UK Spring Budget a ‘vote of confidence’ in UK life sciences

Chancellor Jeremy Hunt and the Spring Budget

There was some good news for the UK life sciences sector in the government’s Spring Budget, but did it go far enough? DDW’s Diana Spencer takes a look at the industry’s reaction.

There wasn’t much to write home about in the UK government’s Spring Budget, described by Bloomberg UK’s Marcus Ashworth as a “minimalist masterclass”. However, there was some positive news for what the Chancellor Jeremy Hunt referred to as the “largest life sciences sector in Europe”, and some measures that could assist in the making the government’s dream of the UK being a ‘Science Superpower’ a reality.

Louise Ward, Partner at Charles Russell Speechlys, summarised the positive take-aways for the industry: “New investment zones to be situated in proximity to universities, already a favoured model for life sciences clusters, could open up new areas of the UK to this burgeoning sector. The new R&D tax credits scheme will be welcomed by small and medium sized companies. Additionally, a pledge to reform the regulation and approval of medicines, could see rapid approval for companies whose products have already gone through the US or European system and quickly open the UK as a new market.”

Investment zones

The government confirmed plans for 12 low-tax ‘investment zones’ across the UK, with the aim of creating new business clusters focused around universities and research institutions. Each zone will receive £80m of support over five years.

Though the sector has generally welcomed the additional investment in research, many have pointed out that re-joining Horizon Europe would have the biggest positive impact on the sector.

Prof Dame Anne Johnson PMedSci, President of the Academy of Medical Sciences, said: “The new investment zones announced today present an exciting opportunity for driving productivity in medical science across all regions of the UK. These proposals will play to our academic strengths, with the explicit connection of the zones to local research institutes and universities.

“While we await further detail on the promising announcements from this budget, I hope that the government will take the earliest opportunity to provide an update on the pressing issue of Horizon Europe. The scientific community has repeatedly highlighted that full UK participation in Horizon Europe is the best possible outcome for research and for the health of people everywhere.”

Others have questioned what this means for current innovation hubs. Jason Mitchell, partner at MHA, said: “While the Chancellor’s commitment to the UK’s new 12 investment zones will bolster the government’s levelling up agenda and develop new skills in the workforce, questions remain over how this will affect current innovation hubs and if their existing funding may become diluted in the years ahead.

“Many start-ups and high growth tech companies will also have a keen eye on the autumn budget which the Chancellor earmarked for providing greater funding and support for businesses following the recent collapse of Silicon Valley Bank. As the market remains jittery following last week’s collapse and the UK’s SVB arm being acquired by HSBC, the Chancellor must deliver on that promise to keep the UK a leading centre of finance and fintech in the coming decade.”

Regulation for medicines

There were significant changes announced regarding the UK’s medicines regulator, the Medicines and Healthcare Regulatory Agency (MHRA). In a statement, the Chancellor explained: “From 2024, they will move to a different model which will allow rapid, often near automatic sign-off for medicines and technologies already approved by trusted regulators in other parts of the world such as the United States, Europe or Japan.”

The Budget included an extra £10m of funding over the next two years to facilitate a new, quicker approval process for the most cutting-edge medicines and devices.

The Association of the British Pharmaceutical Industry (ABPI) Chief Executive Richard Torbett commented: “The Chancellor has announced welcome support for the MHRA. An increase in long-term funding, measures to speed up approvals for new medicines, and a commitment to increase collaboration with global regulators will all support pharmaceutical companies bringing new medicines to UK patients.”

It was felt that the emphasis on increased collaboration was a good thing in the context of the UK’s global position post-Brexit, though some argued this should go further.

Prof Sir Martin Landray, Professor of Medicine & Epidemiology, Oxford Population Health, University of Oxford, said: “The UK is a small market for new products and consequently of lower priority for developers than many other territories, including USA, EU and Japan. A default position of adopting an approval that has been issued by another sophisticated regulator such as US FDA or European Medicines Agency makes sense – and frees up resource to focus on medicines that have particular scientific or clinical issues.

