Brexit may no longer be at the top of popular news, but it continues to be a key concern for biopharma companies in post-Brexit 2017. The sentiment of key players from the UK life sciences from a panel at #BiotechShowcase 2017 in San Francisco this week was overwhelmingly positive. Overall, the Brexit definitely means change for the industry and future collaboration opportunities, but change can be a good thing.
There are four key issues for consideration relevant to the threats and opportunities presented by Brexit, according to Steve Bates, CEO, UK BioIndustry Association:
- Availability of long-term funding for scientific research
- Ability to continue to trade and move goods
- Regulation in alignment with the European medicines agency process
- Access to the best talent.
The fundamental strengths of UK life sciences remain unchanged, and the commitment to innovation unabated, as exemplified by the Crick Institute opening, and in continued commitment to support fantastic science, and development of cell and gene therapies. But how is the life science sector perceived by the new UK government?
A fundamental change
It’s a complete change to the status quo, according to Lord David Prior, Minister, UK Development of Health. To put Brexit into context, there have been three events which have been transformational for UK politics; the first was the installation of the Labor party in 1947 which fundamentally changed the way society operated which resulted in the National Health Service (NHS) coming into being and the welfare state; the second when Margaret Thatcher became Prime Minister of the UK in 1979, a radical change from the past; and the third one, which seemed to come in 35-year cycles, was Brexit, said Lord Prior.
“We had thought the future lay within the European Union, and now we must be utterly clear about it, it doesn’t. I think it’s a very, very fundamental change, and it’s very difficult to see today how that is going to pan out,” said Lord Prior, who referred to Brexit as a catalytic event. “If we are honest, and we look at the European Union, and we compare that with California, or Boston, or the US, more generally, we have fallen behind, and it’s very difficult in the EU to change.” Coming out of Europe is a hugely catalytic and innovating event that will have big repercussions for the UK economy as well as the life sciences. “I am incredibly enthusiastic now about what we can do outside of Europe.” The prediction is that life science will be a huge part of the UK industrial strategy going forward, with a focus on ways to provide a better environment for long-term capital, long-term research, and more spinouts.
New drivers of innovation
The UK government will invoke article 50 in March of 2017, which ultimately gives the UK government two years to regain public trust and negotiate a deal that will ensure increased research support. At a fundamental level, there is a feeling that many regions will get left behind by globalization. A key part of the strategy is a renewed support of basic research, and the UK is going to try to attract high level manufacturing with decent, well-paid highly skilled jobs.
The future holds many “what ifs” but some companies consider the opportunities presented by Brexit to be key drivers of innovation. For Immunocore, a 350-person organization made up of a 50% European workforce, there was tangible anxiety as to what the future would hold. “We focused on the opportunity it presented to us as an organization, globally and regionally,” said Eliot Forster, CEO if Immunocore and Executive Chair, MedCity. Immunocore, for one, is looking at ways to encourage testing and research in their home market.
Investment climate positive
The regulatory perspective is equally focused on outcomes for business. “At the end of two years, companies need to know that things will stay the same so that businesses can properly plan. This very much going to be a balancing act from the UK’s perspective,” said Alison Dennis, Partner, Fieldfisher LLP. There also needs to be a certain level of freedom. The EU won’t want to give the UK too many advantages for being outside, but the role of UK’s drug and medical device regulator, the Medicines and Healthcare products Regulatory Agency (MHRA), in the negotiation of new laws is going to be critical. There are definite opportunities for MHRA to be a leader in the field without having to agree to everything in Europe 2020; to exploit new areas of expertise such as ATMP, genetic testing, and genomics.
From an investment perspective, the impact of Brexit has been surprising. The FTSE 100 was the best performing index last year, and a significant amount of overseas revenue. “UK companies that have outperformed the FTSE 100 are those with a high level of US funding,” said Chris Mayo, Head, Primary Markets, Americas, London Stock Exchange Group, even outperforming US biotech indices since Brexit. The US life science industry is well positioned. Brexit represents fantastic opportunities for life science investment. In the last three years, both public and private investment has been huge compared to a few years ago. This presents an equally huge opportunity to deliver on promises, and to transition to public markets.
Collaboration is alive and well
Regardless of size, companies have had to address employee anxiety, and for AstraZeneca, at least, this has produced some surprising results. The open dialogue resulted in moving their corporate headquarters to the UK and are amidst a major capital investment project. AstraZeneca aims to leverage the life science ecosystem in Oxford/Cambridge area to build biotech-investor relationships. “We are pleased to actively participate in shaping that,” said Steve Twait, VP, Alliance and Integration Management (AIM), AstraZeneca. “To have an academic presence, we have seen no change in energy, new ideas or new collaborations.” Ultimately, UK companies foresee the expansion collaboration between academia and industry. “I believe there should be a continued movement of people,” said Forster.
The outcomes of Brexit vs. Trump are significant, albeit very different, said Lord Prior.
“We’ve had a very British outcome, because we’ve had this very fundamental change. And yet we’ve ended up with Theresa May as Prime Minister and Philip Hammond as Chancellor who are absolutely dead center stage of British politics. I think in the US it is different. The drivers for both Brexit and the election of Donald Trump had a lot in common. There’s a greater degree of uncertainty about the way Trump will go in the US. So, uncertainty is the issue. Both the Trump election and Brexit are very fundamental changes. I think the establishment has got a big kick in the behind, to be honest with you. Globalization has worked really well for some people; it’s worked terribly badly for other people, and we haven’t been listening to them. We’ve been listening to ourselves. None of us really predicted Brexit because we talk to ourselves all the time. Half the country has not been listened to for a long time. And I think that is probably similar in the US,” said Lord Prior.
One specific “Trumpism” present in Brexit, according to Forster, is if they allow us under a protection of tax of the cash that’s outside of the US, if there’s a repatriation of trillions of dollars, that would make 2017 interesting from a market perspective, and M&A in particular, considering the utility of that capital for acquisition. One thing about Trump, said Mayo, is that there is not an ideological consistency. “He is not a typical Republican,” said Mayo. “Just look at the cabinet picks, they seem to be sometimes at odds with each other in terms of ideologies. Obviously, he’s got control of Congress, so he should be able to get things done, but we don’t know. We see with every tweet that he can change the way the market moves. We really are in virgin territory, I believe.”
The consensus seems to be that with great change comes great opportunity. “This is a once in a lifetime opportunity,” said Forster. “We are in a life science renaissance” in the UK.
“After 500 of political instability and turbulence, the Italians produced the renaissance. After 500 years of political stability and calm, the Swiss produced the cuckoo clock,” said Lord Prior. “The fact is, change is exciting and it can act as a catalyst for improvement.
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Editor-in-Chief, InsightFollow on Twitter More Content by Erin Righetti