Send to printer »

Insight & Intelligence™ : Jan 16, 2012

U.K. Counts on New Strategy to Push Biopharma Startups Past “Valley of Death”

Plan represents the latest of several moves by the country’s government to grow its biopharma industry.
  • Alex Philippidis

The U.K. can boast a £35 billion biopharma industry that employed 101,000 people in more than 4,000 companies at the end of last year—part of a broader £50 billion life sciences sector when medical technology is included.

But the industry’s biotechnology sector saw a 3% decrease in the number of companies between 2009 and 2011, down to 945 companies. Several U.K. biotechs struggled: Antisoma cut operations last year to conserve cash after disappointing Phase III results for a leukemia drug, and a lung cancer drug it co-developed with Novartis failed in Phase III trials a year earlier.

Alizyme liquidated in 2009 after years of losses, while a firm specializing in cell therapy for wounded soldiers, Intercytex, was re-launched in 2010 with funding from the U.K.’s Technology Strategy Board (TSB) and U.S. Department of Defense, after selling off assets a year earlier following weak clinical trial results.

Last year, Renovo Group laid off all 100 staffers, halted development of two wound-healing drugs, and outsourced R&D on another potential treatment.

Yet 2011 also saw good news for some life-sci companies. Autifony Therapeutics, a GlaxoSmithKline spinout focused on hearing disorders, won £10 million ($15.5 million) in funding. KalVista Pharmaceuticals, developer of a diabetic macular edema treatment, won £8 million ($12.4 million) in Series A funding, while oncology drug developer Mission Therapeutics, a Cambridge University spinout, raised £6 million ($9.3 million).

Universities or hospitals anchor several successful clusters: London and Cambridge account for a combined 60% of the U.K.’s biotech industry base, while clusters have also grown in Nottingham, Oxford, and especially Scotland, where Dolly the Sheep was cloned.

Intent on shepherding more biopharma companies to market and keeping them growing, Prime Minister David Cameron recently unveiled a “Strategy for U.K. Life Sciences”. The strategy calls for the U.K. to:

  • Launch a £180 million ($278.6 million) Biomedical Catalyst Fund to be overseen by the Medical Research Council (MRC) and TSB. The fund is designed to help startups navigate the “valley of death” between the development of a new drug in the laboratory and the point when it comes to market.
  • Spend £130 million ($201.2 million) toward personalized or “stratified” medicine research.
  • Create a £50 million ($77.4 million) cell therapy technology innovation center to exploit the promising technology commercially, by spending £10 million ($15.5 million) a year over each of the next five years.

“The industry is changing—not just year by year, but month by month. We must ensure that the U.K. stays ahead,” Cameron said in a Dec. 5 statement. “We’ve got a leading science base, we’ve got four of the world’s top 10 universities, and we have a National Health Service unlike any other. But these strengths alone are not enough to keep pace with what’s happening. We’ve got to change radically—the way we innovate, the way we collaborate, the way we open up the NHS.”

The Strategy directs London’s three academic health science centers—Imperial, Kings Health Partners, and UCL Partners—to “explore the potential to develop” information systems that build on NHS data by pulling together patient data for London’s population: “This will enable large groups of patients to be engaged in world-class clinical research on disease-specific and personalised biological therapies, regenerative medicine, and medical devices.”

Some patient data will be generated through remote medical devices that NHS plans to deploy to three million people over the next five years. The devices, according to the Department of Health, will include “home-based equipment that can send details of the vital statistics of at-risk patients directly to doctors.”

Through the National Institute for Health Research (NIHR), the U.K. plans to launch a new app and an improved U.K. Clinical Trials Gateway web portal in March.

Other Strategy Highlights

  • The Medicines and Healthcare Products Regulatory Agency (MHRA) this month plans to unveil proposals for a new “Early Access Scheme” to speed up approvals for new therapies, especially in high-need disease categories such as brain and lung cancer.
  • MHRA will work with industry and international regulators on regulations to encourage new manufacturing technologies.
  • NHS will make available to researchers anonymous health data from post-launch drug use, enabling companies to mine the data for real-world lessons applicable to their R&D. The provision has raised concerns by the opposition Labour party that patient privacy could be compromised; the government insists that will not happen.
  • The government will appoint a chair for a new independent UK Life Sciences Advisory Board similar to the one in Scotland, as well as an advocate for closer collaboration across regional clusters and within government.
  • The Cambridge, Oxford, and London biomedical research centers (BRCs) are joining the Leicester biomedical research unit to develop an NIHR Bioresource intended to promote the U.K. as a hotspot for experimental medicine. Cambridge BRC is recruiting researchers for 15 vacancies at the Addenbrooke’s Biomedical Campus.

