Growing Businesses The Scottish Way

Scotland is a nation of about 5 million people that lies to the north of—and some might say in the shadow of—England, its big sibling on the U.K. island of Great Britain. Scotland is a beautiful place, but it doesn’t possess the natural resources or market potential that typically entice chemical and pharmaceutical companies to set up shop.

What Scotland does enjoy is a renowned higher education system and an aggressive state-run business development organization called Scottish Enterprise. These forces are coming together in two projects intended to convert the best of the country’s academic research into new life sciences businesses using an unprecedented amount of industry-academia cooperation.

The bigger of the projects is a facility called the BioIncubator that was recently completed in the capital city of Edinburgh. Constructed at a cost of more than $35 million by the Scottish Enterprise and partners, the incubator is part of the Edinburgh BioQuarter, a complex of medical research centers that sits in a former sheep pasture on the outskirts of the city.

The BioQuarter is already home to the University of Edinburgh Medical School and the Edinburgh Royal Infirmary. The MRC Centre for Regenerative Medicine opens later this year. The Edinburgh Sick Kids’ Hospital is set to arrive in 2015, and the Scottish Brain & Body Centre will open in 2016.

It’s an impressive array of research institutions that Scottish business development officials believe can spawn industry. “Our goal is to connect researchers in the university and the hospitals with investment and to generate companies,” says James Wood, head of communications and media at the BioQuarter. “We have outstanding facilities, world-class research, and a teaching hospital. Where we’re going with this is the colocation play.”

It’s a concept that has created new businesses in cities from London to Boston to San Francisco. In particular, Wood draws a parallel to San Francisco’s Mission Bay district, where a medical center run by the University of California, San Francisco, has attracted Pfizer and is spawning smaller biotech firms.

Finding similar synergies in the Edinburgh BioQuarter is the job of Diane Harbison. She joined the BioQuarter in November 2010 as a business development manager after 10 years in R&D and business development at Pfizer.

In contrast to their counterparts in the U.S., many of Scotland’s academic researchers don’t have experience trying to commercialize their work, Harbison acknowledges. “There hasn’t been a need to engage with industry because most researchers have been quite well funded,” she says. “But there are advantages to collaborating with industry that they maybe don’t recognize.”

Harbison and colleagues are trying to coax businesses out of the BioQuarter’s medical clinics and academic labs. Two small companies that already have launched are NeuroOrg, a consulting firm, andipSOX, a nonprofit that creates decorative covers for insulin pumps. The latter was created by health practitioners at the U.K.’s National Health Service, which according to Harbison has been particularly resistant to commercial ventures.

This month should see the start of i2eye Diagnostics, which is developing a vision analyzer for children and others who can’t provide the verbal responses required with conventional vision testing equipment. Based on technology developed at the University of Edinburgh, i2eye will have private investors, Wood says, and will be the BioQuarter’s first significant spin-off.

Also awaiting the signing of private investment deals are two other new firms: FibroMed, which offers pluripotent stem cells that create human hepatocytes for drug metabolism and toxicity research, and Edinburgh Molecular Imaging, which is developing optical imaging equipment for research and clinical diagnosis of lung cancer and other conditions.

A potential home for all these companies is the 100,000-sq-ft BioIncubator. At the moment it is being fitted out for use a few hundred feet from the medical school and infirmary. It will be ready for occupancy in February 2012. By 2016 it will be surrounded by the other institutions coming to the BioQuarter and be, development executives hope, 90% occupied.

So far, several organizations are in advanced discussions on taking space at the BioIncubator, Wood says. Interestingly, none of them are BioQuarter spin-offs. One, for example, is an Asian firm looking for a European foothold. It “decided to come here based on the strength of the colocation opportunity,” Wood says. He hopes that BioQuarter start-ups such as i2eye will set up in the incubator as well.

Today’s financing climate is not ideal for new businesses, Harbison and Wood acknowledge. And unlike some biotech clusters in the U.S. and continental Europe, the BioQuarter can’t yet point to any significant global players that have signed up or moved in.

