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Bioclusters benefit from pharma shake-up

Sweeping job cuts at Europe’s largest drugmakers in recent years have spread gloom through the pharma sector, but the release of talent is helping to drive the development of bioclusters

Bioclusters benefit from pharma shake-up

In August, London Mayor Boris Johnson fired the starting pistol on a new project to create a biocluster - called Med City - designed to link the capital with established clusters in Oxford and Cambridge.

Johnson would like to recreate in the life sciences sector what has been achieved in information technology with Tech City in East London, which has grown from a mere 15 companies in 2008 to more than 3,000 employing 48,000 people last year, according to a Centre for London report.

Linking with Oxford and Cambridge to create a 'golden triangle' could - it is hoped - create a hub stronger than the sum of its parts, with the potential to operate at the forefront of European medical research.

The scheme is still in the early stages and a lot needs to happen before it can get off the ground. The timing is good, however, as there are signs of a recovery in Europe's biopharma sector after a tough few years, according to Glenn Crocker, chief executive of Biocity, an organisation which operates four biocluster sites in the UK.

The timing is good, there are signs of a recovery in Europe's biopharma sector after a tough few years

“In the past 12 months the sector has started to turn a corner, and the next couple of years look set to be a really good time for the life sciences,” he told PME. 

While the headlines have been full of negative stories focusing on downsizing of pharma companies around the world, with thousands of staff axed and dozens of sites closed, the changes in the sector are also having some positive effects.

The other side of this coin, says Crocker, is a massive release of talent that can be snapped up by other companies, and the availability of fantastic facilities that in many cases have benefited from high levels of investment during pharma's boom years.

It is interesting to note that figures published by the European Federation of Pharmaceutical Industries & Associations (EFPIA) show employment in Europe's pharma sector - which rose dramatically between 1990 and 2010 - started to level off as the global recession hit but has not gone into steep decline. 

Biocity, which set up its first cluster in Nottingham 10 years ago, has found that it is actually able to 'backfill' former pharma sites with small, fast-growing companies that over time actually employ more people than before.

For example, around 500 people were originally employed on the Nottingham site, which was previously operated by BASF and housed Boots research laboratories. Now, the location employs around 650 people, according to Crocker. 

Similarly, just over a year on from being set up, Biocity Scotland in Lanarkshire - situated between Glasgow and Edinburgh - is halfway to the headcount employed by former owner Merck Sharp & Dohme (MSD) and Biocity has high hopes to follow a similar trajectory as it establishes another cluster of bioscience companies at AstraZeneca's Alderley Park site in Cheshire. 

AZ said in March it planned to cut about 1,600 jobs as part of plans to overhaul its approach to research and relocate its global corporate headquarters to Cambridge, UK, by 2016.

“A good thing about clusters like Biocity is that never again will someone in a distant head office put a cross through a map and wipe out a particular site in one fell swoop,” said Crocker.

Lessons learned
So as Med City gets underway, what messages should its organisers be transmitting as they try to develop momentum?

The most obvious and often cited advantage of a biocluster is proximity, fostering an environment where people from one company can engage with those from another and share experiences and ideas, says Jean-Francois Boussard, chief executive of the Biocitech cluster in Paris, France. 

Med City should benefit like the Paris cluster from its close proximity to London's academic centres of excellence and teaching hospitals, as well as large pharma companies, he noted.

There is more to building a biocluster than having a marketing budget for brochures and websites

Crocker adds that as clusters get established they help to attract top-tier talent, and the larger the cluster, the greater the pull.

“It becomes self-fulfilling,” he said. “The more companies you have together, the more good people are likely to take the risk of going to a small, early-stage company.” Adding the right talent to a small company heightens the chance of success, and the cycle moves on, he added, while the proximity of other firms also gives workers a safety net if one firm does not succeed.

Med City is also being launched as the financial environment for biotech start-ups seems to be improving, after a truly bleak period over the last few years. 

Financings for European biotech companies grew from around 1,500 in 2002 to a peak of 7,800 in 2007, but then plunged to a little over 2,500 as the recession took hold the following year and have been stuttering below the 4,000 level ever since.

Boussard believes that one of the main obstacles holding back biotech in Europe over the last few years has been the fact that there are actually very few investors around with an understanding of the sector.

That view is also shared by Crocker, who notes that a lack of courage (and cash) among investors is leading to “cheap failures” among EU biopharma companies, where a higher level of investment might well lead to more successes. The result is a downward spiral, the reverse of the cluster effect detailed above, where companies are starved of cash, can't attract the right people and descend into oblivion. 

“The situation is starting to change in that there is more money becoming available,” said Crocker, pointing to funding commitments from Cancer Research UK, the Wellcome Trust and GlaxoSmithKline among others, as well as the re-emergence of initial public offerings (IPOs) in the US that may start to filter across to Europe. The latter is crucial as it re-establishes an exit for early investors.

Meanwhile, government financing for biotechs in Europe seems to be improving. In France for example the government recently established a system of loans for small- and medium-sized enterprises (SMEs) and mid-cap companies which focus on innovation. 

Called the BPI, the programme will have funding resources of €42bn and will try to support companies through the tricky period between coming up with a business idea and making it a commercial reality. France also operates a scheme called the FCPI, which makes it easier for citizens to invest in start-ups and has provided some €6bn in funding over the last few years.

Similarly, the UK government has announced a series of measures, including its £180m Biomedical Catalyst funds to help small companies commercialise their R&D and the £600m set aside to improve the infrastructure for scientific research announced during last year's autumn budget.

The government has also provided some £1bn a year through the National Institute for Health Research (NIHR), including £500mn to boost translational research links between the NHS, academia and industry

In the same way that a crowd is more noticeable than a single individual, companies within a cluster can find it easier to attract the attention of investors and collaborators and - in the case of service companies such as contract research organisations (CROs) - potential customers.

To facilitate that Biocity organises subgroups of companies operating in similar areas across all its sites - the CRO group is a good example - that meet regularly and even cross-sell and co-promote each other's' services.

While it can be hard to gauge the success of a biocluster beyond the number of companies resident on a site, one surrogate marker is the financial health of the organisation behind the hub. Biocity is privately-held, but has been growing fast since it was set up a decade ago and has been profitable since 2006.

Crocker believes that the secret of Biocity's success in Nottingham has been a tight focus on helping the companies the cluster houses succeed, and not looking at the business as a simple matter of property development.

A nearby source of talent is just as important - either from industry or academia - and it certainly helps if the location picked for the cluster is a nice place to live and work with a thriving arts scene and other fast-moving creative industries focusing on emerging technologies such as gaming and social media. 

Most of the initial companies in a cluster tend to be set up by graduates and postgraduates from the immediate vicinity, so a successful hub can help retain talented people , which can be an antidote to the 'brain drain' that countries in the UK and western Europe have been complaining of for years and in time even reverse the trend.

London's proposed Med City will enjoy many of the benefits that have helped Biocity become a success, so the portents for the new venture would seem to be good. 

That said “there is more to building a biocluster than having a marketing budget”, according to Crocker, who stresses it will be important for the Med City organisers to understand the needs of the companies they are trying to attract and play an active role in helping them to succeed.

Article by
Phil Taylor

freelance journalist specialising in the pharmaceutical industry

26th September 2013

From: Research



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