The U.K. life sciences sector got a boost Wednesday when the
British government backed a number of industry demands designed to
stimulate drug research.
U.K. Chancellor of the Exchequer George Osborne told lawmakers
the government will boost tax relief for research and development
carried out by small and medium-sized firms, as well as announcing
measures to encourage investment in early stage companies.
In a submission to the government prior to the budget
announcement, the BioIndustry Association, which represents U.K.
biotech and pharmaceutical firms, made the maintenance of R&D
tax credits a key demand. The group also backed a recommendation
made by British inventor James Dyson that tax relief should be
raised to cover 200% of qualifying R&D expenditure, from a
current level of 175%.
Osborne not only raised the rate of relief to 200% from April
2011, but pledged to increase it again to 225% a year later.
Following the budget, BioIndustry Association Chief Executive
Nigel Gaymond said: "This is an extremely significant day for our
sector, enhancing the U.K.'s competitive position in life sciences
through a wide variety of supportive measures. R&D tax credits
are the lifeblood of the R&D intensive bioscience sector, and
BIA has maintained a sustained campaign on this issue for many
years."
The government also announced other measures which pleased the
life sciences sector.
GlaxoSmithKline PLC (GSK), the country's biggest drug maker,
said they contained "a suite of measures that, taken together, have
the potential for a significant positive impact on the life
sciences sector in the U.K."
Glaxo's head of R&D, Patrick Vallance, said in a statement
that "GSK warmly welcomes the government's plans to streamline
regulation of clinical trials and improve the efficiency and
cost-effectiveness of conducting them in the U.K."
He said that "added to the government's proposal to move forward
quickly on a plan to realize the U.K.'s unique competitive
advantage as a location for research using electronic health
records, these proposals have the potential to make a real positive
difference to clinical research in the U.K., with the benefits that
brings for both patients and the economy."
Britain punches above its weight in pharmaceutical research and
drug innovation. But it has recently been stung by the closure of
some key R&D sites in England, notably by Pfizer Inc (PFE) of
the U.S. and by Novartis AG (NVS) of Switzerland in moves
reflecting a sector-wide trend as pharma companies respond to poor
product innovation and downward pressure on drug prices.
"Globally, the pharmaceutical industry is facing unprecedented
pressures, " AstraZeneca said Wednesday, that are "forcing
companies to make tough decisions about where and how to invest in
the development of better treatments for diseases such as cancer,
Alzheimer's and drug resistant infections."
The U.K.'s second biggest drug maker said it therefore welcomed
the government's package of measures, "particularly those on
clinical research and the environment for undertaking clinical
trials," adding that "they represent a powerful statement of intent
about the government's determination to maintain the attractiveness
of the U.K. as a center for R&D activity."
Glaxo also applauded plans by the head of the publicly-funded
National Health Service to report this year on how to accelerate
the adoption and diffusion of medical innovation in the NHS.
"All those involved in research, the NHS and industry now have a
key role to play in supporting these changes and in enabling the UK
to realize its potential as a world leader in the research,
translation and diffusion of medical innovation, for the benefits
of UK patients," Glaxo said.
Richard Barker, Director General of the Association of the
British Pharmaceutical Industry, said it "warmly welcomes measures
in the budget to cut red tape and improve the process for clinical
trials, a significant step towards faster patient access to new
medicines whilst also making the U.K. a more attractive place to do
business."
The current retrenching by Big Pharma globally is making it more
dependent on biotech companies and academia for basic science
research, so the U.K. government's steps announced Wednesday will
reverberate throughout Britain's drug discovery universe.
Keith Redpath, a biotech analyst at smallcap broker FinnCap,
said the relief claimed by biotech firms rarely amounts to huge
sums, but the hike will help to cut companies' cash burn. Redpath
explained that many drug research firms that don't yet make any
revenue and therefore don't pay corporation tax receive the tax
relief in the form of cash payments.
Other analysts warned, though, that there will be further to go
to restore confidence in a sector where a series of high profile
failures have left investors wary.
Still, many early stage firms with little or no revenue, such as
Proximagen Group PLC (PRX.LN), ImmuPharma PLC (IMM.LN), and
ReNeuron Group PLC (RENE.LN), stand to benefit from the changes
announced Wednesday.
Chancellor Osborne also raised the level of income tax relief
individuals investing in early stage companies can claim, and
relaxed the rules governing which investments by venture capital
trusts qualify for tax incentives.
Redpath said such measures would go some way to encouraging
investment in drug discovery firms, but warned that recent high
profile failures have left many investors regarding biotech as
having "an unacceptable risk profile". So far in 2011 both Antisoma
PLC (ASM.LN) and Renovo Group PLC (RNVO.LN) have seen more than
half their market value wiped out in a single day after flagship
drugs failed in clinical trials.
A decade ago, there were "30 or 40" investment funds
specializing in life sciences, Redpath said, while today, only a
handful remain.
Others questioned whether Osborne has done enough to tempt
investors back to the sector.
Anthony Baxter, Chief Executive of Cyprotex PLC (CRX.LN), which
carries out pre-clinical tests on early stage drug candidates, said
the government needs to offer greater incentives to reanimate a
"paralyzed" venture capital industry.
Unless stronger incentives for investment are offered,
highly-skilled workers--such as those made redundant from Pfizer's
Sandwich laboratory--will leave the country, Baxter said.
-By Sten Stovall, Dow Jones Newswires; +44 207 842 9292;
sten.stovall@dowjones.com
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