If Scotland were a US state its biotechnology community would rank seventh in the United States in terms of number of companies, according to Ernst & Young's Millennium Report on Life Sciences. An impressive achievement for a country which, some 20 years ago, had only just begun to realise the opportunities that biotech had to offer. However, with less than 10 per cent of the UK population, Scotland produces more than 13 per cent of Britain's biotech-related graduates, and over 17 per cent of first degrees in medicine. So, when it comes to biotech, Scotland has always thought much bigger than its borders.

Biotech in Scotland can be traced back to the 15th century when the world's first department of medicine was created at Aberdeen University. Ever since then Scots have pioneered many of the major milestones in the history of biotechnology. And that spirit of innovation is still thriving and growing today. Professor David Lane won the Paul Erlich award for the discovery of the p53 gene; more recently Ian Wilmut of the Roslin Institute gave us Dolly the Sheep; and Sir Philip Cohen of the University of Dundee is regarded as one of the most respected cancer specialists in the world today.

The importance of biotechnology to Scotland's future prosperity is now firmly recognised with organisations such as Scottish Enterprise, the country's leading economic development agency, forming a specialist biotechnology group to encourage and accelerate growth.

And growing it most definitely is. The number of new companies in Scotland is increasing at an annual rate of 30 per cent, double the equivalent figure for Europe as a whole. There are now 382 organisations in the Scottish biotech cluster, including 90 or so medical device companies, and the number of people in biotech-related employment is almost 18,500 - and rising.

Peter Lennox, director of biotechnology at Scottish Enterprise, says that Scotland's maturing biotech community is demonstrating a buoyancy and dynamism that will propel the sector into the major league. He continues: “But much work remains to be done. For example the post-genomic era has accelerated demand for computation and analysis and Scotland must put in place the skills and infrastructure to ensure it can compete on a global level.”

At a regional level, networking groups such as Edinburgh Bio-Alliance and Bio-Dundee are providing crucial support, creating marketing opportunities and advisory services for the life science organisations in their areas.

Mark Davison, chief executive of Edinburgh Bio-Alliance, says: “By providing cost-effective, shared services for small and start-up companies - for example in sales and marketing - as well as by promoting networking both locally and internationally, we aim to increase the profitability (or decrease the time to break-even) of member companies.” An indication of biotech's growing prominence in the wider business community can be seen from the popularity of a series of seminars aimed at people from a non-scientific background. The brainchild of Edinburgh Bio-Alliance and technology consultancy Syntec, participants included lawyers, fund managers, business advisors and marketers, all wanting to understand more about the business opportunities that a flourishing biotech sector is bringing to Scotland.

Scotland's reputation for leading edge biotech has been underlined with the decision of the BioIndustry Association (BIA), which represents about 300 companies throughout the UK, to merge with the Scottish BioNetwork Association and set up its first office outside London in Scotland under the banner BIA (Scotland). One of its first tasks will be to focus activity on the Scottish Parliament in Edinburgh.

Simon Best, a Scotland-based board member of the BIA, says: “This merger is a really positive step for both organisations and their members. On a national scale we can have greater political influence across the UK, and at a corporate level members gain access to a broader network of biotechnology companies. The new BIA (Scotland) office underlines the importance of the Scottish biotechnology industry which is in good health and growing.”

Another pointer to Scotland's growing prominence in the sector can be seen at Dundee University, which continues to consolidate its status as a leading life sciences research institution. Over the past year, several senior researchers have relocated to Dundee from Cambridge (UK), Oxford (UK), and Vienna (Austria). External research income per staff member is now the highest in the UK.

And this level of investment extends to the pharmaceutical industry. Kim Fellows, Scotland director of The Association of the British Pharmaceutical Industry (ABPI), says: “More than 20 per cent of all money spent on clinical research in the UK is spent in Scotland, which makes it a leading international player in the pharmaceutical industry. The country is home to a great diversity of companies, who have already made and are continuing to make an enormous contribution in steering Scotland's enterprise economy.” The ABPI represents more than 80 UK pharmaceutical companies and recently opened a Scottish office in Edinburgh.

Scotland is also working to increase understanding of life sciences among young people. This month sees the distribution of the biotech magazine Your World, to every secondary school in Scotland, with a wraparound section profiling some of the Scottish scientists working in the field today. Teachers' notes have been prepared to augment existing teaching materials. As the new kid on the science block, textbooks teaching modern biotechnology are still thin in the ground.

The Medical Device Institute in Scotland, launched in October 2000, is already stimulating collaboration amongst Scotland's medical device companies, health organisations and universities. A formal business plan, due to be presented in April, is seeking funding from local enterprise company, Scottish Enterprise Lanarkshire, which would provide a further two years' funding. Organizer Gillian McIntosh says: “The Institute will handle enquiries from within and outwith Scotland, arrange events, organize training, and stimulate the commercialisation of new ideas.”

