Medicines research in the UK: the need for a bold, imaginative and long-term strategy

The primary objective of the pharmaceutical industry is to deliver long lasting benefits to both patients and the wider public. The industry is made up of large (Big Pharma), medium (Biopharma) and small (Biotech) companies. In the UK, the sector makes a positive contribution to our trade balance, generates and maintains high value jobs, and makes a significant contribution to public health. This country has a long history of successful medicines research that has made a significant impact on both global health and local wealth. Thus, 25 of the current 100 top selling drugs were discovered and developed here and in 2007 pharmaceutical exports totalled over £14.6 billion.  However, since then, the fortunes of this sector in the UK have tumbled.

Major divestment has led to the loss of thousands of jobs with the closure of major research facilities, including those at Harlow (both GlaxoSmithKline and Merck), Loughborough (AstraZeneca), Newhouse (Merck) and Sandwich (Pfizer). This is in response to the stark economic realities of the 21st century.

Big Pharma is no longer delivering double digit growth. According to a recent study by Deloitte and Thomson Reuters, the average internal rate of return from R & D at the world’s 12 largest Big Pharmas has dropped from 11.8% to 8.4% over the past year. A major contributing factor is the expiration of patents for numerous blockbuster drugs. On top of this, the ensuing emergence of generic medicines has raised the cost/benefit bar for subsequent drug candidates.

Alongside problems at Big Pharma, there has been a near complete market failure in the Biotech sector, with the flow of finance to emerging Biotech companies reduced to a trickle. This is largely because investors (particularly venture capital companies) are no longer realising handsome returns on their investments. This, together with the substantial loss of the market capitalisation of a number of the UK’s major Biotech companies, has undermined confidence in the sector. However, these dark clouds may have a silver lining as the corporate venture arms of Big Pharma have now moved into this space.

In the past, the Biotech model was to make shares liquid by listing on public markets. However, this door is now firmly closed so a trade sale has become the major exit strategy. The notable exception is drug discovery companies that have a revenue stream through the provision of contract research services.

In spite of current challenges, the fundamentals of the medicines research sector remain good: the Global market for pharmaceuticals is expected to increase to $1 trillion in 2014.  Growth is expected to continue as medical need increases, largely because of the marked increase in the number of people aged over 65 in the decades ahead and the continued rise in the incidence of obesity.  Although the number of biologic drugs continues to rise, most medicines are small molecules.

The process of small molecule drug discovery depends on a unique partnership between chemistry and biology, which serves to optimise the pharmacological properties of lead molecules in order to identify drug candidates. It is on the basis of the synthesis of optimised new molecular entities (NMEs) that patent applications are filed, which, if granted, provide a period of market exclusivity. Thus, without the generation of NMEs, the potential for subsequent commercialisation diminishes substantially.

With drug discovery research moving offshore (Big Pharma) or being starved of cash (Biotech), this sector of the UK economy is now under serious threat as world-class knowledge and expertise is lost.

Large amounts of government capital have rightly funded University-led research, but very few  university spin-outs that have gone on to become substantial commercial enterprises; Oxford BioMedica is one of the rare examples. It may be more fruitful to provide direct funding to Biotech companies engaged in medicines research through competitive grants; the Technology Strategy Board provides a good example of this approach. However, the fragmented nature of research funding in this country stifles (rather than supports) innovative medicines research. On top of this, the public sector contribution to health-related research in the UK is dwarfed by that of the US National Institutes of Health (NIH), which has an annual budget of $30 billion. The US is also very good at funding and coordinating public and private research, and bringing together scientific knowledge through the creation of centres of excellence. In short, the US excels in directing taxpayers dollars towards medical need.

Many of the beneficial aspects of health-related research in the US are now being employed in the emerging economies. For example, China recently announced very ambitious plans to generate a million new Biotech jobs by the end of 2015, supported by $308 billion of hard cash for science and technology. This bold commitment to science is even underpinned at school level: In the latest OECD comparative review of 15 year olds around the Globe. China-Shanghai came top in maths (the UK came 28th), with similar results for science. Therefore, the UK is off the World pace and so needs to sharpen up if it is to continue to compete effectively in the medicines research arena.

