Since the 24th of June much has been made of the impact of the UK leaving the EU and how this will affect the pharma industry. Concerns are being brought sharply into focus as the planned date for triggering article 50 is now less than 7 weeks away.
From an M&A perspective the appetite for deals, both from within the UK and transatlantic, does not appear to be slowing. With so little of the government’s Brexit plan made public the potential ramifications of this decision will not be known for many years to come. Although the UK government has publically announced that investment in the life sciences industry remains a priority for the UK post Brexit. So far worries voiced regarding the life sciences sector include losing the EMA, attracting the right overseas talent and generally operating in a more uncertain environment.
Taking a view on the short term is a relatively easy task, with 8 healthcare transactions completed last year and many more in the pipeline we have experienced very little in the way of Brexit jitters and feel the short-term outlook is still positive. The drop in the value of the UK currency relative to the US dollar and Euro have made UK acquisitions appear more attractive to foreign acquirers.
Taking a mid or long term view when making post Brexit predictions is a different matter entirely. However, one important predictor of the future health of healthcare is the quantity of funding flowing into early stage research, as it is from here that the next generation of spin outs will form feeding in at the start of the biotech ecosystem. In this respect the UK government has promised continued direct funding for this business sector after the exit from the EU and has pledged £4.7 billion to support life science research efforts in the UK. This will go some way to plugging the £7.8 billion the UK received from EU initiatives such as Horizon 2020, but the private sector will likely have to play an ever more important role in early stage initiatives to avoid an undesirable slump in discovery funding and the subsequent negative knock-on effects to the wider industry.
On the 30th of January Novo Nordisk announced a £115m investment in a new research centre in Oxford. Employing around 100 scientists and working closely with the university Novo Nordisk aims to investigate new approaches to type 2 diabetes. The Danish pharma hopes this will enable the next generation of diabetes treatments to be discovered allowing it to maintain its strength in this important area for many years to come. Although this represents less than 1% of Novo Nordisk’s £1.5 billion yearly R&D spend it dwarfs previous academic collaborations such as the £40m Apollo consortium completed in 2016.
Novo Nordisk is not the only company to show faith in the post-Brexit life sciences. Soon after the referendum Alnylam maintained its commitment to establishing its Maidenhead facility. GSK committed $360m to expand manufacturing in the UK and AstraZeneca is finishing a $500m headquarters and research centre in Cambridge.
The UK has a world class history of academic excellence. Novo Nordisk’s CSO Mads Thomsen specifically cited the 800-year track record of Oxford University as a deciding factor in the decision to invest. It is safe to say that Britain’s top tier universities will remain a significant pull factor for investments and funding in the UK life science sector. Although it may be hard to predict all the consequences of the Brexit vote on the healthcare industry, history suggests the academic institutions which form the bedrock of this sector are not going anywhere soon and will be critically important in securing the future of life sciences research, after the UK leaves the EU.