New drugs could be hit in squeeze

Biotech firms rely on venture capital

The credit crunch is likely to hit the discovery and production of many new medicines, experts are warning.

Professor David Wield, of the government-backed Economic and Social Research Council, said investment in biotech firms was drying up.

A similar trend is emerging among medical charities with Cancer Research UK predicting a 5% fall in donations.

The financial climate also threatens to cause a row in the NHS with unions calling for a pay deal renegotiation.

The outlook is very challenging. But we will not allow it to deter us from achieving our long-term vision of beating cancer Harpal Kumar, of Cancer Research UK

The credit crunch will be top of the agenda at the two-day ESRC conference of scientists and drug industry representatives which starts in London on Monday.

Professor Wield will tell delegates that research is facing a tough period.

Last year biotech firms received £32bn of funding, but Professor Wield said such a figure will not be achieved in 2008.

The biotech industry relies heavily on venture capital firms to back risky early research in return for shares.

But such risk-taking investment has been hit by the credit crunch and Professor Wield believes this will hamper the production of new medicines.

Funding

Speaking ahead of the conference, he said: "Venture capital is very important to biotech firms.

"It is often the main source of funding in the early stages of development and, without this, biotech firms will struggle to get their projects off the ground."

"This year started well but in recent months it has started drying up. It is a real worry."

Charities have also been hit by the downturn. Cancer Research UK said it is expecting its £420m annual income to drop by 5%.

Harpal Kumar, the charity's chief executive, said: "The outlook is very challenging. But we will not allow it to deter us from achieving our long-term vision of beating cancer."

Meanwhile, unions are pushing for more money just four months after signing up to a three-year pay deal which will see salaries of nurses, midwives and a host of other professionals rise by over 8%.

The UK deal included a clause to reopen talks if economic conditions changed.

The unions believe the inflation rate, which is currently running at over 5%, justifies a return to the negotiating table.

They will now ask the NHS Pay Review Body to recall the deal - something the government is expected to resist.

Karen Jennings, chairman of the unions' negotiating team, said: "Hard-working staff accepted the deal believing government and economic predictions that inflation had peaked and would start to fall. This clearly hasn't happened."