Report warns economic instability has hit UK drug discovery

A UK report has said that inflation and geopolitical instability have led to a “dramatic drop” in investment in smaller companies developing new medicines, with a knock-on effect on the entire life sciences industry.

The document from the Medicines Discovery Catapult (MDC), BioIndustry Association (BIA), and the Association of the British Pharmaceutical Industry (ABPI) points to a steep reduction in both the amount and available sources of financing for SMEs between 2020 and 2022 – from just over £3 billion ($3.7 billion) to £1.7 billion – driven mainly by a fall in public equity funding.

In the last few weeks, for example, two UK biotechs – Redx Pharma and e-Therapeutics – have said they intend to delist from the London Stock Exchange’s Alternative Investment Market (AIM) due to a lack of interest from UK institutional investors.

Difficulties in accessing funding combined with cost inflation and exacerbated by shortages of skilled staff in the NHS and other sectors a lack of laboratory space, and a cumbersome system of accessing public funding for projects have created a ‘perfect storm’ for the sector, according to the 2024 State of the Discovery Nation (SODN) report.

“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,” said MDC chief executive Professor Chris Molloy.

“For early-stage companies, we need to offer more coordinated access to the skills and technologies they need to generate ‘investment-ready’ data sets,” he added. “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.”

The report notes that SMEs are a vital source of innovation, accounting for 70% to 80% of the 6,850 businesses in the life sciences sector – which generated £108.1 billion in turnover in 2021 – as well as around a third of all life sciences start-ups created in Europe since 2012.

It comes against a backdrop of other challenges facing the UK biopharma sector, including a fall in the number of industry-sponsored clinical trials amid continued pressure on the NHS, inadequacies in manufacturing capacity, and difficulties in recruiting workers with the skills to support digitalisation, which threaten the government’s vision of making the country a life sciences superpower by 2030.

The report makes a series of recommendations to support SMEs, including measures to encourage collaboration, coordination, and targeted funding, as well as improved access to translational experts, lab facilities, and incubator spaces.