Strong US links

The biotech community has delivered several landmark achievements following the launch in November 1999 of a four-year strategy to double the size of the Scottish cluster. In particular, the nation's relationship with the United States has generated a number of exciting business opportunities including an alliance with the US State of Maryland which has already generated deals for Scottish companies worth over £1.5m. Other Scottish-US collaborations include the Roslin Institute teaming up with Viragen to develop an antibody to skin cancer within a chicken egg that will allow the mass product of protein drugs for patient treatments. And Dundee-based Axis-Shield, Scotland's largest biotech company, has signed its first marketing agreement on a new test for Alzheimer's with California-based ICN Biomedicals.

In February Scottish contract Research Company, Inveresk Research, announced plans for a £78m take-over of its US rival, ClinTrials, which will see it almost triple in size. The company will add more than £72m in annual revenues, and staff numbers will rise from 800 to 2300. Both firms carry out contract research for large drug groups.

ClinTrials, based in North Carolina, primarily serves US drug firms seeking US Food and Drug Administration approvals, while Inveresk has traditionally focused on obtaining regulatory clearances in Europe.

Stronger Infrastructure

Scotland is investing in significant infrastructure to support biotech's future development. Outside Edinburgh, adjacent to the Pentland Science Park, the construction of Scotland's first bio-manufacturing park begins this summer. Jointly funded by Midlothian Council and Scottish Enterprise Edinburgh and Lothian, the site is expected to create up to 900 jobs.

Liam Fennell, biotechnology team leader, says: “Manufacturing is a major issue for the sector and there is a global shortage of manufacturing facilities. We believe Edinburgh could be one of the UK's best centres for manufacturing.”

Another first for Scotland this year was the opening of a new £3m research Centre for Biophotonics at the University of Strathclyde in Glasgow, which aims to position Scotland at the forefront of biomedical science. The Centre is the first in the world to marry the expertise of biology, pharmacology and physics, using laser-based imaging technology. Its work will involve close collaboration with pharmaceutical and medical companies to develop novel drugs, new technology and diagnostic equipment. Staying in Glasgow, the West of Scotland Science Park is home to the Kyorin Scotland Research Laboratory, part of a £5.2m research and development deal between the Japanese Kyorin Pharmaceutical Company and Scottish Biomedical, the university-owned medical research company which specialises in finding commercial outlets for scientific research. The new lab aims to create novel compounds for the treatment of allergies and diseases of the immune system.

And on the east coast Quintiles Transnational Corp opened its Japan Pharma Centre in Edinburgh. The first of its kind in Europe, the Centre provides Japanese pharma companies with the services they need to successfully enter the European market. Based on an 'in-country caretaker' model, Quintiles aims to help Japanese pharma companies achieve their business goals in Europe with minimal bricks and mortar investment. Moving up to Dundee, the Dundee Medipark, a joint venture between Scottish Enterprise and Tayside University Hospitals Trust to provide accommodation for life science companies on the campus of the Ninewells Teaching Hospital, has made significant progress. The first building, a 14,000 sq ft laboratory block, is almost complete and is likely to be fully let immediately. Two bespoke buildings for spin-outs from the Medical School are close to starting on site, and two more multi-occupancy buildings are at the design stage.

Show me the money

The dotcom boom initially had a positive impact on biotech as everyone suddenly woke up to the value of technology. However, Mark Kerr, head of biotechnology at leading venture capitalists, 3i, says that while the well-documented demise of the dotcom sector has affected every technology business it has also underlined the importance of intellectual property in a business: “and most people recognise that biotech businesses have that in spades whilst most dotcoms did not”.

Kerr has seen a significant increase in biotech venture capital investment and cites the genomics revolution for fuelling higher interest in biotech, bringing them closer to the top of VCs' wish lists. “The recognition that biotech companies can reach profitability - Celltech is a good example - has also helped increase the perceived credibility of these stocks. And, while public markets have come off considerably over the last nine months, the investment community now recognises the long-term fundamentals of biotech. “Investors are more selective than they were 18 months ago,” says Kerr. “The market has softened over the last six months, with investors looking for companies with more depth or which are closer to having products on the market. However, successful fund raisings in Scotland for the likes of Strakan, Voxar, Scottish Medicine, YAbA and Tayside Flow all point to a very healthy appetite for quality healthcare and biotech businesses in Scotland”.

Kerr points out that there is significant disparity in Scotland between the quality of the science and the scientific resource (about 20 per cent of UK life science graduates) with the success/maturity of commercialization (Scottish quoted healthcare represents less than 2 per cent of UK quoted healthcare (excluding Glaxo and other non UK-based quoted companies). “This lack of maturity unfortunately means there is a dearth of experienced quality management”.

“The failures of Scotia and Rosgen have undoubtedly had a dampening effect on confidence but the community appreciates the reasons why they didn't make it - respectively dependence on one product, and lack of intellectual property and market timing.”

