Life Sciences In Need Of Competitive Boost

The life sciences sector is a leading force in the UK economy, representing innovation and progress on the global stage. Its significance for our future well-being and prosperity cannot be overstated. As a result, there has been a strong emphasis on funding and new initiatives from the central government over the past year.

However, while we envision a brilliant future with groundbreaking treatments and innovations originating in the UK, it is crucial to focus on resilience in the present moment.

A recent report by The Society of Chemical Industry estimated that unless the UK improves its support and commercialization of science, it could miss out on £230 billion of economic growth between now and 2030.

Although the recently published Life Sciences Competitiveness Index highlighted positive statistics indicating industry growth, these were overshadowed by a significant decline in foreign direct investment (FDI) in the sector. In just 12 months, FDI dropped from £1.9 billion to £1 billion, a swing of 47%. As a result, the UK now ranks ninth out of 18 comparator countries for FDI, compared to its second-place ranking in 2022.

There were also notable decreases in equity finance raised (£3.3 billion compared to £7.2 billion) and the number and value of initial public offerings (only three IPOs raising £7.1 million, compared to 11 IPOs raising £751.5 million in 2021).

In my work with the life science businesses within my employer’s network of innovation districts and science campuses, it is evident that the sector possesses the necessary skills, knowledge, and know-how to thrive. However, such a significant decline in international competitiveness over a short period suggests the need to address recent changes in the operating landscape.

For instance, the Association of the British Pharmaceutical Industry (ABPI) rightly highlights the importance of addressing rebate rates and the broader commercial environment. Rebate rates for branded medicine manufacturers increased to 26.5% of sales (£3.3 billion) at the end of last year, nearly double the previous year’s value and over five times the figure for 2021. While it is reasonable for businesses to contribute to the NHS, the magnitude of revenue clawback has undoubtedly dampened enthusiasm for investment in research and development (R&D), particularly when the rate is more than double that of comparable economies.

In addition, the UK’s unresolved access to the European research program Horizon has further discouraged investor interest in the past year.

Simultaneously, it is crucial to explore new avenues to attract foreign investment. The NHS, as one of the few publicly-funded healthcare services globally, has the potential to offer innovative and alternative approaches. This is already evident in the battle against antibiotic resistance, which claims over 12,000 lives in the UK annually. The government has experimented with a new “Netflix”-style model that reimburses pharmaceutical companies through favorable flat fee contracts instead of the traditional price-per-use approach, and this model is expected to expand.

Currently, antibiotics are primarily utilized as a last-resort measure when established treatments fail, meaning that expensive R&D for potential breakthrough drugs is not incentivized. Many of the early-stage infectious disease businesses I collaborate with view this new approach as highly favorable.

In addition, there are plans for Lord O’Shaughnessy’s independent review of commercial clinical trials, aiming to improve access to innovative treatments and make the UK a more attractive investment destination. Although recent statistics in this area have been discouraging, the recommendations outlined in his May report hold the potential to enhance international competitiveness.

Further interventions of this nature, executed with determination, can revitalize the sector’s international standing. Despite the substantial decline in FDI, it is not a permanent state. This year’s data serves as a wake-up call, emphasizing the need to ensure next year’s statistics showcase a sector on the rise.

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