Science and TechnologyWritten evidence submitted by Scottish Lifesciences Association

The Scottish Lifesciences Association (the SLA) is the industry body for life sciences in Scotland. We welcome your Committee’s inquiry into the commercialisation of research, and the opportunity to submit to your Committee our views on the crucially important issue of the translation of the UK’s world class life sciences research into commercial application to the benefit of the economy.

The Scottish life sciences cluster is of considerable importance to the UK and to the global sector. It consists of 640 companies and other organisations employing over 32,000 people. The SLA is fully funded by our many private and public sector members, including a large number of businesses as well as Scotland’s university medical schools. We welcome the emphasis on growth at the core of the UK Government’s economic agenda, and its determination that the UK should become a global leader in sectors such as the life sciences. We share that agenda with both the UK and Scottish Governments. Our purpose is to help grow life sciences businesses in Scotland as a key sector of the country’s economy, in support of the aspiration to double the sector’s turnover and Gross Value Added between now and 2020 as set out in the Scottish Life Sciences Strategy 2011.1

Clearly that growth will depend to a considerable degree on translating the UK’s and Scotland’s excellent life sciences research into commercial applications, and we have thought a great deal about the barriers to that happening more successfully. We understand why your Committee has identified as a key issue in this area the lack of funding for life sciences companies—what you have called the “valley of death”. The attraction of new sources of venture capital funding to the Scottish life sciences sector is one of our top priorities. However, based on our experience of working with companies of all sizes, we are not entirely at one with the Committee’s view that there is a funding gap for new spin out or start-up companies, at least in life sciences.

We believe that the main funding gap is after the initial stage of a life sciences company’s development. We observe a reasonably satisfactory flow of start-up funding to new companies, with private sector angel funding and public sector funding from Scottish Enterprise being readily available. In our view, the “valley of death” in life sciences occurs at a later point when a company seeks to expand beyond that initial stage, and needs to attract more substantial amounts of venture capital to take it to the next stage of clinical trials or product development. It is at this crucial stage that so many good small companies with great ideas find it very difficult to secure the funding they need from the private sector. In general the public sector is not equipped to assist with the quite large sums involved, although the excellent Scottish Investment Bank’s Co-Investment Fund, whereby Scottish Enterprise co-invests with private sector investors, has been a great benefit to life sciences companies in Scotland. But for some SMEs seeking to expand, the reality is that they get bought out by bigger companies (often from outwith the UK) or they fail.

Instead, the SLA sees the main barrier to the commercialisation of research as the great difficulty which many life sciences SMEs have in dealing with university tech transfer offices. We have attached as an Appendix our comments on this crucially important area in the form of answers to some of the Committee’s questions.

We trust that these comments will be of use to the Committee, and would be glad of the opportunity to give further evidence if that would be useful.

Appendix

1. What are the difficulties of funding the commercialisation of research, and how can they be overcome?

The Scottish university sector is renowned for the quality of its research. Per head of population, Scottish research papers are cited more often than for any other country in the world bar Switzerland. However, this has not in general translated into commercial development of life sciences research. There is a perception on the part of life sciences businesses, especially smaller ones, that universities have complicated and delayed the technology transfer process by sometimes over valuing technology that still needs significant development, and thus have been reluctant to see it used without long and very onerous conditions attached to its exploitation. It is often the case that this results in research not being commercially exploited at all.

Over the past two years, the University of Glasgow has developed and introduced an “Easy Access IP” scheme to address this issue. The thesis on which Easy IP is based is that the primary role of universities is to create and disseminate knowledge, not create spin-out companies. The Glasgow Easy Access IP scheme assumes that only around 10% of IP generated by a university will be of significant commercial value—this IP is identified then commercialised/spun out by the University’s Research & Enterprise department. The rest is assigned on an exclusive basis and at no cost to companies expressing an interest in it, on three principal conditions:

that the company bidding for use of the IP sets out how it intends to use it to create economic growth in Scotland, with the concomitant jobs;

that the University is publicly given credit for any resultant commercial development/jobs; and

that the company does something to exploit the assigned IP within three years—if nothing is done then it is returned to the University.

