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London Notebook: Conversations Inside The Biomedical Golden Triangle

Xconomy National — 

Xconomy had reporters in eight locales when I joined in the spring of 2014. Since then, we have expanded into Texas and North Carolina, adding two more locales where we cover the life sciences and much more. We’re always looking for the next place to put down roots.

One big place on our radar is the United Kingdom, especially London and nearby Oxford and Cambridge, each about an hour from the capital. I went to London just before Thanksgiving to meet with venture capitalists, economic development officials, professors, and scientists to hear about what’s working, and what isn’t, in the area’s life sciences scene. I won’t pretend that this is a comprehensive survey, but the short trip was rich with on-the-record conversation and, at an Xconomy dinner with two dozen of the life science community’s leaders and thinkers, often spicy debate.

Topics ranged from real estate in London (too expensive, too scarce) to public transportation (did you know there is no direct rail line between Oxford and Cambridge?); from underpowered capital markets to the area’s leg up in clinical trials.

Those familiar with the decades-long soul searching in New York City, where an urban biotech cluster is now struggling to coalesce, might recognize several themes emerging from London and surroundings.

In both areas, there is a concentration of biomedical research and practice. There is international finance and philanthropy. And there is urban density, so prized in places like Kendall Square of Cambridge, MA—the ne plus ultra of biotech clusters—for letting people rub shoulders and exchange ideas informally.

Oxford and Cambridge are world famous for their academics, while London itself has three top life science research universities, University College London, King’s College London, and Imperial College London, which are also healthcare teaching centers. There’s also the Francis Crick Institute, “Europe’s superlab,” as Nature dubbed it, moving into massive new digs between the Euston and St. Pancras train stations near London’s historical center. Formerly the UK Centre for Medical Research and Innovation, it will be Europe’s largest biomedical lab. The Crick is also a big part of London Mayor Boris Johnson’s plan, now being carried out by the promotional group MedCity, to make the capital the third leg of a biomedical “golden triangle” with Cambridge and Oxford.

London also has more than 60 hospitals, many of which have specialties that make them centers of expertise for industry collaboration. Just last month, London’s Great Ormond Street Hospital, a children’s center, reported that an infant in its care had received a cancer therapy made from a donor’s genetically altered immune cells. The therapy, dubbed UCART19, came from a collaboration between French biotech Cellectis (NASDAQ: CLLS) and University College London.

It was an extraordinary case, not just because it was outside the bounds of a clinical trial—the therapy has not yet been tested in humans—but also because the child, at death’s door when her parents made the special request, recovered from her cancer.

The case had recently come to light when we convened our dinner, which was co-hosted by Johnson and Johnson Innovation and sponsored by London and Partners and MedCity. No surprise, then, that some guests were ready to counterpunch when I first asked what they would change in the London or U.K. life sciences community if they could wave a magic wand.

There was no shortage of suggestions. There was also a complaint that starting with such a question immediately tipped the conversation into the negative. It came from Sarah Haywood, chief operating officer of MedCity, so her agenda was no secret, but OK, fair enough. I’ll start here with one of the region’s strengths, something that struck me as unmatchable in the U.S.: access to a connected network of dozens of biomedical institutions, thanks to the U.K.’s nationalized health system.

The central record-keeping and collaboration across institutes is a big advantage for developers of drugs or medical devices looking to recruit patients for trials. The pool in London and beyond is vast and diverse, with 40 percent of the city’s population born abroad.

To make access easier, dozens of healthcare centers and institutes across London and surrounding counties that count 6 million people as their patients, have formed UCLPartners, the largest of what the U.K. calls its “academic health science partnerships.” Think of it as a two-way funnel. UCLPartners helps sort through promising research at its member institutions and license it to the outside world—like a tech transfer office on steroids. And it helps life sciences companies connect with its institutions’ clinical teams to design or run trials.

“We’ve harmonized the process,” said UCLPartners director of commercial development Joanne Hackett. When a big drug company or a clinical trials contractor like Quintiles Transnational (NYSE: Q) shows up with money, she said, “we sort it out.”