“We need to move to a future where there is greater exchange of ideas, experience, and skills with the wider world beyond the concrete walls of the regulator. We need regulation – but we need regulation that is focused on enabling solutions.”

R&D tax relief 

Perhaps most importantly, particularly for small to medium sized companies, was the announcement thatthere will be a new enhanced R&D tax relief rate for the UK’s most innovative businesses.

Small and medium sized enterprises (SMEs) that are investing over 40% of their total operating costs in R&D and not yet making a profit will receive a cash payment of 27p for each £1 they have invested in R&D. All other loss-making SMEs will receive a new lower relief rate of approximately 18p, which was announced at the Chancellor’s Autumn Statement in November 2022.

Cancer Research Horizons described the budget announcement as “a shot in the arm” to oncology start-ups and growing companies across the UK at a time of tough economic challenges. “Spin-out companies play a vital role in translating Cancer Research UK-funded research from the lab into life-saving treatments. Today’s decision by the Chancellor is a vote of confidence in the UK’s outstanding life sciences start-up community, creating the opportunities needed to develop new tests, medicines and advances in healthcare for cancer patients,” stated Tony Hickson, Chief Business Officer of Cancer Research UK (CRUK) and Cancer Research Horizons.

The UK BioIndustry Association (BIA) also welcomed the announcement. Steve Bates OBE, CEO of BIA, said: “This is a huge boost for biotech companies across the UK developing new medicines and improving healthcare for patients. The new ‘R&D intensive SME’ category is a highly effective way to incentivise truly innovative businesses taking significant financial risk by investing heavily in R&D. It will target UK taxpayer support to enable life science entrepreneurs to crowd in further private investment allowing them to grow and accelerate innovation in the UK.”

Risky but vitally important

The move was applauded by small-to-medium biotech companies, who invest heavily in R&D, often to provide treatments in areas of unmet need.

“While most successful businesses begin to turn a profit within three years, companies in our sector can, for example, require a decade of work to bring a new medicine to market,” explained Jason Foster, CEO of Ori Biotech, adding a caution: “Any changes to the tax credit system should protect UK taxpayers from bad actors without limiting job growth or pushing expertise outside our borders. Otherwise, the next life-saving technologies may be created somewhere else, or worse, not at all.”

Professor Andy Whiting, CEO of Durham University spinout Nevrargenics, said: “Drug development is inherently risky but vitally important for improving access to new treatments. We will be able to reinvest this R&D relief back into intensive research to bring new treatments to market more quickly and change lives for patients. This targeted R&D support will benefit society and the economy.”

The future

While there was optimism for the UK’s life science sector, many cautioned that more could and should be done, and the industry will be keeping a close eye on developments over the next few months, particularly on whether the UK is able to re-join Horizon Europe and benefit from this hugely important funding source.

Steve Bates OBE, CEO of BIA, said: “The new scheme being developed is a great opportunity for the UK to fine-tune and enhance what is already recognised globally as a key mechanism for incentivising SME investment in R&D and innovation. Going forward we need to ensure the UK’s support for highly innovative companies is globally competitive, eliminates fraud and targets taxpayers’ money into truly innovative businesses that are creating jobs and driving economic growth.”

An AstraZeneca spokesperson described the Budget is “a step in the right direction”, but added that “we look forward to the UK government going further to create stronger commercial and fiscal conditions to attract major new investment in the face of growing global competition. Specifically for life sciences, the government must also speedily resolve the problem of the 26.5% revenue levy on innovative medicines used by the NHS.”

This message was amplified by the ABPI’s Richard Torbett, who said: “To further unlock this potential, it is essential that a new Voluntary Scheme is agreed between industry and government which will help build on the Chancellor’s vision for a globally competitive, high growth UK.”

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