The SLA very strongly supports the Glasgow Easy Access IP scheme, which has been warmly welcomed by the life sciences sector, and believes that it should be used more widely to create commercial value from Scottish and indeed UK university research. We have pressed for its adoption by other Scottish universities, not least by making that case to the Scottish Funding Council. We are delighted that the Scottish Government now explicitly supports the adoption of Easy Access IP by all HE institutions in Scotland. We believe that the Easy Access IP scheme is a great step forward in terms of the academic interface with businesses, especially smaller ones, and we hope it quickly becomes the norm across all of Scotland’s universities, and indeed across the UK. It is of note that it is currently being adopted by the Australian HE sector.

2. Are there specific science and engineering sectors where it is particularly difficult to commercialise research? Are there common difficulties and common solutions across sectors?

We believe that it has proved particularly difficult to commercialise research in life sciences.

3. What, if any, examples are there of UK-based research having to be transferred outside the UK for commercialisation? Why did this occur?

No comment.

4. What evidence is there that Government and Technology Strategy Board initiatives to date have improved the commercialisation of research?

We value greatly the initiatives taken by the TSB to improve commercialisation of life sciences research. However, in our experience, it has proved difficult to get SMEs to engage with the TSB process.

5. What impact will the Government’s innovation, research and growth strategies have on bridging the valley of death?

Success of the UK Government’s strategies in these areas will depend on the policies being accurately targeted. In addition to what is already being done, the SLA would suggest that the approach currently being taken by the Scottish Government on access to IP (see our comments under Q1 above) be adopted by the UK Government also in respect of the HE sector in England and Wales.

6. Should the UK seek to encourage more private equity investment (including venture capital and angel investment) into science and engineering sectors and if so, how can this be achieved?

As already stated, the SLA agrees that the focus should be on attracting new sources of private sector venture capital into life sciences, but our experience is that the main funding gap is after the initial stage of a company’s development. We observe a reasonably satisfactory flow of start-up investment in new life sciences companies in Scotland, with private sector angel funding and public sector funding from Scottish Enterprise being readily available. In our view, the life sciences “valley of death” occurs at a later point when a company seeks to expand beyond that initial stage, and needs to attract more substantial amounts of venture capital to take it to the next stage of clinical trials or product development. It is at this crucial stage that so many good small companies with great ideas find it very difficult to secure the funding they need from the private sector.

We would suggest that the UK Government should look at the success (albeit on quite a small scale in UK terms) of the Scottish Investment Bank’s Co-Investment Fund, whereby Scottish Enterprise co-invests with private sector investors. This has been successful in attracting private sector funding to life sciences.

7. What other types of investment or support should the Government develop?

The SLA believes that business access to university research should be streamlined by the setting up of regional tech transfer mechanisms. Our experience is that each university having its own TTO can become a significant barrier to larger companies seeking commercialisation agreements with a number of institutions. As well as being supportive of Glasgow’s Easy Access IP model, we also strongly support action on streamlining the TTO process.

We are therefore very pleased that the Scottish Government now intends to set up within the next two years an integrated Knowledge Exchange Office for all of Scotland’s HE institutions. Our members companies’ often difficult experience of interacting with the existing multiple TTO set up, with its different contract structures and variability of performance across institutions, means that we support this development fully. We believe that it might merit consideration in certain areas of England and Wales also.

We do not argue for a single central tech transfer office in a region. We have found in discussion with members, including the universities and investors, that there is no support for a single organisation based in one location, remote from the universities in the region, and not aware of what is happening among academic researchers. We see the solution as being an organisation with commercially minded representatives in the universities who link to and are part of an Integrated Knowledge Exchange Office (in our case for the whole of Scotland) which handles the interface with businesses. And from this Association’s point of view, that organisation should employ people with knowledge of life sciences, not least within the universities with medical schools. There are great exemplars—all of the Californian universities, covering a population of 24 million people, operate through one TTO.

February 2012

1 See www.lifesciencesscotland.com/media/14388/lss-strategy-2011.pdf

Prepared 11th March 2013