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16 March 2023BiotechnologySarah Speight

UK industry welcomes Budget boosts for life sciences

New R&D tax incentive announced for SMEs in UK Budget | Funding for medicines regulator aims to open up drug approvals | ‘Hidden benefits’ in Budget for industry | Reaction from Bioindustry Association, Potter Clarkson, Mischon de Reya, Marks & Clerk, Taylor Wessing.

The UK has announced new measures aimed at boosting the country’s life sciences sector, which has been broadly welcomed by industry figures.

In his  Spring Budget yesterday, March 15, Chancellor Jeremy Hunt pledged a £1.8 billion package of support for life science and technology enterprises, promising to help 20,000 “cutting-edge companies who day by day are turning Britain into a science superpower”.

Among the plans was an enhanced R&D tax relief rate for small and medium-sized enterprises (SMEs) in the life sciences.

Under the new scheme, SMEs that spend in excess of 40% of total operating costs on R&D, and are not yet making a profit, will be able to claim a credit in the form of a cash payment worth £27 for every £100 they spend on R&D.

“That means an eligible cancer drug company spending £2 million on research and development will receive over £500,000 to help them develop breakthrough treatments,” said the chancellor.

All other loss-making SMEs will receive a new lower relief rate of approximately 18p, which was announced in the Autumn Statement in November 2022.

Medicines regulator funding

Budget pledges include an extra £10 million over the next two years for the drug regulator  Medicines & Healthcare Products Regulatory Agency (MHRA), the first regulator to license a COVID-19 vaccine.

The funding will allow drugs already approved in the US, Europe and Japan to receive approval in the UK.

This, said the chancellor, will help the agency to “put in place the quickest, simplest, regulatory approval in the world for companies seeking rapid market access”.

The funding comes as the agency plans to move to a different model from 2024, 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 US, Europe or Japan.

It will also instigate a new approval process for “the most cutting-edge medicines and devices to ensure the UK becomes a global centre for their development”, said the chancellor.

“We are proud of our life sciences sector which received more inward investment than any in Europe last year,” he said, adding that changes announced in the Budget “will make the UK an even more exciting place to invest—as well as speeding up access for NHS patients to the very newest drugs”.

“We have built the largest life sciences sector in Europe, producing a Covid vaccine that saved six million lives and a treatment that saved a million more,” he continued, adding that “...we want the UK to be the best place in Europe for companies to locate, invest and grow.”

‘Fine-tune and enhance’

The UK’s trade association for innovative life sciences and biotech, the  UK BioIndustry Association (BIA), welcomed the chancellor’s R&D incentive.

Steve Bates OBE, CEO of BIA, said that the scheme 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”.

“Our research-intensive industry is a key growth area for Britain’s economy. The chancellor is rightly focusing UK taxpayer support to enable life science entrepreneurs to crowd in more private investment, help keep the UK at the cutting-edge of international science, and create new high-value jobs across the UK,” said Bates.

Sheena Linehan, a patent attorney in the life sciences team at Potter Clarkson, said that the BIA is to be “applauded” for campaigning and working with the government. The association’s work helped reverse the impact of R&D tax changes proposed in the autumn statement that was out of sync with the UK’s  Life Sciences Vision, she explained.

“Without this intervention, R&D-intensive SMEs would have been in jeopardy, particularly in life sciences and biotech sectors, which create IP to secure value in the face of long development timelines and complex product regulatory pathways,” said Linehan.

“While these are certainly welcome measures, it is worth noting that they only apply to SMEs that are investing over 40% of their total operating costs in R&D and not yet making a profit.

“As an economy, we need the most favourable conditions for all innovative companies to thrive and, for those who don’t qualify for this relief, we wait with interest to see what further measures we may see from the recent R&D tax relief consultation.”

Hidden benefits

Patrick Farrant, partner at  Mishcon de Reya, said that the Budget contained “several exciting developments for the UK life sciences industry, including the eye-catching new R&D tax credit scheme”.

“However, tucked away in the Budget papers are several other schemes of real benefit for UK life sciences,” he noted.

