Simon Best, the founder of biotech company Ardana, which plunged into administration last week, used to work as tour manager for the 1980s pop group the Human League.
It may not seem the ideal training ground for running a biotechnology start-up. However, as administrators from Ernst & Young last week effectively relieved Simon Best and his boardroom colleagues of their management responsibilities, the Human League’s 1981 number one hit Don’t You Want Me must have been resounding in Best’s ears.
At the time of its stock market debut in March 2005, Ardana was one of the great white hopes of Scotland’s emerging biotechnology cluster. Stock-market investors, spurred on by the then bull market, had started to warm to biotech companies once again.
Indeed the flotation galvanised several other European life sciences companies into tapping the stock markets to help fund their development. Around the same time, three other Scottish biotech companies — ProStrakan, Idmos and Stem Cell Sciences — pulled off IPOs of their own. However, since the credit crunch took effect last August, investors have been shunning early-stage biotech companies like the plague as part of a wider “flight to safety”. This has been compounded by what industry insiders believe is a more cautious approach from the US Food & Drug Administration.
The best that can now be hoped for Ardana is that aspects of its drug development pipeline will be sold off, probably at fire-sale prices, to other biopharma players. The product likely to attract the most interest is Teverelix, which, among other things, is intended as a treatment for prostate cancer.
Whether Ardana was the victim of bad management, or simply the fact that investors are looking for more reliable returns than are obtainable from biotech start-ups whose products remain untried is a moot point.
Having already burnt its way through £43m of venture capital funding, Ardana raised a further £18m at its 2005 flotation. However, even this was not enough to see it through to profitability and it was forced to start scaling back its clinical development activities last year. With just £6m left in the kitty in February the firm admitted it was running out of cash and said it was looking for a merger partner.
The company also had run-ins with corporate governance watchdogs who questioned the independence of board members and of committees on its board. They did not like the fact that Best had stepped up from chief executive to chairman ahead of the float.
Unfortunately for Ardana, whose initial research was spun out from Edinburgh University’s human reproductive sciences unit, no merger partner could be found and the company has now joined the ranks of other failed biotech firms such as Scotia Holdings, PPL Therapeutics and Idmos in that great biotechnology cluster in the sky.
This series of calamities, coupled with the departure of Stem Cell Sciences to Cambridge, calls into question Scotland’s ambitious goal of creating a biotech cluster to rival that of Cambridge, England and Boston, Massachusetts. It leaves Johnson & Johnson subsidiary Lifescan, Dundee’s Axis-Shield, Galashiels-based ProStrakan and a few other survivors with a lot to prove.
Legal connection
News that Dickson Minto, probably Scotland’s most successful law firm, has formed a “strategic alliance” with New York-based legal powerhouse Wilkie Farr & Gallagher should come as no surprise. There have been rumours of on-off merger talks between the two firms for several months.
However, the deal announced last week does raise questions over the long-term independence of Edinburgh and London-based Dickson Minto, which has about 70 lawyers and annual revenues of £31m. American Lawyer believes the deal may end in a full-scale merger of the two firms, which might suit DM co-founder Alistair Dickson, who, at 58, is apparently looking at his exit options. However, it is unlikely to suit everyone at Dickson Minto.
A better back office
Despite the best efforts of Labour-led administrations to transform Scotland into a global centre for “back office” financial services work, the country is doing badly at gaining recognition as a desirable location for carrying out such work.
A survey published by consultancy AT Kearney, the Global Services Location index, ranks the UK (including Scotland) at 43rd in the world as a base for offshoring and outsourcing activities — behind places such as India, China, Slovakia, Jordan, Vietnam, Sri Lanka and Jamaica.
However, Andrew Rigby, an expert in the field, who is now a partner at law firm Brodies, sees this as a chance for Scotland to raise its game. He believes one solution might be for the Scottish government to take a more joined-up approach to what has become a massive global market.
As Rigby has already advised the governments of the Cayman Islands and Argentina on boosting their status as business processing outsourcing centres, the government should give him a hearing.
This Scottish Agenda column was published in the Sunday Times on 6 July 2008
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