Ithaka Life Sciences - Blog

Ithaka Life Sciences Ltd (Ithaka) is a provider of business advisory and interim management services to the life sciences sector.

Tuesday, 3 March 2009

Should the government bail out biotech?

The biotechnology industry has joined the queue of industries pleading their “special case” for a government bail out in the current financial climate. In this article I will examine the case for the biotech industry following the examples of the banking sector and, latterly, of manufacturing industries such as the car makers.

Here in the UK, a group of luminaries led by Sir Chris Evans and Lord Drayson are making the case for the government to provide £1 billion of taxpayers’ money to a group of VC funds that would then invest the money to “save” the UK biotech industry by driving the consolidation of the myriad of small biotech firms in the UK (http://www.guardian.co.uk/business/2009/feb/15/biotech-excalibur-evans).

Even in the US there have been calls for the government to provide $10-25 billion annually to venture capital firms for investment in the biotech sector (see an article by Leslie Glick in the February 1st, 2009 issue of Genetic Engineering & Biotechnology News http://www.genengnews.com/articles/chitem.aspx?aid=2760). As ever, anything that the UK may be considering pales into insignificance when compared to the US!

Those of us old enough to remember what happened in the nineties when the German government attempted to promote the development of a national biotech industry by providing matching funding to encourage venture capital firms to invest in biotech start ups – lots of new companies created only for most of them to collapse a few years later when the government money ran out – might be a little wary of the current calls for government support. Perhaps surprisingly, there seems to have been little debate within the UK biotech community about the merits of the proposals put forward by Sir Chris Evans and his colleagues. More importantly, I’m not aware of any attempts to engage with the UK taxpayers to ask if they think this would be a good use of their money!

The only note of dissent from within the UK biotech community appears to have come from William Bains in a typically trenchant analysis published in the February 23rd, 2009 issue of Chemistry & Industry (http://www.chemind.org/CI/index.jsp) . William argues that the problems faced by the European biotech industry actually have their origin in the business model adopted by European venture capital firms. He concludes that the UK government should not be bailing out a group of investors that have failed the biotech industry and that, instead, it is time to find other ways of restoring creativity and entrepreneurship to the industry.

I certainly agree that we need to find alternative business models for the European biotech industry rather than simply pouring “good” taxpayers’ money after “bad”. This is a subject that I plan to return to in another blog.

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