Pharmaceuticals & Biotechnology – Sector Summary

• Five of the top 25 R&D investors in the UK and eight of the top 25 global investors are pharmaceuticals and biotechnology companies. Two UK companies, GlaxoSmithKline and AstraZeneca, are among the top global R&D investors.
• The pharmaceuticals and biotechnology sector was the largest contributor to R&D in both the UK1000 and the G1000 in 2008. There are 134 pharmaceuticals and biotechnology firms in the UK1000 and 116 in the G1000.
• R&D spending by companies in the UK pharmaceuticals sector is highly concentrated: GlaxoSmithKline and AstraZeneca continued to dominate R&D with a combined contribution of 75% of the sector total, and 27% of overall UK1000 R&D spending.
• R&D in the UK pharmaceuticals and biotechnology sector grew more quickly than sales and operating profits overall. There were, however, significant differences between the largest investors: GlaxoSmithKline grew its R&D spend twice as fast as its sales, while reporting a 6% operating loss; AstraZeneca grew its R&D more slowly than sales; and Shire actually reduced its R&D by around 1%.

CASE STUDY Oxford Nanopore Technologies: A new generation of genome sequencing

It is now a decade since former US President Bill Clinton and British Prime Minister Tony Blair announced the first draft of the human genome project, following an unprecedented international collaboration between the world’s leading geneticists. Today, the focus has shifted to reducing the costs of genome sequencing. Currently, most methods for detecting and analysing DNA or single molecules are time-consuming and expensive, and rely on optical labelling using costly hardware. This puts it out of the reach of broader applications, such as in healthcare, where it is hoped that the sequencing of a patient’s genetic profile could lead to earlier diagnosis of health problems and personalised treatment.

One of the leading global players in the race to cut the cost of genome sequencing is Oxford Nanopore Technologies, a UK company that was spun out of the University of Oxford in 2005. It was cofounded by Hagan Bayley, Professor of Chemical Biology at the University, and Gordon Sanghera, who was appointed chief executive in June 2005.

For the past two decades, Professor Bayley has been a pioneer in the study of nanopores, and specifi cally in methods to use nanopores to study individual molecules such as DNA. His method detects and analyses molecules by passing them through a tiny hole, or nanopore When a current is conducted across the nanopore, the disruptions caused by the analyte passing through are measured. Using this information, it is then possible to identify and record DNA bases as they pass through the nanopore. More importantly, the process promises to be much quicker and cheaper than traditional sequencing methods that use chemical labels and optical equipment.

Oxford Nanopore Technologies has focused its R&D efforts on creating a platform, based on nanopore technology that can be used across a broad range of different applications. “Although we’re looking at DNA sequencing as our lead application,” says Zoe McDougall, Communications Director at the company, “we are also expanding our operations to include to protein analysis and even go beyond that into security and defence, for example the detection of explosives. Around 80% of our R&D effort goes into the common elements that span every potential application.” The vast majority of the company’s 80 employees work on R&D, and this, along with the acquisition of relevant intellectual property rights, consumes the lion’s share of funding.

The DNA of financing

Despite a challenging financing environment, the company has continued to hold successful rounds of fundraising. It has raised around £50 million since it was founded, including £17 million in 2010 from existing investors, and an £11.8 million equity investment from Illumina, a leading life sciences company, in January 2009. In return for its investment, Illumina secured the exclusive rights to commercialise the first generation of nanopore sequencing technology created by Oxford Nanopore. The company expects that, as the nanopore platform enables new applications, other commercial agreements will follow. “We don’t plan to become a sales and marketing company ourselves because we believe that our core competency is in technology development,” she explains.

“We recruit staff with a track record of building disruptive technologies that are genuinely disruptive and a vision for how change might happen commercially"

The company believes that there are three key reasons why the company has been able to buck the trend, both in its ability to raise funds and its willingness to invest in R&D. First is the people. “We’ve taken great care to recruit staff with a proven track record of success in building technologies that are genuinely disruptive and who have a proper vision for how change might happen commercially,” she explains.

Second, the company has made significant efforts to adopt a broad IP position covering as many aspects of nanopore sequencing as possible. To help achieve this, it has announced licensing deals with leading academic institutions in the fi eld, including Harvard University and the University of Santa Cruz. “If you’re looking at label-free nanopore analysis, you can be pretty sure that Oxford Nanopore Technologies will have a strong IP position for it,” she says.

Finally, the company has been ambitious in its objectives. “The investors that we speak to often see people coming in with a technology for one little diagnostic test,” notes Ms McDougall. “Rather than go for the low-hanging fruit, we have gone for the large market potential with a product that is genuinely going to innovate, and be successful and competitive within its market.”