There was good news for Scottish universities in March with the announcement that they are to share in a new £90m fund to develop drug treatments and advanced technologies. The joint venture between the UK and Scottish governments aims to boost Scotland's position in life science research. The Scottish Science Research Fund will be distributed over the next three years and universities will have a great deal of freedom to follow their own investment strategies. Confirming the cash injection, Wendy Alexander, Scotland's enterprise and lifelong learning minister, said: “The top universities that I recently visited in America knew of the great research we had locked up in our universities, but they urged us to improve our ability to get those ideas out of the labs and into our industries.”

Some Company Highlights

Ardana Bioscience, a bio-pharmaceutical company dedicated to women's reproductive health, was arguably the highest profile new start up in Scotland last year, thanks to the reputation of chief executive officer Simon Best, formerly managing director of Geron Biomed. The company will commercialise research from the Medical Research Council's Human Reproductive Sciences Unit in Edinburgh, recognised as a world-leading centre for the study of reproductive health. Under the terms of the agreement, Ardana has options to commercialise technologies emerging from certain key areas of the Unit's research over the next five years.

Simon Best said: “Women's health is an under-served market estimated to be worth in excess of $8bn (£5.47bn). We'll be working on more convenient and better tolerated contraceptives, novel treatments for gynaecological disorders, innovative obstetric products and anti-infectives. We aim to have at least two products into human clinical trails and establish several product development collaborations within two years.” PanTherix, which is making important advances in the fight against superbugs, has secured second round funding of up to £10.25m. The cash was raised from a number of new venture capital and private investors, as well as its existing shareholder, The Merlin Fund LP. The investment was co-led by MB Venture Capital and Scottish Equity Partners, and also includes Merlin Biosciences and Hamilton Portfolio. Although at an early stage in the therapy's development, it is hoped that, within three years, PanTherix will progress to clinical trials of a drug, which will form a new weapon in the armoury against drug resistant bacteria. Chief executive Cameron Macdonald predicts that his workforce will almost double within the next year, rising to 120 employees by 2003. Rhone Diagnostics Technologies, also based at the West of Scotland Science Park, is blazing a trail across the globe, supplying mycotoxin testing kits to 50 different countries. Mycotoxins in every day foods have been identified as one cause of various cancers. The Food Standards Agency-led legislation in the UK means that all food producers using mycotoxin- sensitive ingredients must test their products to ensure levels in consumable foods remain very low.

Autogenics, the company behind revolutionary heart valve technology, is working towards human clinical trials of a unique, life-saving device. It has designed a state-of-the-art heart valve which uses tissue from the patient's own body and significantly reduces the risk of rejection. Company representatives recently targeted potential investors in the USA in the hope of attracting the $12 million (£8.2m) it needs to embark on human clinical trials this summer and take the company through to profitability in around 2005.

Cyclacel Ltd, one of the most exciting young UK biotech companies, has moved into a new 40,000 sq ft HQ/R&D Centre in Dundee, strengthening the management team with the appointment of Robert Jackson (formerly with Chiroscience) as R&D Director. The company recently started clinical trials for its lead anti-cancer compound, CYC202, which works by imitating naturally occurring tumour suppressor genes that cause cancer cells to self-destruct. The move marks the start of a series of drug trials that the company hope will produce a flow of new drug products.

Aberdeen-based environmental biotechnology company, Remedios, was voted by its industry peers Best New Biotechnology Company 2000. Formed in August 1999 as a spin-out from the University of Aberdeen, the company uses biosensor technology to diagnose contaminated land and provide solutions for its clean up. Demand for its services is already generating substantial business in the UK and Europe. (BIO-WISE, a major UK Government Programme which offers free, independent advice to industry on biotechnology and its uses, has produced a free publication, 'Contaminated Land Remediation: A Review of Biological Technology' which weighs up the pros and cons and assesses the costs involved.)

PPL Therapeutics, based at Roslin, outside Edinburgh, has sold an 8.5 per cent stake in the company to Bayer for some £10 million. The move will allow PPL to progress the construction of a £42m manufacturing facility for its lead product, rAAT, which can be used for the treatment of hereditary emphysema and cystic fibrosis. The two companies first agreed to collaborate on the development of rAAT in August 2000.

YAbA Ltd, a company that develops diagnostic kits for the human and veterinary markets, has big plans for 2001. YAbA secured second round funding in September 2000 from a number of investors including 3i, Scottish Equity Partners, Lion Capital (London), Hansol Chemience (Korea), Pro-Seed Capital Holdings (Belgium), Eastern Scotland Investments and the Scotland-based Braveheart Ventures Ltd. The cash will allow YAbA to push forward with its work on synthetic peptides and their use, not only as supremely specific diagnostic reagents for the detection of antibodies produced during disease but also, in a reverse manner, as vaccine antigens for diseases such as genital chlamydiosis. The company aims to produce interim reports on this work by the summer.

Edinburgh-BioComputing Ltd (EBS), which was formed by a group of molecular biologists and computer experts from Edinburgh University, develops sophisticated DNA/protein sequence database searching tools and has just introduced the latest version of its groundbreaking MPSRCHTM product. For the first time, supercomputer performance is achieved with affordable desktop hardware. The company recently relocated to the Roslin BioCentre.