UK Biotechnology: roll up, roll up and buy

Last week AstraZeneca announced that it is to acquire Arrow Therapeutics, a London based biotech company with several anti-viral products in the clinic. This is the third recent acquisition of UK biotech companies by AstraZeneca, after KuDOS and Cambridge Antibody Technology last year.

Sensibly, AstraZeneca seems to be trying to make sure it does not “throw the baby out with the bathwater”, by stating that Arrow’s London facility will be its new hub for anti-viral discovery activities. This is a strategy consistent with AstraZeneca using the KuDOS acquisition to lay the foundations for a global oncology research hub to be developed in Cambridge and its expansion of CaT’s Cambridge base to be a centre for antibody research.

From where we sit in Cambridge it seems that pharmaceutical companies are falling over themselves to purchase local talent. For example, at the end of last year GlaxoSmithKline announced it would be acquiring Domantis for £230m, and we just have to look out of the windows of our offices in Chesterford Research Park to see that Arakis has now become part of Sosei, BioFocus has become part of Galapagos and last week Solexa became part of Illumina.

It is highly likely that the current biotech acquisition frenzy is not only driven by the need for pharmaceutical companies to plug gaps in their portfolios, but also by the increasing values ascribed to high quality licensing deals (even early stage deals) compared with the low values ascribed to pharmaceutical companies in Europe. In many cases it has become cheaper to buy the company than license the product.

We know that biotech-derived speciality products require a different approach to sales and marketing and it is interesting to note that many of the most biotech-acquisitive companies (eg, Pfizer and AstraZeneca) are those that are also going through a significant rationalisation of their traditional workforces. Perhaps we will see "gorilla" sales and marketing approaches being replaced by "guerrilla" strategies in some cases.

It is, of course, a great complement to the quality of UK research, and Cambridge research in particular, that so many pharmaceutical companies are camped out in hotels in our vicinity trying to prise these gems from the clutches (mainly) of VC investors – a task made easier by the difficulties that these investors have had over the past few years in effecting an exit through public markets.

Many high quality local assets remain for those pharmaceutical companies wishing to improve the quality of their R&D pipeline. However, potentially interested companies should not wait - the pretty ones always get snapped up first.

[This article also appeared at the guest editorial in Scrip 3232, Feb 9th, 2007]

To discover the value of CH& B can add to your business, please contact Martyn Postle, Director, Cambridge Healthcare & Biotech, The Mansion House, Chesterford Research Park, Little Chesterford, Essex CB10 1XL

Tel: +44(0)1799 530009 Fax: +44(0)870 7517505

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