“The U.K. government continues to make the continued growth of a productive and innovative life science industry in the country a priority. The high caliber of universities in the region provides an important pipeline of talented scientists who can help drive quality R&D in the U.K.,” Pamela Spence, partner at Ernst & Young, told GEN.

Another strength for the U.K., Spence said, is the presence of the maturing regional biotech clusters “that can not only fuel R&D efforts of companies which already call these clusters home, but can serve as a magnet for new companies to establish a footprint in the country.”

The Strategy is the latest of several moves by Cameron and his Labour Party predecessor Gordon Brown to grow biopharma. Soon after taking office in 2010, Cameron maintained Brown’s planned spending of £250 million ($387.1 million) toward developing the Francis Crick Institute, formerly the UK Centre for Medical Research and Innovation—though Cameron spread the funds over five years; Brown envisioned spending it all in 2010.

Set to open in 2015, The Francis Crick Institute is a consortium of six U.K. scientific and academic organizations—the Medical Research Council, Cancer Research UK, the Wellcome Trust, UCL (University College London), Imperial College London, and King’s College London.

Patent Box Proposal

Spence noted that the U.K. government has made attracting drug developers and other innovation-based companies a priority through its recent “Patent Box” proposal. The U.K. would lower its rate of corporate tax on income derived from patents to 10% as of April 1, 2013, compared with the regular corporate tax rate, now 26% but set to dip to 24% when the Patent Box takes effect. Patents granted by either the UK Intellectual Property Office or the European Patent Office, and first commercialized after November 29, 2010, would qualify for the Patent Box rate, which according to Her Majesty’s Treasury would cost £1 billion ($1.55 billion) per year.

According to a draft of the legislation, the Patent Box would be expanded to include national patents granted by other EU member states with patentability criteria and search and examination practices comparable to the U.K. A list of approved member states will be published this spring. Also, a U.K. company could own exclusive U.K. rights to a patent while the rights elsewhere are held by other companies.

The Patent Box was cited by GSK CEO Sir Andrew Witty when he announced in July that the pharma giant would increase its staff and spending on manufacturing and R&D in the U.K. In perhaps a very public “thank-you,” Witty was knighted earlier this month for contributions to the U.K.’s biopharma industry and overall economy.

The focus on tax cuts and future life-sci spending by government comes as at least one private source of research funding is set to decline. Last month Cancer Research UK, the kingdom’s leading cancer charity, said it will cut its research spending by 10%, or £30 million ($46.4 million) over each of the next three fiscal years, for a savings of £100 million (about $155 million) due to a drop in projected income it blamed on the weak economy. CRUK spends about £330 million ($510.7 million) a year on research.

Reimbursement Challenges

If the U.K. is serious about growing its biotech industry, it should address a key challenge cited by Spence: a tough reimbursement environment driven by the National Institute for Health and Clinical Excellence (NICE).

“The U.K. is one of the more aggressive countries in Europe in terms of linking reimbursement levels with the future efficacy of the drug, which requires companies to propose innovative approaches for demonstrating differentiated improvements on outcomes. This approach, however, will ultimately drive a better return on investment for all parties and organizations in the Healthcare ecosystem,” Spence said.

But improved RoI comes at a cost to companies. Some have entered clinical risk-sharing agreements, agreeing to pay for nonresponding patients while payers agree in return to fund treatment of responders. Other companies have agreed to fund additional patient doses beyond an agreed-upon level. “Companies will need to demonstrate to payers that their products are truly differentiated and can bring about meaningful changes in health outcomes,” Spence said.

Reimbursement would seem another logical place for the U.K. to cut red tape. Also, the U.K. must look beyond government and encourage private biopharma investment. In an E&Y survey in May, respondents deemed biopharma the fifth-most important sector in driving U.K. economic growth over the next two years, behind banking/finance/insurance/private equity; telecommunications; cleantech; and business-to-business services excluding finance.

A June survey by Deloitte and the British Private Equity and Venture Capital Association found that 33% of respondents anticipate increased biopharma investment in the U.K. over the next five years. That’s better than the U.S.’ 19%. But with China at 83%, the U.K. has a significant competitive challenge if it wants to be a world leader in biopharma growth.