Further written evidence from the University of Dundee (SS0031)

University of Dundee: Response to Scottish Affairs Committee Inquiry into Science and Scotland

1. LIFE SCIENCES – what makes Dundee world-class

Dundee has the oldest, and still long-lasting, partnership between industry and academia, grown around our School of Life Sciences and biomedical expertise. The idea of moving away from pre- and post-competitive research being separated, and moving towards a much more integrated approach, started in Dundee and has been absolutely key to Dundee’s success.

What differentiates us is the direct impact that our science has – the translation of research, our collaboration with industry, turning science into action.

Strategic regional investment has also supported the deliberate development of Dundee as a life sciences cluster – supporting skills development and ensuring world-class research is commercialised and able to deliver economic benefits for Dundee and Tayside.

By championing entrepreneurial researchers, and fostering great relationships with investors, we have been able to provide springboards for several companies, including high-value success stories such as Amphista Therapeutics, Tay Therapeutics, and Exscientia.

Correction: Please note the transcript of oral evidence states “For example, 80% of Exscientia, which was a £2 million spinout in 2021, is now in Cambridge because it couldn’t stay in the Tay region.” We would like to clarify that the £2.2 billion launch of Exscientia on the US NASDAQ exchange is one of the largest ever UK spinout exits.

2. PRIVATE INVESTMENT

What impact have city region deals had on private investment into the university?

£20 million funding from the Tay Cities Deal has facilitated the creation of a £40 million Life Sciences Innovation Hub where high-growth companies emanating from our world-class health and life sciences innovation and entrepreneurial expertise can be accommodated; retaining economic benefit and jobs for our technologically advanced but economically depressed region. Construction is ongoing and the Hub is due to open in late 2024.

The University also has a Tay Cities Project for “JustTECH” a project that will provide a proving ground for new technology solutions (including forensic science platforms) that will service the increasing demands of the justice and legal system(s). The £15M capital investment in JustTECH by Tay Cities Deal is forecast to create 8 new technology companies, and 150 new graduate level jobs over the term of the Tay Cities Deal

How can the UK Government incentivise private investment both within city region deals and separate from them?

The UK Government can incentivise private investment in two ways:

• First, by providing a non-dilutive public sector investment in the form of a pan-Scottish “Innovation to Investable Asset” fund or instrument. This would aid the commercialisation of Scottish universities’ and research institutes’ Health and Life Sciences opportunities enormously. It would provide the key proof-of-concept and/or business intelligence work demanded by major private Life Sciences Venture Capital investors before they commit to Seed (circa. £2-8 million) and then Series A (circa. £5-20 million) investment to create high-growth companies. A huge amount of Scottish Health and Life Sciences IP, arising from the >£500 million pa of competitively won biology and medicine research grants, is not exploited, or not exploited in a timely-enough fashion due to the absence of suitable translational funding. The return on an additional 1% (£5 million pa) of UK public sector investment would be >40X (>£200 million pa in private sector investment in relevant opportunities), giving rise to >200 new jobs each year.  
• Second, by supporting (co-investing) with private sector Life Sciences real estate experts in the creation of follow-on space for successful (series B and beyond) Health & Life Sciences companies as they outgrow and exit incubator facilities like the Dundee Innovation Hub, Edinburgh BioQuarter, Aberdeen ONE BioHub, BioCity Glasgow at around 40 FTEs per company. Without this, companies are at risk of leaving Scotland, and likely leaving the UK,long-term.

Both of these actions would be a huge incentive to private sector investment and would leverage City Deal assets and Scottish HEI innovation. This is, perhaps, an opportunity for the Scottish National Investment Bank to be true to its name – at present in our opinion SNIB struggles to invest its funds due to insufficient high-growth potential companies requiring investment in SNIB’s areas of interest (£5M-£20M in SNIB’s stated fields of interest).

What is the University doing to connect with industry and what can the Government do to help?

The University of Dundee has an outstanding track record of industry engagement, particularly in the area of drug discovery:

• Dundee is home to the longest (>25 years) and one of the largest (>£60 million of industry inward investment) Pharmaceutical company-academia collaborations in the world. This pre-competitive collaboration in Signal Transduction has involved the Pharma giants Astra-Zeneca, Boehringer-Ingelheim, GSK, Merck Kga, Merck Sharpe and Dohme and Pfizer.
• Dundee has the largest academic Drug Discovery Unit in the world, founded in 2006, successfully delivering drug candidates for neglected infectious diseases (malaria, leishmaniasis, Chagas disease, tuberculosis) and de-risking innovation in oncology and neurodegeneration. Industry partners include Amgen, Astra-Zeneca, Eisai, GSK, Pfizer, Takeda.
• Dundee has the only Centre for Targeted Protein Degradation (CeTPD) in Europe. This new drug modality is revolutionising the Pharma industry. Major Pharma companies including Boehringer-Ingelheim, Eisai and Almirall are not only collaborating with the CeTPD but are embedding research teams within it.

In addition, Dundee is rated 1st in the UK for spin-out success (Octopus Ventures 2023 Gateways to Growth report). Its 2012 spin-out Exscientia (the world’s first AI drug design company) underwent Europe’s largest biotechnology IPO in 2021 ($510 million) and now employs 500 people. Its 2018 spin-out Amphista Therapeutics underwent one of the largest series B rounds in 2021 (US $53M) and currently employs over 75. Retention of such companies is an issue because of, historically, lack of incubator space and a lack of follow-on space.

