Pandemic provides further impetus to the booming life-sciences sector
Overview – Pandemic and technological breakthroughs driving growth
The COVID-19 pandemic has significantly boosted the life-sciences sector. The rapid development of vaccines highlighted the innovative characteristics of the sector, its agility and its key role in protecting public health. It also underscored the critical importance of investment in medical research, as well as projecting leading scientists into the media spotlight. COVID-19 also accelerated investment into the sector. Private and public biotech funding, including global venture capital (VC) investments, deals, and IPOs, reached all-time highs in 2020, according to McKinsey. The consultants added that the surge in financing helped the global biotech sector outperform its sister industry, pharmaceuticals, and the consumer-goods and technology sectors. The rapid pace of technological disruption is a key influence. Advances in digital technology, artificial intelligence, machine learning, robotics, big data and computing power are just some of the drivers increasing the speed at which new products can be brought to market, processes can be streamlined, and safer, more effective treatments can be delivered to patients.
Current position – UK emerges as a global leader
The life-sciences sector is booming around the globe, and the UK is emerging as a leader in this field. It is, for example, Europe’s centre for breakthrough life-sciences start-ups and is behind only the US worldwide. The UK’s scientific excellence has played a key role in propelling its life-sciences sector. The country produces 29% of European scientific journals, invests heavily in R&D, and boasts globally excellent universities. The government has promised to make the UK a “science superpower” and has pledged £1bn in support of this.
Meanwhile, private investment is flooding into the country. McKinsey reports that 22 biotech companies were founded in the UK between 2018 and 2022 – twice the number in France or Switzerland. Moreover, some of the world’s biggest property investors are planning to spend billions of dollars on labs and offices for the sector in the coming years with much of the investment directed at the “Golden Triangle”, according to the Financial Times.
The future – technological innovation to drive growth
The life-sciences sector is expected to grow rapidly worldwide in the coming years. In the US, which dominates the industry, annual growth of 7.7% is projected for 2022 to 2030. Technological innovation and an insatiable appetite for more effective and more efficient treatments as societies age around the globe are driving growth. Environmental, Social and Governance (ESG) factors will also remain prominent as companies face enhanced disclosure requirements and new global standards. Access to medicines, drug pricing, environmental sustainability, health and race equity, and diversity in leadership are among the ESG issues facing the industry.
The biotech sector worldwide is encountering specific challenges in 2022 after a sharp drop in the valuations of biotech companies due to scientific setbacks and as investors abandon the sector following a pandemic-related surge. That is hitting the ability of biotech companies to raise fresh funds. Many companies raise finance through IPOs and in the expectation that they can tap investors for fresh funds in subsequent share sales as their drugs progress through R&D. European and UK companies have been particularly badly affected as they tend to raise smaller amounts of money and have less of a financial cushion than their US counterparts. This can lead to companies experiencing solvency issues and difficulties raising further finance. Solvency issues can be further compounded with delays in regulatory approval, slow progress in commercialising products, a lack of experience at boardroom level, and the inability to establish partnerships with a large pharmaceuticals causing companies to fail at an early stage.
Overall, however, the life science industry, and the biotech sector, should continue to grow rapidly in the UK. Across the country, there are 6,300 life-sciences businesses, generating a turnover of £80.7bn and employing more than 256,000 people. Moreover, the industry is expected to grow by an average of 14.6% per annum over the period 2018–28. The main barrier facing UK businesses is finding early-stage funding, which is far more difficult to obtain in the UK (and Europe) than in the United States or China. The government is planning to introduce new rules on R&D tax relief in April 2023, which will hopefully prove positive in this regard. The way artificial intelligence is regulated in life sciences and other industries is also a challenge, and this area too is being reviewed by the UK government.
“Technological innovation and an insatiable appetite for more effective and more efficient treatments as societies age around the globe are driving rapid growth, but that growth can come at a cost.”