| Resources for basic research
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| 1. | The UK's research expertise in biotechnology has made its relative prominence in commercial biotechnology possible. Excellence in research cannot in itself ensure commercial success in biotechnology but it does seem to us that its absence will preclude it. The strength of the commercial biotechnology sector cannot be guaranteed merely by putting ever greater sums of public money into higher education and academic research. However, given the integral links between education and research and commercial biotechnology, it is hard to see how strength can be achieved and sustained in the latter without the former being adequately resourced. Levels of investment remain a problem, with the UK spending less than its competitors on research and on the HE sector as a whole. Whilst the UK is still performing creditably, there must be some concern about the degree to which this can be sustained over the long term. (Paragraphs 24 and 31)
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| Regulation of research |
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| 2. | While we agree that regulation should set clear, ethical limits beyond which researchers should not be allowed to go, public opinion in the UK seems broadly content with the difficult ethical balance struck in the regime here. We would therefore oppose any attempt to tighten regulation here. We are aware that the Government takes the same view, but we wish to underline the importance of continuing vigilance; the regulatory environment for biotechnology research in the UK is a real source of advantage and must not be undermined by developments at the European level. (Paragraph 30)
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| Technology transfer
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| 3. | The USA has a clear lead in the size, and also the sophistication, of its technology transfer effort. Some Universities, such as MIT and Stamford, have gained very large incomes from their commercialisation activities. But even at institutions where the revenues from such activities were much smaller, we were impressed by the commitment to transferring their research into the commercial world and making the most of any potential applications that it might have. The UK's technology transfer process is less developed than the USA. In many ways it appears to be developing in the right direction. We applaud the efforts that have been made on the part of UK universities to increase the benefits to the public through commercial exploitation of scientific discoveries. (Paragraphs 52 and 53)
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| Increasing commercial exploitation of IP
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| 4. | We are not convinced that attempting to replicate the measures contained in America's Bayh-Dole Act would have the same impact in the UK. In the USA the Bayh-Dole Act was introduced to increase the exploitation of publicly funded research in the context where regulations were acting as a deterrent to this. We received no evidence suggesting that a similar pool of unexploited technology exists here as a result of government regulations on the use of its intellectual property. However, we do suspect that the change in the IPR regulations that the Bayh-Dole Act brought about was only part of the reason for its success — its main contribution may have been the increased awareness among academics and companies about the potential of university based science and the enthusiasm for commercialisation it created amongst leading research universities. There has clearly been an increase in the UK's technology transfer effort in recent years. Our impression is that the UK is still some way behind the USA in this area. However, this is as a result of a relative lack of experience and expertise, and a relative lack of resources, rather than as a result of constraints imposed by government regulations. (Paragraph 51)
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| Technology Transfer Offices
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| 5. | The reports of variable quality led us to question the need for in-house technology transfer offices at all: could not the technology transfer activities be contracted out, perhaps with the good units taking over the less good? Whilst not ruling out this route, we were persuaded that good in-house technology transfer units were preferable. Although too many technology transfer staff may lack expertise, this will improve over time. However, in the meantime, efforts to promote best practice must be made. Whilst recognising the independence of universities and the sensitivity of individual government departments to incursions into their territory, we think that there may be a role for the relevant sectoral units in the DTI — in this case the Bioscience Unit — in bringing representatives from the various technology transfer offices together with industry representatives in order to exchange best practice and to obtain a clearer idea of what industry wants from the offices. Furthermore, efforts to inform and incentivise scientists in the possibility of commercialising their research must continue. (Paragraph 48 and 53)
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| Funding of biotechnology companies
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| 6. | There are a number of highly successful UK biotechnology companies and more will come through in the coming years. However, it seems that less money is available from all sources for biotechnology companies in the UK than in the USA. Government support in its various forms, venture capital and angel funding, are all on a fraction of the scale that they are in the USA. There was little support for extensive government subsidy for commercial biotechnology in the UK. It is not clear that it will make better biotechnology companies. (Paragraphs 98 and 99)
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| 7. | Perceiving market failure in the earliest stages of company formation, government policy has been targeted at facilitating the commercialisation process by concentrating on seed and early stage funding through schemes such as the UCF. Support in this area has been considerably less than in both the USA and Germany. But, as the German case highlights, it is possible to make it too easy to start a biotechnology company. The companies have to be based around commercially viable technology, and there needs to be an adequate private equity market to develop and sustain the companies once they are established. (Paragraphs 83 and 100)
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| Availability of Venture Capital funding