One such example, he said, is accelerated drug approvals by the MHRA which will also have accelerated drug approval pathways for impactful medicines such as cancer vaccines.

The ten-year extension to the British Patient Capital programme is another hidden benefit, added Farrant.

And even the proposed East-West rail link between Oxford and Cambridge could bring benefits to the industry, he said, by helping to boost collaboration and innovation between two key UK scientific research centres.

“In addition, new technology investment vehicles will enable pension funds to more easily invest in new technologies and science—a further demonstration of the government's commitment to supporting growth in the sector.”

Medtech boost

Tim Hargreaves, partner at Marks & Clerk, added that the Budget, following on from the launch of the UK’s first  MedTech Strategy last month, seems to confirm that the government is committed to speeding up access to new treatment and encouraging the rapid adoption of new technologies.

“The headlines are taken by the significant funding for AI research, but given the reliance of many new diagnostic methods and drug discovery techniques on machine learning innovations that could also provide a real boost for medtech innovation,” he commented.

“It’s also good to see a recognition that regulatory and approval processes need to be speeded up, especially for new areas of innovation such as cancer vaccines and AI therapeutics, and this will be a boost for tech companies whose success depends on finding a timely route to market.”

MHRA regulation ‘not a barrier’ to market

Alison Dennis, partner and international co-head of life sciences and healthcare at Taylor Wessing, commented on the proposals affecting the MHRA.

“The MHRA has had to recognise that outside the EU, the UK is a relatively small market and for which a separate regulatory system would be a barrier to placing medicines and devices on the market,” she said.

“By recognising other authorities' decisions (both for medicines and devices), the MHRA can ensure that regulation is not a barrier to market entry into the UK.

“There are likely to be further pertinent details to follow to ensure patient safety. The MHRA will likely have powers to determine that a particular medicine or device is not acceptable, despite being regulated in one of the ‘approved’ countries.

“The MHRA will also need to develop an IT system for the registration of products so it can operate its supervisory powers properly. There will be a much greater emphasis on post-market surveillance as the means by which the MHRA will act as a regulator for medicines, medical devices and IVDs.

“Extra funding and a supportive environment for innovative products wanting early access is to be welcomed—and while £10 million is a good start, more funding will be needed to achieve a significant difference in this regard.”

Biotech companies stand to benefit

BIA gathered responses from three biotech companies that will benefit from the new R&D tax relief.

Infex Therapeutics is a biotech company in the North West developing medicines to treat infectious diseases and tackle the threat of anti-microbial resistance (AMR).

Peter Jackson, CEO, said: “Today’s announcement is welcome news for Infex and UK life sciences, which is a key pillar of the UK growth economy. The new R&D tax credit system will give us the financial flexibility to continue to advance our pipeline of innovative treatments for life-threatening infections.”

RQ Biotechnology is developing antibody-based treatments to protect immunocompromised people against COVID-19 and other future pandemic threats.

Hugo Fry, CEO, said: “As a small but ambitious London-based antibody discovery company, we’re really pleased to hear the chancellor’s announcement today of a special higher research and development tax relief rate.

“This announcement will really allow us to grow quickly, to build our portfolio, employ local talent and to continue our strong investment in the UK’s biotechnology sector.”

Stevenage-based biotech  VasoDynamics develops medicines to address the side effects associated with cancer therapies.

Fiona Li, founder and CEO, described government support to drug research and development as “vitally important”

As noted by BIA,  government figures show that there are more than 6,500 businesses in the UK life sciences industry, and approximately 70%-80% of those are SMEs.

These businesses employ more than 280,000 people and generated £94.2 billion of turnover in 2021. The number of businesses and the number of sites operated by these businesses have both seen an upward trend since 2009, with 23% more businesses and 32% more sites operating across the UK in 2021 compared with 2009.

BIA also highlighted that medical innovation is driven by smaller companies, according to  findings by health information technology and clinical research firm Iqvia. Those smaller companies represent 65% of the global drug development pipeline, with an additional 7% being developed by them in partnership with larger firms.

And,  according to McKinsey, the UK accounts for 35% of all life science start-ups created in Europe since 2012.

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