BioWorld International Correspondent

LONDON — The UK government is putting in £150 million (US$248 million) as a cornerstone investor in what it hopes will become a £1 billion fund for biotech and other high-tech start-ups over the next 10 years.

The UK Innovation Investment Fund will not invest in companies, but rather in a small number of specialist technology funds that have the expertise to make direct investments.

As the latest economic stimulus measure, the fund has been set up following protracted lobbying by the UK BioIndustry Association in particular, and health care and venture capital groups in general. Clive Dix, chairman of BIA, said it would make a significant contribution to securing the long-term health of the life sciences sector.

"[It] provides much needed follow-on investment to early stage companies," he said.

Dix added that it was an "excellent first step" toward delivering an integrated strategy for life sciences. The government is due to announce a full package of measures sometime later this month.

Now the BIA wants to see a rapid implementation of the fund so it can start investing before the end of the year.

The government not only wants its cornerstone investment to pull in VCs and institutional investors, it also is looking to pharmaceutical companies to put money into the fund. Richard Barker, director general of the Association of British Pharmaceutical Industries, acknowledged that many small health care companies face a funding crisis. "Meeting this need is an important signal of the government's intent and a first step toward delivering against an ambitious strategy to put UK life sciences at the forefront of [the UK's] economic and health future," he said.

The innovation fund was put together with the support of the European Investment Fund. "At a difficult time for the VC industry, the UK Innovation Investment Fund will underpin a next round of critically important fundraising for fund managers," said Richard Pelly, chief executive of the EIF.

The UK government boasted that the £1 billion fund will be one of the largest technology funds in Europe. Alongside biotech, it will invest in cleantech, information technology and advanced manufacturing companies.

While the BIA welcomed the formation of the fund, it will do nothing to help the band of quoted - but impoverished - UK biotechs, such as Alizyme, Summit Corp. or Phynova, that are finding it impossible to raise finance in the current highly constrained capital markets. (See story in this issue.)

Published  July 1, 2009