It is essential that taxpayer’s money effectively supports innovation in medicines research and facilitates its translation into new medicines or novel medical devices. The same is true for medical research charities. However, the UK lags behind the USA in this area also.

The US has many charities and foundations that make a significant impact on human health by directly supporting medicines research. Notable examples include the Bill and Melinda Gates Foundation, the Michael J. Fox Foundation for Parkinson’s Research and the Huntington’s disease Society of America. In the UK, medical charities account for one third of all public expenditure on medical and health research. However, the majority of these charities exclude medicines research companies from applying for funding. This questions the ability and intent of such charities to meet their charitable objectives. They are rejecting the very organisations with the know-how and expertise to translate research into tangible benefits to patients. Important exceptions are the Wellcome Trust, Medical Research Council Technologies and Cancer Research Technology. These World-leading organisations illustrate what can be achieved outside of traditional pharmaceutical business constructs, particularly in early stage translation.

To counter the erosion of medicines research in the UK, a bold, long-term strategy is urgently needed. An important start has been made with Government support of the Francis Crick Institute in London, and funding of science parks, particularly the Stevenage Bioscience Catalyst (in association with GSK) and the Babraham Research Campus. In addition, this week the Government launched its Life Sciences Strategy, which includes a £180 million BioMedical Catalyst Fund. This is very welcome, but it may not be sufficient.  What is needed is a vision for how medicines research in the UK can be re-energised and re-imagined.

Change brings opportunity and so there is now a great opening for the creation of new business constructs to combine bioscience knowledge creation and medicines discovery for the benefit of patients, healthcare providers and scientists.

Written by Alan M. Palmer

The One Nucleus blog is written by individuals and is not necessarily a reflection of the views held by One Nucleus.

About onenucleus

The One Nucleus blog is written by individuals and is not necessarily a reflection of the views held by One Nucleus.
This entry was posted in December 2011. Bookmark the permalink.

3 Responses to Medicines research in the UK: the need for a bold, imaginative and long-term strategy

  1. Davidson Ateh says:

    Crisp, clear and concise analysis of the major issues in the UK drug discovery and development sector today from the scientific education of our children to the suffocation of early stage ventures, thanks Alan.

    With respect to funding early stage companies, it would be really great to get a much larger participation/access to the UK charity sector – indeed it should be in the charities interest to fund work with shorter paths to patients – this needs to be top of the AMRC’s agenda. As a sector, we simply need to get on with attracting as many funders as possible to reverse the drought, government, charity, high-net worths, institutions, corporates and VC’s – the fundamentals are strong, the risk is high (until someone invents an in silico drug performance predictor) but balanced by high returns (especially for a well chosen and managed investment portfolio…).

    Should we be less internal in our discussions and start interfacing with the public more? Get Jo public, policy makers and non-techy high-net worths etc… interested and excited about biotech in the UK?

  2. Alex Yule says:

    There is no question that action is needed if the UK wishes to sustain even a fringe role in medicines research (and healthcare innovation in general) and that new initiatives and mechanisms are required to make a meaningful contribution.

    Any initiative needs to recognise that, in contrast to the opening statement in Alan’s article, the primary objective of the pharmaceutical industry is NOT the delivery of long-lasting benefit to patients or for the common good but to make a return for its stakeholders. That’s not to say that, as a by-product of wealth creation, societal benefit might not be good for business or that the industry is devoid of altruism, but turning a sustainable profit is and should remain the industry’s raison d’être. In short, UK medicines research has to be readily exploitable by and to create clear value for the pharma industry.

