase three and getting marketing approval for it. That is a huge attrition rate, huge.

  523. Is it that the wrong ideas are being commercialised, or is it just that this is a random process?
  (Dr Samuels) Just to support what Philip has said in terms of attrition and the challenge, I think what one is seeing in the biotech sector is exactly what we see in big pharma. It is the difficulty of converting the basic science into the product and I think that reflects a variety of things from possibly not understanding the underlying disease process well enough to the disease process not being amenable to targeting with relatively simple molecules. Plus, of course, the fact that we have very many more regulatory and safety hurdles than perhaps existed 15 years ago. Again, as Philip said, there is a very high attrition rate and it takes—I would say a little bit longer than Philip has said—maybe up to 15 years from the time that you have an idea to the time that you actually have a product that you can launch on the market place. That is a long time. It is a little bit like Snakes and Ladders, really, but I do not think biotech is really significancy different from big pharma, apart from the fact that in big pharma we have a portfolio of projects on-going and biotech—on average the smaller companies—have one particular programme going. It is a portfolio of companies in the biotech area but in big industry it is a portfolio of programmes. That is significantly different because if we lose a programme we do not go down, but if a company that has a single or possibly two approaches loses a programme then they have problems.
  (Dr Duncan) I would question whether the UK biotech industry is failing. This is a risky business. It does take a long time. I think the average is about 12 years to get a compound onto the market. Even then not all of those are going to make money. For companies it is somewhere a little longer than the 12 years to develop a product. So companies are not going to be successful for about 15 or so years. The industry itself in this country is around 10 to 15 years old so that is why you have not seen a lot of successful biotech companies in this country as yet. Again, if you look at the US they are about 10 years older than the companies in the UK. There are not that many actually profitable biotech companies world-wide. Once they do become profitable then they really are drivers for competitiveness of those countries.
  (Dr Wright) It is not a random approach as you suggest. What you tend to do is try to identify targets in vitro and the problem generally happens when you need to start looking at it in whole animal systems, when you actually go up to the full animal models and then of course into humans. Although our information is becoming much more useful in terms of bioinformatics and chemoinformatics, you still have a situation where you need to prove a medicine in an animal or a human model. That clearly can bring up either reactions you do not expect or can bring in problems in terms of actually not being able to get the medicine to the site of action, so it is not as effective as you would think.

  524. Of the list of specific things that you are calling on government to do, what would be the single most important from your point of view?
  (Dr Wright) I would not go down a single route. It is not a single route. If you think that you can make a single recommendation—

  525. If I am playing prime minister and I am saying that you are to get one of these, which one do you want? Which is it?
  (Dr Wright) I think the UK then would probably fail in continuing to attract biotechnology investment in the UK long term. Just because of the things that I have been talking about with member companies this week, the biggest concern I would say at the moment—of critical concern at the moment—would be animal extremism.

  526. You mentioned regulation. There is regulation and regulation. Which bit do you not like? I think we need to be a wee bit more specific. Is it bureaucratic?
  (Dr Wright) My colleagues might be able to pick up on this. It is in a variety of different spheres. If you look, for example, at the animal regulation system, I think in the UK we have a pretty good regulation system, but the House of Lords (in their recent report) noted that we should be aiming for the best regulation, not the tightest regulation. I think that is quite a good rider. I suppose the concerns that we have is the regulation not necessarily just coming from within the UK but also Europe. We are seeing it at all levels of the business, from health and safety in research environments (which can be overly bureaucratic) through to manufacturing through to—as I said—the animals perspective. It is not one single piece; it is actually the series and the weight of it. I suppose the key concern that we have is that the growing biopharmaceuticals could be buried with it as they grow.
  (Dr Duncan) It certainly is quite comprehensive; we certainly do not need more regulation. In terms of bureaucracy, if you look at the very small companies there is an amount of bureaucracy which makes it difficult to invest in some of those smaller companies. If you are a venture capitalist with let us say £10 million to invest, you have to go through the same amount of bureaucracy to invest £1 million as you do to invest £10 million so it makes it difficult for investors to invest in 10 pots of one million; 10 times more difficult than it is to invest one lump of £10 million. That cannot be right, because what it is doing is it is forcing people to think about only investing in larger blobs of money, whereas if it were spread more then we might have more chance of success later on.