The Government can help by:

• First, recognising, and incentivising HEI industrial collaborations as an important form of inward investment and, in many cases, foreign direct investment into the UK.
• Second, recognising place-based needs to stimulate growth in the specific sectors they excel in and working with them to stimulate regional economic growth with appropriate interventions. For example, using the current DSIT “heat-mapping exercise” to identify the Tay Cities Region as a significant cluster of world-leading expertise in biological sciences that has the potential to address goals of the UK Government’s Life Sciences Strategy and the Scottish Government’s Innovation Strategy (Health & Life Sciences Cluster).
• Third, at the risk of repetition, the provision of a nationwide proof-of-concept type fund, allocated competitively to help us advance promising research results and IP towards investible assets.

3. SPINOUT SUCCESS

What support can the UK Government give to facilitate and scale up spinouts?

Dundee has been the top-ranked UK university in Biological Sciences for the past two REF exercises and was earlier this year named as the top university in the UK for supporting spin-out success this year (Octopus Ventures). This contributes to the University’s independently-assessed economic impact of £975 million GVA and 9,410 jobs in Scotland.

The £2.2 billion valuation upon the launch of Exscientia, a Dundee spin-out company on the US NASDAQ exchange is one of the largest ever UK spinout exits.

Despite this, a lack of infrastructure capable of housing spin-out companies generated from the University’s stellar life sciences research activity has meant the city has struggled to retain the firms it birthed. Policy decisions have missed opportunities to support the development of the Dundee Health & Life Sciences pipeline and nascent cluster (with Dundee having missed Investment Zone status via the [totally non-transparent] allocation of Investment Zones in Scotland and failure to secure Levelling Up Fund funding in any of rounds 1, 2 and 3.

As a result of the lack of infrastructure, 80% of Exscientia is now located outside Scotland. Amphista Therapeutics, identified by the UK Government as a ‘futurecorn’ was lost to Dundee due to a shortage of available development space and is now located in Cambridge with 75 high value jobs and growing.

The creation of the Tay Cities Life Sciences Innovation Hub is the catalyst to unlocking the full potential that a broader Life Sciences Innovation District will deliver for the local economy and beyond. These companies – allied to the world-leading researchers at the University – will make a positive difference to the health and wellbeing of millions of people across the globe.

We need UK Government to do several things to help unlock this potential:

• Explicitly recognising Dundee as a Health & Life Sciences cluster, as part of DSIT’s UK-wide mapping exercise currently underway – something that we would be keen to support as indicated during the visit;
• Supporting a strong narrative to DLUHC that a Health & Life Sciences cluster based around Dundee/Tay Cities would be a strong deliverer of the goals of future Levelling-up Fund, Investment Zones etc;
• Providing the opportunity for Dundee to compete on a level playing field for future place-based innovation initiatives of DSIT;
• As part of the UK Government response to the Spin-out Review, to commit to an early stage translational funding mechanism (Proof of Concept type fund) that is available UK-wide to advance early stage technologies in life sciences towards investable proposition. Dundee would be delighted to act as a pilot region if this was possible;
• Working with devolved Governments and their funding agencies to promote Connected Capabilities Fund analogues in the devolved nations, to help join up outstanding capabilities for accelerated economic and societal benefits.

For example, there is a wide disparity when it comes to the funding available to Scottish and English universities for innovation and knowledge exchange. Whilst it has been pleasing to see the SFC’s University Innovation Fund (UIF) grow by 21.5% in cash terms between 2014-15 and 2023-24, increasing from 6.9% to 8.5% of the total for REG, this contrasts significantly with innovation funding available in England. Research England’s Higher Education Innovation Fund (HEIF) has increased by 76.5% in cash terms over this period, and remains at a much higher level relative to QR (18% in 2022-23).

This means that core funding for innovation and commercialisation lags in Scotland.

What private investment is needed? And what is the Government’s role in this process?

We need private investment to do two things:

• We need private risk investment into early stage technology companies, with a particular emphasis on Health & Life Sciences companies. This needs investors to be prepared to contemplate investing beyond the South-East of England which in turn requires the UK Government to promote actively the potential afforded by other regions of the UK, in line with Levelling-up rhetoric, rather than doubling down on a SE-centric narrative. Dundee works incredibly hard to engage all levels of private investment in our opportunities from regional business angel networks to global life sciences VC Firms. We need Government to work with us rather than against us in this respect;
• We need private sector specialist property developers such as Kadans Science Partner, Pioneer Group etc to be convinced that investment in science and technology incubation facilities in UK Regions and Nations away from the SE of England is worthwhile based on the support that businesses formed there will receive. Again, we need Government to work towards this goal rather than against it. We would not underestimate the power of reginal tax reliefs such as those offered via Investment Zones in this respect i.e. it is not all about demanding more UKG £££ direct investment in regional infrastructure projects. We think we have a compelling story and that is proven by the private sector interest we already have but we need to be able to compete on a level playing field with other areas that may already have such relies and incentives in place. 

December 2023