But making the region a top spot for clinical trials isn’t enough to make it a dense biotech cluster. For that to happen, local biomedical ideas have to form, grow into companies, and stay local without shifting key operations overseas or being acquired.

Not surprisingly, in one of the world’s most expensive urban centers, real estate was top of mind among our dinner guests. Just as the world’s oceans need reefs and coastal wetlands to nurture young organisms, London itself needs more space to incubate its emerging startups. It has four incubators currently, with a fifth due to open in 2016 that will bring total capacity to 700,000 square feet—room for more than 80 companies.

One conspicuous absence from the incubator scene is Johnson & Johnson (NYSE: JNJ), which has put its JLABS incubators in five North American cities. Despite having an innovation center in London to make connections to local academic and industry, there are no U.K. JLABS plans for now, a spokeswoman said.

There is space in the sprawling suburbs ringing London, but several dinner guests noted that, unlike the U.S., few entrepreneurs are keen on living near distant industrial parks or making long commutes. Centrality and proximity are high priorities. (The U.S. is learning this lesson, too, in watching the rise of Kendall Square.)

One of Europe’s top biotech venture investors, Index Ventures of Geneva and London, rents space in Cambridge for its handful of startup companies to tap into personal networks and “top research,” according to Index partner Francesco De Rubertis.

But Index is not necessarily looking to create companies for the long term, and the firm’s strategy illustrates some of the obstacles in building out a homegrown U.K. sector. About a decade ago Index decided in large part to scout single drugs, build minimal corporate infrastructure around them, and develop them with an eye toward a sale to a company looking for pipeline material. (Here’s one recent example.)

Some VCs in the U.S. have pursued a similar model, sometimes called asset-based financing. Avalon Ventures of San Diego is one; Versant Ventures (which is also in Europe and Canada) is another.

The difference is, the venture pool in Europe is smaller and the risk greater of making long-term biotech investments in full-scale companies. “It’s hard to do follow-ons and stay [invested] in a company longer,” said De Rubertis, who spoke to me one evening at the Index office in London’s swanky Mayfair neighborhood.

The U.S. has a fairly exclusive group of early stage biotech investors, too, but the unprecedented IPO run that has finally slowed this fall was fueled by something those I interviewed said barely exists in Europe: crossover investors, which are public funds that take a private stake in a biotech as a way to get a better slice of the company come IPO time. (I wrote about the U.S. crossover phenomenon, and the consequences if it were to falter, at the end of the summer.)

Crossovers provided the late-stage tinder to keep the IPO fires burning in the U.S. But not in Europe. “In Europe, they don’t invest in biotech,” said De Rubertis. In the U.S., they might cut back for a time, but they have “a Pavlovian instinct” to go back into biotech as markets heat up. London’s markets—either the London Stock Exchange or its AIM offshoot for emerging companies—have hosted a few life sciences IPOs in the recent boom years, none more notable than the £200 million ($332 million) raised by allergy drug maker Circassia Pharmaceuticals of Oxford in 2014.

But while U.S. IPOs returned in 2012, with the boom starting in 2013, U.K. biopharma issues were barely to be seen in those years: only two, according to LSE records. (Note: Link downloads an Excel spreadsheet.) In 2014 and 2015, there have been 14, raising a total of £509 million ($770 million)—and 40 percent of that from Circassia alone.

Just as notable, then, are the British firms that have jumped to the American markets for financing, such as cancer immunotherapy developer Adaptimmune Therapeutics (NASDAQ: ADAP), which raised $191 million on the Nasdaq this year after a big crossover round led by American firm New Enterprise Associates. “We only did crossover funding in the U.S.,” Adaptimmune CEO James Noble said at a biotech investment conference in San Francisco this fall. “You’re wasting your time in Europe, I wouldn’t bother.”