  527. Dr Wright, the Committee has heard from different people that the UK biotech firms do not really enjoy support from the large UK pharmas. Is this your experience? I know you draw the experience with the Americans; you have championed the success in the US. Is there something for us to learn from the experiences of the large pharmas helping the American biotech firms compared to us?
  (Dr Wright) First of all, I do not think that is the case, but I would like Gill to answer that.
  (Dr Samuels) I do not think that is the case. We will go where the good quality science is. I think the reason why we probably have more investments in the US relates to the fact that the biotech sector in the US is more mature than the biotech sector here in the UK. Therefore, we know much more about what we are getting so we will invest in, for example, platform technologies, and there we have got substantial investments in Europe in general. But when it comes to investing in potential new medicines which might be at a fairly early stage in development, I think it is fair to say that because of the maturity of the US sector there are more interesting compounds there.
  (Dr Wright) I was trying to wrack my brains to identify in the UK where a large pharmaceutical company has taken over a small biotech and I could not think of one, but I could think of lots of examples where companies have actually gone into agreement with the small biotech and done some equity funding for them. That is, I think, a very positive relationship. Alex, do you want to say anything as well?
  (Dr Duncan) Just to add that the big UK companies are global companies. If you have good technology or a good product then you will attract investment from those big companies, whether they are based in the US or the UK. I guess the issue for the smaller UK companies is actually having a presence in the US; do they even know about you? That is something worth thinking about because we do spend a lot of our time trying to get ourselves noticed in the US.
  (Dr Wright) I think one of the other points is that quite a lot of the smaller companies, although they take a product through, actively seek links with a large pharma to take their product through the next step of development and into clinical trials. That quite often creates the links where you do get, I think, some of the people from the smaller companies gaining experience in the larger ones. I do not know whether you would like to add something on that.
  (Dr Duncan) We certainly have during the development phase because they are quite willing, if you are going to collaborate with them—very willing, actually—to help you with the development phase. Again, in terms of sustainability of the industry, we need to be getting those companies in the UK to move on to the next stage, which is late stage clinical trials and actually on to marketing.

  528. Can I turn to biomanufacturing and just begin, really, with the question, as we have heard from other witnesses, there is a worldwide shortage of biomanufacturing capacity. Why do you think that has occurred? Why has the market not developed to fill that gap?
  (Dr Wright) From my perspective I think it is the time. If it had been developed earlier they probably would have been sitting there for a while without the capacity being used. I suspect that very quickly there will be a worldwide catchup on that. Whether the UK is in a good position as part of that, we will have to wait and see. There are certainly significant amounts of investment going in in Singapore, the US and other countries in terms of developing facilities. They are putting incentives in to create this type of capacity.

  529. As in other respects, if the American biotechnology companies are further down the track, what does their experience tell you about their choices in terms of the location of biomanufacturing? So if they are in Cambridge Massachusetts or Stanford or wherever, where do they chose to manufacture at the early stages and when they actually get to the point of producing the product in market quantities?
  (Dr Wright) I suppose it depends on what particular requirements there are for their manufacturing process. It could actually be around access to the skills and the technology to be able to implement maybe new manufacturing processes. It can also be, I think, clearly associated with where is the best tax regime? If you have a high value added product you clearly want it on a global basis to be manufactured in the most tax efficient country you can find.
  (Dr Duncan) To reiterate what Philip has already said, where they are incentivised to do it, it is quite a major component. In terms of regulatory requirements manufacturing is quite high in those terms. You need to have the right skills. Generally, for the biotech companies in the US, they have been incentivised to do it. Often a community, county, state, will actually build a facility for you and rent it out to you. When you are trying to spend your money on the research and commercialisation of the product, that is a tremendous form of advantage point.

  530. So, as far as you are aware—we may find this out if the Committee goes to America—the American companies, when they are getting to the stage of manufacturing, they are still being incentivised to retain manufacturing close to their original research and development?
  (Dr Duncan) The biotech companies which are moving towards profitability, that is certainly the case. A lot of these companies will have agreements with larger companies. So if you look at Embrel which is quite a well known biotech product, that is actually partnered with Wyeth, a larger company building facilities to be able to manufacture their products. It is probably the one case where there is a global shortage of this, because the take-up of this product was much greater than expected and there was a manufacturing hole there to be filled. Certainly once they partner with a larger company, if that product is successful, then they will want to control their product supply chain. So they will build facilities to ensure that they do have that supply.

