Tough times for Scottish biotech firms

Tag : Floatation Suit


Simon Best, the founder of biotech company Ardana, which plungedinto administration last week, used to work as tour manager for the1980s pop group the Human League.

It may not be the ideal training ground for running a biotechnologystart-up. However, as administrators from Ernst & Young lastweek relieved Best and his boardroom colleagues of their managementresponsibilities, the Human League’s bestselling 1981 hitDon’t You Want Me must be resounding in Best’s ears.

At the time of its stock market debut in March 2005, Ardana was oneof the great white hopes of Scotland’s emerging biotechnologycluster. Stock market investors, spurred on by the then bullmarket, had started to warm to biotech companies once again.

Indeed the flotation galvanised several other European lifesciences companies into tapping the stock markets to help fundtheir own development. Around the same time, three other Scottishbiotech companies — ProStrakan, Idmos and Stem Cell Sciences— pulled off IPOs of their own. However, since the creditcrunch took effect last August, investors have been shunningearly-stage biotech companies like the plague as part of a widerflight to safety. This has been compounded by what industryinsiders believe is a more cautious approach from the US Food &Drug Administration.

The best that can now be hoped for Ardana is that aspects of itsdrug development pipeline will be sold off, probably at fire-saleprices, to other biopharma players. The product likely to attractthe most interest is Teverelix, which, among other things, isintended as a treatment for prostate cancer.

Whether Ardana was the victim of bad management, or simply the factthat investors are looking for more reliable returns than areobtainable from biotech start-ups whose products remain untried isa moot point.

Having already burnt its way through £43m of venture capitalfunding, Ardana raised a further £18m at its 2005 flotation.However, even this was not enough to see it through toprofitability and it was forced to start scaling back its clinicaldevelopment activities last year. With just £6m left in thekitty in February the firm admitted it was running out of cash andsaid it was looking for a merger partner.

The company also had run-ins with corporate governance watchdogswho questioned the independence of board members and of committeeson its board. They did not like the fact that Best had stepped upfrom chief executive to chairman ahead of the float.

Unfortunately for Ardana, whose initial research was spun out fromEdinburgh University’s human reproductive sciences unit, nomerger partner could be found and the company has now joined theranks of other failed biotech firms such as Scotia Holdings, PPLTherapeutics and Idmos in that great biotechnology graveyard in thesky.

This series of calamities, coupled with the departure of Stem CellSciences to Cambridge, calls into question Scotland’sambitious goal of creating a biotech cluster to rival that ofCambridge, England and Boston, Massachussetts. It leaves Johnson& Johnson subsidiary Lifescan, Dundee’s Axis-Shield,Galashiels-based ProStrakan and a few other survivors with a lot toprove.

Legal connection

News that Dickson Minto, probably Scotland’s most successfullaw firm, has formed a “strategic alliance” with NewYork-based legal powerhouse Wilkie Farr & Gallagher should comeas no surprise. There have been rumours of on-off merger talksbetween the two firms for several months.

However, the deal announced last week does raise questions over thelong-term independence of Edinburgh and London-based Dickson Minto,which has about 70 lawyers and annual revenues of £31m.American Lawyer believes the deal may end in a full-scale merger ofthe two firms, which might suit DM co-founder Alistair Dickson,who, at 58, is apparently looking at his exit options. However, itis unlikely to suit everyone at Dickson Minto.

A better back office

Despite the best efforts of Labour-led administrations to transformScotland into a global centre for “back office”financial services work, the country is doing badly at gainingrecognition as a desirable location for carrying out such work.

A survey published by consultancy AT Kearney, the Global ServicesLocation index ranks the UK (including Scotland) at 43rd in theworld as a base for offshoring and outsourcing activities —behind places such as India, China, Slovakia, Jordan, Vietnam, SriLanka and Jamaica.

However, Andrew Rigby, an expert in the field, who is now a partnerat law firm Brodies, sees this as a chance for Scotland to raiseits game. He believes one solution might be for the Scottishgovernment to take a more joined-up approach to what has become amassive global market.

As Rigby has already advised the governments of the Cayman Islandsand Argentina on boosting their status as business processingoutsourcing centres, the government should maybe give him ahearing.