Another sign of the troubling economic times and its impact on the life-science sector comes from the United Kindgom, where industry representatives are requesting government assistance, according to a Times of London article.

According to the report, several biotechnology industry leaders, including the investor Christopher Evans and Chris Collins, chief executive of the investment bank Nomura Code Securities, have written to the prime minister and Lord Mandelson, UK’s business secretary, asking for £500 million ($730 million) in assistance to set up one fund for that amount, and then a second fund for the same amount from venture capitalists and other investors.

One fund would be used for consolidating the sector’s smaller companies, with grants of between £10 million ($15 million) and £40 million ($58 million). The other fund would give UK’s larger, more successful biotechnology companies up to £100 million ($146 million) to buy other assets and to fund clinical trials, according to the report.

Does such a move in the UK portend what may eventually happen in the US? Although the UK’s biotechnology sector is much smaller than the US’s, they share the same weakening fundamentals caused by the global financial crisis.

US-based companies accounted for $65.2 billion or 76.9% of global revenues of publicly traded biotechnology companies in 2007, according to an Ernst & Young report. European companies recorded revenues of $12.9 billion, or 15.3% of the global total. Biotech companies from Asia-Pacific accounted for nearly $4 billion in revenues, or 4.7% of the global total, and Canadian companies recorded revenues of $2.7 billion, or 3.1% of the global total.

The large biotech companies should be able to weather the current financial problems and the volatility of the markets as a whole, but small-cap biotech firms are at peril. Consider some recent statistics from industry indices. The Burrill Small Cap Biotech Index dropped 13% in November 2008 and 34% since the end of September 2008. Among the 370 publicly-listed biotechnology companies tracked by the monthly Burrill Biotechnology Report, 54% have a market capitalization well below $100 million.

But publicly traded companies account for only a portion of the global biotechnology industry. On a global basis, there were 4414 private and public biotech companies in 2007, and roughly 82% of these were private companies, according to Ernst & Young estimates. The lifeblood of these private firms is private investment, and the flow of financing into and the liquidity of these private biotechnology firms are at risk during the current global financial crisis.

With the US government facing bailout fatigue and the appetite of the public and government officials for direct government assistance fading, it would seem unlikely that a specific plan to assist the life-science sector in the US would be forthcoming. Instead, monetary and fiscal policies and current government assistance to the banking sector to improve the economy and restore investor confidence would seem to be the likely remedy for the troubling times facing the biotechnology sector.

But with that remedy, the real casualty, and at a cost yet to be determined, will be pharmaceutical research and the loss of potentially promising drug candidates and classes of drugs.

Is weathering the financial storm the best public policy or should more pre-emptive measures be taken for the biotechnology sector? That is the question, but what is the answer?