British biotech has become the latest industry to plead for a government bailout as a result of the credit crisis.

A host of high-profile names in the sector, including Sir Christopher Evans, the biotech investor, and Chris Collins, chief executive of Nomura Code Securities, have written to the Prime Minister and Lord Mandelson, the Business Secretary, asking for £500 million to stop the sector from imploding. The plan was first disclosed by The Times in September.

They propose setting up two funds, one with £500 million from the Government and the second for the same amount from venture capitalists and other sector investors, to help to restructure the struggling industry, which employs about 15,000 people in the UK.

One fund would be earmarked for consolidation between the sector's smaller companies, with grants of between £10 million and £40 million. The other would give the UK's larger, more successful biotechs up to £100 million to buy other assets and to fund clinical trials.

The group suggested that applicants would have to pass through three levels of an application process before receiving funding, with the ultimate say in allocation of funds resting with a committee composed of industry figures and government officials.

Sir Christopher said: “If the Government does not do something soon a host of companies will fail. 2009 will be a critical year to shape the industry for the future. If there is a potential for conflict of interest, people can leave the room.”

The UK biotech sector, formerly second only to the United States, could slip to fourth or fifth within a couple of years if the Government does not intervene, the industry group said. For small companies, the option of raising money through a flotation has dried up with the credit crisis.

Small UK biotechs typically raise enough funds to run their companies and conduct trials on their medicines for between 18 months and two years at a time and many of them are now approaching the point where they will run out of cash.

While big pharmaceutical companies often snap up promising drugs to help their own pipelines through in-licensing deals, they usually wait until the drug has been through two rounds of clinical trials, which take millions of pounds to set up and fund.

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