    So far, so obvious. Defining simple solutions is a wee bit trickier (and I’ll throw this out as a challenge) because the elements and processes which contribute towards value creation are themselves poorly understood by the pharmaceutical industry and its observers. In evidence, I cite the pick n’ mix of actions taken over the last four years or so to reverse declining growth rates and loss of revenue: open innovation, moving preclinical and clinical R&D to lower cost regions, consolidation, increasing specialisation (orphan disease, and who isn’t doing something in cancer these days?), discontinuation of core R&D (cardiovascular, neuroscience and antibiotics come to mind), early-stage partnering, strategic academic alliances, and pricing incentives (coupons, rebates). Some combination of these might just work, but it’s too early to tell.

    As a nation of taxpayers with endless calls on our contributions besides medicines research, should we worry about the fortunes of the pharma industry? After all, there will be no shortage of ex-UK manufactured, low-cost, reasonably efficacious generic drugs for the bulk of ailments which afflict the majority, although life might not be so rosy for those with Alzheimer’s or Parkinson’s disease or in chronic pain. The cost burden of new drugs will be high and increased tax contributions from a buoyant pharma industry or from royalties where UK research has made a quantifiable contribution would compensate to some degree.

    So, whether our contribution to medicines research is driven by altruism or avarice (but please, not misplaced national vanity), where should we place our bets? Recent government actions indicate that the uncertain future of UK medicines research is recognised, although the announced initiatives are of questionable value (I’m struggling to see how an additional £90 million in new money will achieve much when viewed in the perspective of the current industry R&D spend of over £40 billion in 2010). On the other hand, broader access to NHS data (if handled with diplomacy) could offer new insights into fundamental questions around treatment outcomes, predicting adverse events and improving compliance at relatively low cost.

    As Alan concludes “change brings opportunity”. The migration of pharma R&D from the UK is probably permanent, but value creation through the exploitation of proprietary knowledge is not constrained by geography. The starting point is to define how a significant part of that knowledge will flow continuously from the UK.

  3. Geoff Lawton says:

    Excellent summary Alan on the current state of the biopharma landscape.
    Many of the reasons for the poor output (and consequent reduction in investment) in the past decade for the biotech and pharmaceutical companies arise from scientific difficulties and great efforts are being made to address these. The more disappointing failures are those projects which stop for financial/strategic reasons. These can be simply corrected by having business models with different financial/strategic objectives.

    INMedD is proposing a Social Enterprise solution. This provides a vehicle for bringing together different types of stakeholder under the same umbrella and can at the same time reduce the risk for the financial investor and increase the impact for society (individual patients and governments).
    Rather than establish this as a virtual organisation, we believe that a laboratory-based expert drug discovery group can thrive and help to sustain this vital skill set in the UK.

    The current fashion for ‘asset-centred investment’ can be easily accommodated. This model works for all parties. The investor/funder gets to spend their money only on the work that is directly related to their individual objective. They can manage their investment within their own familiar portfolio and project management framework and when the project is completed there is no need for a clean-up of assets or messy disposals. Originators get their new medicine discovery ideas off the ground faster, as they need to raise less money, and can focus on resourcing only the essence of the project instead of wasting energy on establishing a corporate structure. Capital required to develop a single compound to a data package which can be partnered with pharma is modest. Revenues coming from licensing deals can be distributed at an early time point to the investor(s).

    A range of different investor types can be accommodated within the INMedD portfolio. Funders can include stakeholders whose goal is a simple financial return, philanthropists aiming purely at public benefit, and those, such as patient advocacy groups, who want to direct their philanthropic ‘investment’ towards specific disease indications.

    In the current economic environment, the probability of a licensing transaction on an attractive asset with early clinical data is much greater than the probability of an ‘exit’ for a company. The structure is also very motivating to the originators and operators of the individual project as they are more likely to achieve their desired return in a reasonable timeframe. Complex unwinding of company structures at the time of the exit is avoided.

    Of course other forms of stakeholder participation are possible via setting up joint ventures. Even crowd-funding may be a possibility.

    If you want to contribute to the debate on this social enterprise approach, join the INMedD group on linkedin.

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