Biotechnology entrepreneur Chris Evans has warned that a fizzling out of the City's enthusiasm for science-based companies could slash the value of established biotechnology companies and new spin-off ventures from universities.
Professor Evans, a former academic who has set up a string of biotechnology firms and a venture capital company, said that poor performance and drug programme failures among certain firms over the past two years account in part for the lack of enthusiasm. And there are growing fears of a big economic downturn.
"If the climate for the sector continues to decline, then future flotations and rights issues by biotechnology firms will either stall, be cancelled or go ahead at half, or even 75 per cent discounts on the sorts of valuations we saw in 1996-97," said Professor Evans.
Large financial institutions are cautious about the biotechnology sector, choosing to retain their funds and wait for the market to bottom out so they can pick up shares or even whole companies at bargain prices.
"This waiting game means life is tough for small and large private biotechnology companies wanting cash for investment programmes, and extremely tough for those starting up," he said.
Professor Evans said the gap between university expectations of spin-offs and the market's assessment is illustrated by the way institutions value their firms, discoveries and patents.
"They all do it by comparison - there is no accurate way of valuing a start-up and so everyone always refers to what Professor Lucky Joe got when he started say in 1995, 1996 or 1997. Well, it's 1998, soon 1999 and it's tough and different out there."
Professor Evans warned that firms with a good portfolio of products in the pipeline could end up "lying naked in the street for venture capitalists to buy them up cheap". He wants the sector to club together to encourage city institutions to open their vaults to invest in the firms.
And he said academic entrepreneurs must not give up or the United Kingdom biotechnology scene could grind to a halt. "For high-quality science projects, there is plenty of cash around but everyone must be realistic."