Can Liverpool incubate a new generation of innovative pharmaceutical firms? Alistair Houghton reports

WHEN it comes to growing Merseyside’s pharmaceuticals sector, it seems small really could be beautiful.

The “life sciences” sector has long been tipped for growth by regeneration officials, who believe it could create thousands of skilled jobs.

The region already plays host to some of the biggest names in the pharmaceuticals world, from Novartis to Eli Lilly.

But, according to the team at ambitious Liverpool pharmaceuticals firm RedX, it will be small companies that will drive the sector’s growth in years to come.

RedX, based at MerseyBIO, specialises in developing new drugs based on existing compounds, rather than using the traditional “big pharma” model of developing drugs from scratch.

That means it can get drugs to market more quickly, without the lengthy testing procedure needed to develop new drugs.

RedX has big ambitions. Its chief executive, Dr Neil Murray, said: “The hope is that we will become a cornerstone of the biotechnology sector in Liverpool and the North West.”

It aims to do that through its plans, unveiled in the Daily Post last month, for a £39m “centre of excellence” to develop cancer treatments.

RedX has applied for £5.9m of Regional Growth Fund cash, which will in turn unlock £33m of private investment.

The centre could, says Dr Murray, employ as many as 250 people when it opens in five years’ time.

Initially, the project will be based at Liverpool Science Park, but in time it will move to the proposed BioCampus set to be built at the new Royal Liverpool Hospital.

RedX would be the first company to sign up to the BioCampus – which health bosses hope will house many more small firms developing and marketing many new drugs.

Speaking last year, Royal Liverpool chief executive Tony Bell said: “The BioCampus should enable Liverpool to carry out some of the best research in the world, it will put us right up there.”

The BioCampus is designed for small firms that have the potential to grow into medium ones. That, says Dr Murray, is crucial to the long-term health of Liverpool’s pharmaceutical sector.

He said: “The BioCampus is about organically growing companies of about 200 or 300 people that can give critical mass to the biosciences sector in the city.”

Last month, RedX joined a 2Bio conference in Liverpool that debated the issues facing the pharmaceutical sector.

Speakers, including private equity veteran Jon Moulton, agreed that small firms needed to step into the gap left by “big pharma” as those giant firms were now developing fewer drugs.

Dr Murray said: “There are three primary issues with the big pharma model.

“Firstly, their ability to develop their own drugs – they can’t bring their drugs quickly enough to the market to meet their needs. Then there is their funding model, in terms of the investment of money in developing a drug versus the risks involved versus the revenue made in return.

“That drives them to a decision like, for example, they will only bring through drugs that will generate over $1bn in sales. Therefore, they will cut programmes that will only bring $500m of sales.

“It sounds crazy, but I understand where that comes from.

“The third thing is the skills gap. There’s a significant lack of people at a technician level.”

RedX is based at MerseyBIO, the Crown Street innovation centre that today houses nine innovative life sciences firms.

Geoff Wainwright, director of MerseyBIO’s owner 2Bio, agrees that small firms are vital to the future of Merseyside’s pharmaceutical sector.

He said: “The pharmaceutical industry is producing less and less products. The cost of producing them isn’t going down.

“The understanding that we now have of medicine is so much more sophisticated than even five years ago, let alone 20 years ago when some of these blockbuster drugs were conceived. The world is changing and it’s hard for large organisations to adapt at that pace.

“It’s a great opportunity for companies like RedX to step into the breach, and to help supply new products for the future.”

One of the key issues for the sector, as identified in The Mersey Partnership’s report into the city region’s knowledge economy, is lack of laboratory space.

The report says, for example, that several companies from MerseyBIO have gone on to greater success – but that “lack of grow-on space in the area has contributed to 16 companies moving away from the city region.”

And the report later states that, for the sector to grow, regeneration bodies will need to “tackle the severe shortage of incubation space” and “tackle the complete lack of grow-on space.”

Several developments in the region could help solve that problem. As well as the BioCampus, the University of Liverpool is also developing new laboratories, while there have also been proposals to create an Innovation Park at Clatterbridge, Wirral.

The region boasts a skilled workforce of pharmaceutical researchers but, in common with the rest of the UK, has a lack of lab technicians. Mr Wainwright said he was now working with Liverpool’s universities on plans to train more such technicians.

The region also boasts a new source of finance for life science firms in the form of the new North West Fund. A £25m pot has been set aside for the sector. Speaking at the 2Bio conference last month, RedX chairman Pete Jackson explained that his firm had been attracted to Liverpool from Bradford by three factors.

“Firstly, the infrastructure,” he said. “There was a lab ready-built that we could move into.

“Secondly, there was a pool of people that could do the jobs we wanted. We recruited some great people from the university at post-doctoral level, and are in the process of attracting people from elsewhere in the UK.

“But probably the key that unlocked the whole thing was the availability of finance. In one room we could meet people who gave us a grant.

“At Merseybio, that was relatively easy for us. We started with two people and went up to four.

“What’s got to happen now is the same level of infrastructure, people and finance has to be in place for us to go up to 250 people.

“That’s available in places like Singapore. The city has to be competitive for people to come here.”

The conference also debated how the small firms that could change the face of the pharmaceuticals sector are becoming increasingly attractive to investors.

Jon Moulton, one of the UK’s best-known venture capitalists, today leads private equity firm Better Capital. He told the delegates at Liverpool Science Park that small firms were well-placed to compete against the dinosaurs of the industry who were no longer innovating. Those innovative firms would, he said, prove attractive to private investors.

“There are opportunities galore to innovate in low-cost areas,” he said.

“Small pharma has the opportunity to be nimble, lower-cost, innovative and to make money out of it.

“There’s definitely money out there to finance these companies.

“It doesn’t have to be handouts from the Government.”

Mr Moulton was backed by Savvas Neophytou, an analyst with Liverpool broker Panmure Gordon.

“If you make your companies attractive enough to outside investors, we’ll find them,” he said.

People like Jon Moulton, Mr Neophytou said, need to be encouraged to invest in Liverpool.

He said: “Let’s give the world a success story and more will follow.”

Max Steinberg, chief executive of Liverpool Vision, said the city should offer a “coherent package” of support to pharmaceutical firms, including support to help them find premises. The biocampus and the Apex centre being built by the University of Liverpool could also, he says, help seed the bio-science firms of the future.

Liverpool should also, he said, shout about its record as a “science and learning city”, while organisations in the sector should work together to ensure they do not duplicate each other’s work.

And, he said, pharmaceutical firms in Liverpool should build on expanding links with China, where demand for pharmaceuticals is increasing.

He said “The city has some advantages, but if it doesn’t develop these Chinese links it could miss out substantially.”

Mr Jackson, of RedX, is clear that the pharmaceuticals sector could, with the right support, become a key part of Liverpool’s economy.

He said: “If Liverpool wants to end up with vibrant industries, we are an industry based on intellectual property and the human skills base.

“It’s a really good business area for Liverpool to push for.

“It needs people, facilities, decent buildings, university support.

“They’re all in the land of the feasible.

“It’s important that Liverpool gets things like this, or Liverpool will slide steadily downwards.

“ It needs a council that’s constructive. It needs all the help it can get.”