Early last month, the Technology Strategy Board and the Medical Research Council announced an additional £47.2 million in government funding to the Biomedical Catalyst programme. This funding is targeted at innovative businesses providing new approaches to healthcare services. It is specifically aimed at life sciences companies who find it difficult to secure the start up/early stage funding that they need to progress beyond the so called “valley of death”.
Bringing a drug to market or commercialising an innovative new technology or a medical device are all highly capital intensive. The cost of bringing a drug to market has been estimated by Deloitte as being in excess of $1bn. Some estimates put the cost as high as $4bn. It is therefore no surprise that securing sufficient capital to take a new drug or technology from concept to commercialisation has always been challenging. Factor in the risky nature of the business, the high failure rate of drugs in clinical trials and a backdrop of straightened economic times and it makes sense for venture capitalists to target their cash at less risky, later stage projects; hence the appearance of the “equity gap” or “valley of death” where money becomes hard to find for SME’s seeking to develop their projects to the point where they can attract the attention of venture capitalists.
To address this issue, the Biomedical Catalyst was established by the government in late 2011 to support SME’s and medical scientists during this crucial early phase of development. The current round of funding is part of an overall £180million being made available to provide support to fledgling projects through the scheme and is split between 43 SME’s and 7 universities. Alongside government money, the initiative has also seen the companies awarded grants in the first round, raise more than £20million in additional funding, proving that incentives such as the Catalyst can lead the way in encouraging private investors to commit to supporting early stage companies.
The success of the Biomedical Catalyst has led the government to consider whether the model can be replicated across other technology areas. It remains to be seen whether this will happen, but the success of the initiative with regards to funding the biotech sector (and improving the health of the nation) cannot be underestimated.