On the other hand, as the country that produced Dolly the cloned sheep and is a world leader in regenerative medicine and stem cell research, Scotland has plenty of untapped commercial potential, Wood argues. “There’s a lot of low-hanging fruit here,” he says. “There are a lot of researchers who haven’t collaborated with industry in the past.”

For an example of close industry-academia cooperation in Scotland, BioQuarter executives can look to Glasgow, an hour’s drive to the west of Edinburgh. There, at the University of Strathclyde, a new center for continuous manufacturing and crystallization is taking shape. Involving 13 professors and 35 researchers, the center is working with GlaxoSmithKline, AstraZeneca, and other firms to move away from batch production of pharmaceuticals and other fine chemicals.

The project has its roots in a pilot study with GSK. It accelerated in February 2010 when the Scottish government awarded a team across four Scottish universities about $2 million to support 10 Ph.D. students studying continuous crystallization.

The program initially focused on continuous-process equipment developed by the Scottish firm NiTech Solutions. Then in February of this year, the U.K.’s Engineering & Physical Sciences Research Council awarded $12.5 million over five years to create the Centre for Innovative Manufacturing in Continuous Manufacturing & Crystallisation, or CMAC. The effort involves seven universities and is led by Alastair Florence, a chemistry professor at Strathclyde.

Seeing the start of something big, in July Florence and his colleagues hired Craig Johnston as operations director of CMAC. Johnston is a 22-year veteran of the Scottish chemical scene, having worked at a facility in Grangemouth, Scotland, that was established by ICI and later was owned by Zeneca, Avecia, and now Fujifilm.

CMAC launched on Oct. 1 with AstraZeneca and GSK as “tier one” members. Johnston says he is working to get other pharmaceutical, fine chemicals, academic, and technology members aboard. Already, the center has more than $20 million of committed funding from partners and public sources, and he expects to draw as much as $75 million in overall funding.

As Johnston points out, drug companies are not backing CMAC out of the goodness of their hearts. They realize that continuous processes are much more efficient than the batch processes they now use to make active pharmaceutical ingredients (APIs). At the moment, though, Genzyme claims to be the proprietor of the world’s only patented API to be made by a continuous process: sevelamer, a phosphate-binding polymer for kidney dialysis patients sold as Renagel. Genzyme, now part of Sanofi, manufactures it in Haverhill, England.

Johnston is confident that more APIs can be made via continuous processes. “The pharma guys have collectively spent hundreds of millions of dollars in this area with varying returns,” he says. CMAC’s goal is an industry-driven program bringing company researchers together with academics on a precompetitive level to advance continuous manufacturing and crystallization in a way that neither side could on its own.

Although it is a network, CMAC has a physical hub in a new building at the University of Strathclyde. In a few years it will expand into a Technology & Innovation Centre in downtown Glasgow. Now under construction with $150 million in university and Scottish government funds, the center is intended to increase cooperation between companies and academics across a range of sectors.

Scotland boasts a respected academic chemistry community, notes Jan Ramakers, a fine chemicals consultant based in East Linton, near Edinburgh. Ramakers, a Dutch citizen who has lived in Scotland for about 15 years, notes that EastChem, an alliance of the chemistry departments at the Universities of Edinburgh and St. Andrews, ranked above the better-known Universities of Cambridge and Oxford in a 2009 research assessment of U.K. institutions.

Moreover, chemistry educators at Scotland’s universities understand the need to interact with industry, Ramakers says. He points to the creation in 2008 of 31 new Ph.D. “studentships” in chemistry to work on opportunities identified by Scotland’s chemical industry. Students pursuing degrees in the program split their time between university and company labs.

In announcing the program three years ago, Chris Gilmore, a chemistry professor at the University of Glasgow who heads an alliance of seven Scottish chemistry departments known as ScotChem, said it takes industry-academia cooperation in chemistry to a new level. “I know of no similar scheme anywhere in the Western world, and it underlines Scotland’s commitment to innovation,” he said.

Although Ramakers is enthusiastic about such efforts, he cautions that no amount of state assistance or government-brokered cooperation can substitute for sound business plans. Any ideas that emerge from Scotland’s efforts to develop its life sciences sector must pass economic muster. “In the end, all these companies will have to have a sound business case,” he says. “That goes for CMAC, the BioQuarter, and anything else.”