Financial migration isn’t the only concern. Those I spoke with on my trip often cited the trend of U.K. firms building out manufacturing in the U.S. instead of at home, leaning on U.S.-based expertise (not to mention government incentives) in large-scale vaccine and antibody manufacturing.

It’s too late to lure back that part of the business, said Roger Bone, vice president of transactions at J&J’s London Innovation Center. But the U.K. should be thinking of ways to keep home the next technological wave and the wealth that comes with it. “This is not about trying to regain manufacturing that is well established elsewhere,” Bone said. “It is about making the U.K. a center for manufacturing [that requires] new processes.”

So certain businesses might not be lured back, but what about people? Derek Jones, the CEO of Babraham Bioscience Technologies, mused about how to get British “sea turtles” to repatriate, borrowing the phrase for the Chinese diaspora of professionals who return home.

Sitting to Jones’s left at dinner was a semi-sea turtle: Kevin Lee, a Brit based in Boston who was just named CEO of Cambridge, UK-based Bicycle Therapeutics. Before Bicycle, he criss-crossed the Atlantic, setting up Pfizer’s gene therapy group in London. Now he’ll steer Bicycle, a company started in 2009 to develop drugs from synthetic peptides. He’ll be moving some operations to the American Cambridge “to take advantage of accessing the best people in both places,” which Lee told me a few weeks later via email.

Back at dinner, the conversation shifted toward the U.K.’s pool of entrepreneurs. While many pointed out the U.K. was doing quite well starting companies from a population of 64 million, compared to the 320 million in the U.S., Lee noted how U.S. venture firms did a good job building a “deep bench,” specifically by hiring entrepreneurs in residence, or EIRs, to help them grow new companies.

That touched a nerve for Matthew Foy, the lead investor in the U.K. for GlaxoSmithKline’s SR One fund. He said EIRs in the U.K. are risk averse, looking askance at future rewards coming through equity holdings. “They want salary,” Foy said. “It should be entrepreneurship at risk instead of entrepreneurship with a nice salary.”

Simon Kerry, the CEO of Oxford-based cancer drug developer Karus Therapeutics, offered his own view of another difference between American and British entrepreneurs. “U.S. biotechs tend to be product-focused and talk about where innovation is needed,” Kerry said. “In the U.K., CEOs talk about where their science is coming from.” In other words, they look back instead of forward.

Not everyone agreed. “If my CEOs talked like that,” said SR One’s Foy, “they wouldn’t be CEOs for long.”

The talk of entrepreneurial mindset made me think of Silicon Valley, where the growing convergence of the freewheeling, unregulated tech world and the more deliberate, regulated life science world is creating fascinating cultural, strategic, and product development overlap. Take, for instance, the launch of a new bio-focused Andreessen Horowitz fund, headed by a polymath Stanford University professor.

London and its environs aim to capture some of that foment, as well. Digital health has begun to carve a niche, helped by an institute at University College London and other efforts.

Synthetic biology is another cutting-edge discipline that has just begun to move from academia into the commercial world. It’s the practice of engineering new functions into biological parts—or creating new parts entirely—for medical, agricultural, and industrial purposes. One of the field’s leaders, Richard Kitney, runs the The Institute of Systems and Synthetic Biology at Imperial College. Kitney and his Imperial peer Paul Freemont co-direct a U.K. group dedicated to turning academic synthetic biology work into startups and products. (More to come on this: I’ll soon post a separate Q&A with Kitney, who met with me in his office one morning on the Imperial campus in the old Royal School of Mines building.)

Extending biology in radical ways is nothing new to the Brits, of course, with U.K.-born Francis Crick, co-discoverer of DNA’s structure, just one example, with his namesake institute opening its new lab.

Whether that tradition translates into a bustling biomedical city to rival Cambridge, MA, or simply more growth in the triangle that connects London, Cambridge, and Oxford, remains to be seen. Whatever happens, scientific caution blended with traditional British reserve might make for a bit less hype than one might see across the pond, as Babraham’s Derek Jones pointed out during our dinner: “We’re just not very good at celebrating our own success.”