A novel report released by Medicines Discovery Catapult, in partnership with the UK BioIndustry Association and the Association of the British Pharmaceutical Industry, highlights the impact of recent economic instability on companies in the life sciences sector.
The future health of patients depends on continuing to improve approaches to medicines discovery. However, barriers to investing in companies in the current economic climate threaten to prevent the UK from making some of its biggest breakthroughs.
State of the Discovery Nation (SODN) 2024: ‘Fostering a Dynamic, Sustainable Medicines Discovery Sector’ reveals the extent of the sector's challenges.
Funding SMEs brings big investor returns
As SODN shows, investment in life science companies brings clear benefits to patient health, UK productivity and investor returns.
In 2021, UK life science companies generated GBP £108.1bn in turnover and accounted for 35% of all life science start-ups created in Europe since 2012. Small and medium-sized enterprises (SMEs) are a vital source of innovation, making up 70-80% of the sector’s 6,850 businesses.
Macro-economic events such as inflation and geopolitical instability have led to a dramatic drop in therapeutic company investment. MDC's analysis of the UK medicines discovery pipeline showed a reduction in the amount and available sources of financing between 2020 and 2022.
SME funding dropped from £3.04bn to £1.7bn between 2021 and 2022
Funding is drying up
SME funding dropped from £3.04bn to £1.7bn between 2021 and 2022, with a reduction in public equity funding being the main factor behind the decrease. This was compounded by the inflationary increase in R&D costs over the period.
This has resulted in a challenging combination of reduced investment and higher costs, made worse by shortages of skilled staff and laboratory space.
Because of this phenomenon, companies cannot afford to generate data to prove their ‘investment-ready’ status to investors and pharmaceutical companies. Without funding, these companies’ ideas and unique skill sets will be lost.
The report highlights a need for a shift in mindset, combined with practical steps to help boost investment
What can be done?
The report highlights a need for a shift in mindset, combined with practical steps to help boost investment. If not, some of the most promising innovations and companies will be at risk. This will starve large company pipelines and slow the delivery of new medicines to patients who need them the most.
SODN 2024 examines the sector's challenges. It shows what is needed to secure a rich medicines pipeline and build on the UK’s global leadership in life sciences. This includes:
- Create strong partnerships with translational experts, who can take early-stage discoveries through to late-stage clinical development so SMEs can de-risk assets for investment wherever they are in the UK
- Provide high-quality laboratory facilities and incubator spaces for companies at all stages of maturity
- Make funds available, visible and accessible to support SMEs. Leverage private/public initiatives to co-develop pipelines of high-quality fit-to-fund companies.
Professor Chris Molloy, CEO of Medicines Discovery Catapult, explains: "If we want to keep the life sciences sector healthy and able to compete on a global stage, it is not enough to ask investors to simply become more comfortable with high-risk investments. We need to de-risk the innovation as much as we can. For early-stage companies, we need to offer more coordinated access to the skills and technologies they need to generate ‘investment-ready’ data sets. For investors, we need to provide them with a holistic picture of the health landscape and the UK medicines discovery pipeline so they have more insights to make funding decisions. In short, our sector deserves a purposeful fit-to-fund programme that will ultimately serve our patients, our pensions and our national productivity."