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| 8. | Venture capital provides the backbone of biotechnology funding and the UK has the most developed venture capital sector after the United States. Nevertheless, in comparison with the USA at least, the venture capital funds are smaller and the amount of money they are prepared to commit to each investment is smaller. A further difficulty seems to be that the venture capitalists are looking to exit long before the companies are developed enough to be an appealing prospect for the public markets. Moreover, we have found evidence that UK investors are keener to invest in US biotechnology companies than they are to invest in domestic ones. The perception, at least, is that the US companies are superior to, and have better quality management than, those from Britain or the rest of Europe. The result is that the UK venture capital market does not serve small biotechnology companies well. (Paragraphs 101, 103 and 83)
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| 9. | Increasing expertise in university Technology Transfer Offices may in time provide more attractive prospects for venture capitalists. However, even if better companies are spun out the 'structural' factors that deter the venture capitalists from becoming involved in the earliest stages would remain. Investors are under no obligation to support a sector that they feel is too risky for them. The role of government is to ensure a favourable regime so that investors are not deterred. Beyond this, it is the companies that must prove themselves viable commercial propositions in order to secure investment. (Paragraphs 83 and 103)
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| 10. | Whilst government measures to increase the flow of funds into venture capital would seem appealing, the problems of Germany should serve as a warning. The regional venture capital funds that are currently being established may provide valuable support in the absence of private funding. We received no evidence as to whether — and if so how — small biotechnology firms are using such funds: and, in any case, the funds are too new for any firm conclusions about their usefulness to be drawn yet. However it is important that the rigorous scrutiny of new investments and strict commercial criteria that one would expect from private venture firms is maintained by these public funds. (Paragraph 83)
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| Flotation or M&A?
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| 11. | The public market seems to have been the route that most of those involved in the biotechnology industry aspire to. However, it is evidently not always the most suitable option. Companies have approached IPO as merely another stage in the development process but the conditions under which public companies operate are very different. Public companies face a much more volatile climate than private companies and are subject to far greater pressure to deliver some tangible success. It is clear that not all those companies who aspire to the public markets, or indeed all of those that have already floated, have been ready for the harsher climate there. With the public markets closed to new biotechnology offerings, it may be that venture capitalists will have to wait longer before exiting and perhaps take a more proactive role in encouraging some consolidation in the sector, both of which could potentially strengthen it. (Paragraphs 101 and 102)
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| Clusters |
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| 12. | We are concerned that too many areas have targeted biotechnology as an industry to cultivate. Not only may considerable sums of public money be wasted in trying to force into existence local biotechnology companies, but also rivalry between regions may adversely affect those with existing strengths in the sector thus undermining the success of biotechnology in the UK as a whole. (Paragraph 121)
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| Skills |
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| 13. | We recommend that the Government and the BIA, perhaps along with the biotechnology specialists in the RDAs, look into ways to provide some systematic training in management. Given that so many companies are spun out of universities, they could also clearly play a role in this. Biotechnology is a high risk industry and some failures are inevitable. However with better quality management these failures can be kept to a minimum. (Paragraph 128)
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| 14. | We note concerns about a shortage of suitably qualified technicians. Again this would appear to be an area where the Department for Education and Skills should be working with bodies such as the BIA, the RDAs and the LSCs to ensure the adequacy of training provision. We heard that Scottish Enterprise was working with local colleges with a view to increasing the provision of technician training. We applaud this and would encourage other regions to consider similar initiatives. (Paragraph 130)
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| Biomanufacturing |
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| 15. | It may be too early to tell whether the lack of biomanufacturing will significantly limit the growth of the biotechnology industry in the UK, and also whether there is a market failure that the Government may need to address. Whilst much pharmaceutical manufacturing has moved abroad, this is not yet the case with biomanufacturing. The UK has the potential to retain it. Government and the RDAs should ensure that there are no obstacles to the establishment and retention of adequate biomanufacturing capacity accessible to the major R&D centres. (Paragraph 134)
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| Clinical trials |
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| 16. | Ultimately, whilst it clearly imperative that drugs are subjected to thorough trials, a long and drawn out process merely diverts resources away from more innovative aspects of R&D. Anything that can be done to smooth the process, without reducing necessary protection, should be welcomed. (Paragraph 138)
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| Animal rights activism
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| 17. | Last year there was tightening of company legislation designed to give some greater protection to directors under threat of attack. Before advocating further measures we would like to judge the effectiveness of the recent measures. We recommend a wider review of company law to see whether investors in vulnerable companies could be similarly protected. We support moves to make a more concerted attempt to explain the necessity of animal experimentation in drug development and to raise awareness of its benefits. (Paragraph 140)
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