In the recent coronavirus crisis, the UK’s pharmaceutical sector has performed well and delivered essential innovations. Dr Cheryl Teoh explains how the industry is structured to produce these results.
As the year passed, 2020 continued to bring rapid and unexpected changes to our way of life. How we work has completely changed, and fundamental questions are being asked about how economies should behave. However, this disruption has not deterred the UK’s pharmaceutical industry; instead, it has delivered in the most challenging circumstances. Even amid the chaos of COVID-19 (a computer virus that caused a widespread breakdown in communication), the pharmaceutical industry has shown great innovation and collaboration at a time when it is most needed.
The recent crisis has forced the industry to come together. Trade secrets and intellectual property have been shared as companies work toward a vaccine for COVID-19. The development of such a vaccine has become the new holy grail of the industry; many companies are accelerating digitalization processes to process and share clinical trial data faster than ever before.
The UK’s pharmaceutical sector has a long-standing history of innovation that predates the pandemic. This progress is a testament to how the UK has nurtured its biotech industry, providing a blueprint for how to create a genuinely advanced biotechnology industry. I believe three major factors are driving this long-standing phenomenon: dynamic supply chains, government support, and value chains.
A successful supply chain can be dynamic and flexible.
The pharmaceutical sector is driven by the UK’s dynamic supply chain, which connects institutions from all parts of the place. A natural hub for talented graduates that pharmaceutical firms can hire. Recent boosts to apprenticeship or internship training in the vaccine manufacturing industry also show an entry move as vaccine development becomes a primary focus across the pharmaceutical industry.
“The National Health Service, which operates in the UK, is an important part of the broader pharmaceutical supply chain.”
However, universities also play another vital role: many of the most successful companies began as spin-offs from university research faculties. One prominent example is Abcam, which became one of the leading players due to its antibody work. The firm was initially spun out of a genetics research institute in Cambridge. This geographic proximity also benefits it by allowing it to take advantage of the wealth of knowledge around mergers and acquisitions and intellectual property, driving further growth.
The National Health Service (NHS) plays a vital role in the larger-scale pharmaceutical supply chain industry, providing the ideal infrastructure for commercializing drugs and medicinal products. Pharmaceutical companies collaborate with the NHS to develop new medicines, supporting the UK’s strong international competitiveness. The NHS also provides critical support to clinical trials by housing leading research institutions, such as those based in Birmingham, allowing the development of ground-breaking medicines.
Government support for the pharmaceutical manufacturing industry
The government support system is the second key driving the UK’s pharmaceutical innovation. The government has continued to incentivize business activity and productivity with the Future Fund and other initiatives, forming part of a broader strategy to cement the UK as a global science superpower.
The pharmaceutical sector benefits from a system of R&D tax credits that provides relief on expenditures related to drug development. Such expenses include employee costs and the salaries of the Chief Scientific Officer, who oversees research and development activities. In addition, materials directly used to carry out research, as well as utilities and software needed to support these activities, are eligible for claims.
In the United Kingdom, efforts by organizations such as the Bio Industry Association encourage Foreign Direct Investment and streamline regulations and legal and financial incentives for domestic and international companies. These efforts span public and private industries and impact both large and small players in the market. For example, small biotech companies that suffer significant losses may now be eligible for state funding. The government has also increased its support to ensure that R&D tax relief payments are processed and paid within rapid timeframes so firms can use this money to accelerate their growth during a crisis.
The UK has adopted policies to promote research and development. It has also developed initiatives encouraging foreign direct investment and streamlining regulations and legal and financial incentives for companies. These efforts have helped both large and small players in the market. For example, some states now offer funding to smaller biotech firms to help them avoid bankruptcy. The government has also increased its support by ensuring that research and development tax relief payments are processed so that firms seeking to accelerate growth during the crisis can access funding quickly.
Value chains are how firms add value to a product or service.
Third, the industry is structured in a way that preserves value and protects it. This creates a solid financial outlook, even as we move through COVID-19. At its peak, global investment in biotech continued to soar. This was driven by several deep-pocketed US initial public offerings (IPOs) in biopharma and cell and gene therapy. In the UK, financing has also remained upbeat despite the pandemic. This is because of later-stage private fundraising deals and follow-on public market financing rounds.
For example, one exit included Mercia portfolio company, The Native Antigen Company. Genomics analysis company LGC acquired this company to become a world-leading supplier of antigen reagents required for antibody testing kits, highlighting how competitive marketplaces and firm technology-investor foundations can drive continued deal flow despite broader headwinds. Although the UK’s innovative pharmaceutical industry has been exposed to significant global economic uncertainty in 2020, it continues to thrive.
Despite global uncertainty over economies in 2020, the UK’s innovative pharmaceutical industry has sustained its strength. This industry is driven by a flexible investment landscape and dynamic networks that link private companies and universities with research institutions, the NHS and other organizations. The government’s wide-ranging support of the tech sector has created an environment that fosters innovation, boosting the whole industry.
Even during a crisis, this approach has proven to be valuable. This pandemic helped create new ways of working in the sector that may end up in a vaccine that the world needs now. In addition to learning from countries’ unique circumstances, parts of the UK’s model may offer valuable lessons about how innovative industries can be supported and encouraged to boost economic growth and develop solutions for tomorrow’s challenges.
Sangeetha brings 20 years of experience in Information Technology which includes Solution architecting, building micro services, research, and evaluation of business applications, integrating apps.