By Suzanne Elvidge
While the United Kingdom is only the fifth largest country in Europe (in terms of population), its biopharmaceutical industry has a significant input into worldwide R&D. According to the Association of the British Pharmaceutical Industry (ABPI), about a fifth of the top medications prescribed globally originate in the UK. The UK government has made a significant number of changes in order to maintain the country’s place as one of the leading locations for biopharmaceutical research and innovation.
In 2009, there were 777 biotech, small pharma, and service companies in the UK developing or manufacturing biologics and small molecule drugs or supporting this sector, according to the UK government. These companies had an annual turnover of £4.2 billion ($6.6 billion) — this translates into 9% of the global turnover and 30% of the European turnover in the sector. The UK biotech and small pharma companies represented the biggest R&D pipeline in Europe, having 447 products in development, with around 250 of these in discovery or preclinical development. In 2006, the UK biotech and small pharma companies employed 24,000 people — this was around 25% of Europe’s total employment in this sector.
UK Research And Innovation
The UK is one of the innovation leaders according to the European Innovation Scoreboard 2008, with innovation performance above the EU average. Lord Darzi, parliamentary undersecretary of state at the UK Department of Health, in his review of the National Health Service (NHS), “High Quality Care for All,” encourages innovation. This includes the development of Health Innovation and Education Clusters (HIECs), which will bring together the NHS, business, and academia.
The Bioscience Innovation & Growth Team (BIGT), drawn from bioscience companies, government departments, trade associations, universities, and research bodies, said that the UK is a world leader in stem cell research and regenerative medicine. The government, through its RegenMed Program, is investing £21.5 million ($33.6 million) in companies focusing on regenerative medicine. An initial £4.5 million ($7 million) will go to UK-based companies to fund business-led projects. The remaining £17.5 million ($27.3 million) will go to longer projects in 2010 and 2011.
UK Life Sciences Hubs
The UK has a number of life sciences hubs. The East of England, which includes Cambridge, has the largest concentration of R&D engineers per capita in the country, according to the UKTI (UK Trade & Investment), and won 105 investment projects from overseas in 2008/2009. Other key areas of activity include London and the South East, Scotland, and the North West. These areas include 74% of the biotech and small pharma companies in the UK, employ 73% of the people in the sector, and account for 87% of the turnover.
In January 2010, the UK government announced plans for a Life Sciences Super Cluster, bringing together academia, industry, and the NHS to work on early- stage clinical development and experimental medicine. This will be based around “Therapeutic Capability Clusters,” which will include NHS and academic centers of excellence. The therapeutic clusters will provide a critical mass of skills and patient populations within an existing infrastructure, creating a single point of contact for industry.
The pilot cluster will be operational by mid-2010. This will focus on immunology and inflammation, including asthma and rheumatoid arthritis. The project will be funded by £1 million ($1.6 million) from the UK government’s Strategic Investment Fund (SIF).
“The idea behind the Super Cluster is to link up organizations through expertise rather than geography — and since the UK is a small country, this idea gives us an advantage,” says Joseph Wildy, joint head of external relations at the BioIndustry Association (BIA).
Pricing And Market Access
There are a number of schemes that will improve market access in the UK for companies, allowing earlier launch for drugs and supporting research. The Pharmaceutical Pricing Regulation Scheme (PPRS) is a voluntary agreement between the UK government and pharmaceutical companies. It aims to secure the provision of reasonably priced, safe, and effective medicines for the NHS and promote a profitable pharmaceutical industry.
Following a review by the Office of Fair Trading (OFT), a new version of the PPRS came into effect in January 2009, including flexible pricing and patient access schemes. Flexible pricing recognizes that the initial indication of a medicine and its supporting evidence may not fully reflect the longer-term value to patients and allows companies to increase (or decrease) the price as new evidence or indications emerge. Patient access schemes, also known as risk-sharing schemes, are intended to facilitate earlier patient access to medicines that are not initially deemed to be cost- and clinically effective by NICE (National Institute for Clinical Excellence). “Patient access schemes do appear to provide a way of improving access to innovative medicines,” says Timothy Fitzgerald, CEO, Bridgehead International.
The government has also created an Innovation Pass scheme, which will allow drugs developed for limited patient populations to reach the market before NICE approval, allowing the company time to collect cost-effectiveness data. The pilot scheme has a budget of £25 million ($39 million) and will begin in 2010 or 2011.
Protecting Revenue: The ‘Patent Box’
In December 2009, the UK Chancellor Alastair Darling proposed a “Patent Box” scheme. This would create a lower 10% corporation tax for income based on UK-derived patents. It will come into effect from April 2013 and should promote R&D in the UK, both internally from UK companies and through encouraging inward investment from non-UK companies.
The Patent Box scheme has already started to have an impact, with GlaxoSmithKline looking to make around £500 million ($780.7 million) of further investment in the UK, including a state-of-the-art biopharmaceutical manufacturing plant in the UK. The company also has committed to investing in its Hertfordshire facility for the manufacture of next-generation respiratory medicines.
“The Patent Box is exactly the sort of active, long-term, and creative support that we need from the government to ensure that the UK remains an attractive place for highly skilled sectors such as pharmaceuticals. For GSK, assuming the new regime will apply to patents currently under development, it will have the immediate impact of making the UK a priority area for future investments, particularly in manufacturing,” says Andrew Witty, CEO of GlaxoSmithKline. AstraZeneca also has said it will review its global investments following the announcement of the plans.
BIA’s Wildy adds, “We believe the Patent Box will have a significant effect, both for companies already carrying out R&D in the UK and for those considering investing here. For existing companies, it will mean that they can retain more of their revenue to invest back into research, and for investors, it will make their money work harder. It could encourage companies to retain UK facilities following mergers and acquisitions and also encourage companies to invest in research in the UK.”
The Funding Climate
The business funding model in the UK, as elsewhere, has traditionally been based on seed funding for start-up companies, venture capital as the company grows, and then flotation on the stock market. As funding has become harder to find, the UK government is looking to provide support.
“There was rapid growth in biotech in the UK in the 1990s, and this has slowed over the past five years or so as venture capital money has dried up. The government has schemes such as Venture Capital Trusts [VCTs] and the Enterprise Investment Scheme [EIS], which encourage venture capital investment,” explains Wildy.
In June 2009, the UK government announced the creation of the UK Innovation Investment Fund (UKIIF). This will invest in technology-based businesses with high growth potential, including the life sciences, and will target spinouts, start-ups, and small businesses. The government has invested £150 million ($234.2 million) and is seeking further investment from the UK and overseas. This 12- to 15-year fund could reach a value of more than £1 billion ($1.6 billion). At least £25 million ($39 million) of the original £150 million will go to life sciences companies.
The Future For The UK
With these significant levels of investment and changes to regulations, the UK biopharma industry, along with the NHS and academia, has potential to remain a key force in biopharmaceutical research. Schemes like the Patent Box will allow companies to reinvest more of their income in R&D and will improve returns to investors. And changes to PPRS and the Innovation Pass will ease companies’ access to the market and improve the availability of drugs to patients in need. Wildy’s conclusion — “There is a lot to be positive about in the UK. The BIA is working to create an environment that is good to invest in.”