  531. It does seem at the moment as though there are people who are addressing the question of biomanufacturing in the same terms as they previously addressed pharmaceutical manufacturing: as though there was no distinction. For example, the Irish are trying to incentivise for manufacturing there because they have had pharmaceutical manufacturing in the past; it is probably the same in Singapore. The Biotechnology Industry Association suggested to us that one of the characteristics of biomanufacturing is that very small volume very high value added does not require the same sort of scale of facilities as has been provided for pharmaceutical manufacture in the past and requires a much higher level of skills. There is an intimate relationship, if I represent their view correctly, for quite some time between the development activity and the manufacturing activity, so the two have to interact. That would suggest that other things being equal, if the UK has a strong research capability and retains it, we could have a strong manufacturing capability and retain that because companies will be disposed to continue to manufacture close to their research and development facility. How far is that true in your experience?
  (Dr Wright) I think generally in the UK the issue is probably that it would be nice—and it is nice—to try to co-locate it as much as possible, certainly for convenience. The issue is also about skills. Even if you have a small volume high value added product and the tax regime is particularly disadvantageous, they can be moved elsewhere. The other point to note is that countries like Singapore are putting significant amounts of effort in bringing together that trilogy which is the research base, the development capabilities and then the full scale manufacturing capability as well. They have actually noticed this and they have a very, very pro-active approach to developing the whole picture, not just one part of it. I think that the UK has an opportunity to retain the manufacturing as these companies grow, but we need to make sure that we are competing on a global basis.

  532. Are you saying that they actually sat down and worked out the whole equation of how to go from A to B?
  (Dr Wright) Yes, they did.

  533. Unlike in our case where it has been disjointed.
  (Dr Wright) Have a look at the Singapore EDB, Enterprise Development Board.
  (Dr Samuels) Singapore has some excellent programmes ranging from one for which the acronym is STAR which is a tech transfer and IP seeking organisation which goes round universities to look for programmes which could be converted into product, through to giving tax breaks to companies who invest there, and have extremely efficient clinical trials. They really have made a substantial effort.

  Dr Kumar: But that was not the American experience.

  534. Would it be fair to say that were there just a small but limited presence, the kind of planning and laying out of a clear regime is critical, whereas in the US where you have a sufficiency of companies—a critical mass—almost self-sustaining growth, it is not quite so important, but you then have states fighting with each other to get a bit of the action.
  (Dr Wright) I think you are forgetting that the US has a very different culture and attitude to entrepreneurship. The history of Silicon Valley and the developments around Boston and the research triangle, all those areas, it is just a different culture.
  (Dr Duncan) Also they were there first. It developed there. What Singapore has done is to say that they need to catch up with that. They have been very pro-active and actually very impressive in the way they have done that.

  535. Like Silicon Valley, they have a relatively short but quite intense history of high tech promotion so there is no reason why high tech in an industrial sense should be any different from the biotech industries.
  (Dr Wright) I think the only difference is the time scales involved. Fifteen years from even a potential compound through to the market; it is going to take a long, long time.

  536. Are you saying that the Singaporians, for example, 15 years ago decided they were going to have a biotech industry, part of which will be manufacturing, part of which will be research and part of which will be development? Or are you saying they went in and opportunistically plucked some of the research from other countries and manufactured it there?
  (Dr Wright) My understanding—and I would recommend that you investigate what is happening in Singapore a bit further—is that they took a variety of approaches and one of them was to encourage the development of a research capability within Singapore so that they could bring out some of the IP developed there. At the same time, they also put a significant amount of investment into manufacturing facilities and, of course, they have a very good tax regime there, an incentive to attract overseas manufacturers into Singapore. I think it was not a single approach. They looked at the totality of what was required and developed a strategy which has put them, I think, in a very good position.
  (Dr Samuels) I think it is important to remember a point that was touched on earlier on, which is that there is no particular reason for us to manufacture close to the R&D site. Once you have got past producing material for clinical trials at a fairly low level, you will go where the tax advantages are. That is why we have plants in Puerto Rico and in Ireland, and I think you will see substantially more investment in Singapore. Just to reinforce the point that Philip is making, Singapore has some great worked examples.

  537. That is true in relation to a pharmaceutical product.
  (Dr Samuels) It would be equally true for biotech products, I think. I do not see any difference.

  538. Even if essentially you are looking towards—I am stretching my knowledge here—the kind of therapies which are almost individualised, for example on the gene therapy you are producing a product to fit a particular person's problems. We are not talking necessarily about production line processes here; we are talking about manufacturing which flows directly from therapy.
  (Dr Duncan) Mostly we are talking about production line processes. Biotech is quite an interesting word, it is where we started this morning. What we are really about is making pharmaceuticals.

  539. With new therapies.
  (Dr Duncan) It is a class of compound. It is a new class of pharmaceutical. We are going to go through the same regulatory hurdles (hopefully not more), and at the end of the day the patient is not really going to mind what class of compound it is as long as it is going to be effective in them. I do not think we expect to be treated any differently because of that.
  (Dr Wright) On the point of gene therapy, gene therapy will become a larger market. I do not see it being the principle market in terms of products and medicines going through to treat disease.