BREXIT vs. SCIENCE Part 3: Brexit and Biotech

Author: Sandra Ionescu Edited by: Luiz Guidi

Will it be a hard or soft Brexit for biotech? The unprecedented decision of the UK to leave the EU has been marked by confusion and uncertainty. The biggest push against Brexit came from academics and the education sector. In Oxfordshire, with a 70% turnout in the referendum, 70% voted to remain in the EU. Slogans such as "science is global" have taken the Twitter world by storm. A sticker on the lab door in the Chemistry Research Lab at the University of Oxford still reads "this lab equipment was funded by the EU" and its walls are covered with over 20 flags representing the different nationalities of the lab members.

The UK is a powerhouse for innovation and Oxford has produced more spin-outs than any other city in the last five years (9 and counting this year alone). Oxford Nanopore, OxStem, EvOx, Vaccitech, Immunocore, and Adaptimmune are only a few of these successful start-ups. But will Brexit slow this process down? 

Opinions about the toll Brexit will take on the biotech industry are split, with some touting optimism and others declaring the end of British biotech. In an interview with The Telegraph, Dr. Eliot Forster, CEO of Immunocore and executive chairman of MedCity, said he was “optimistic” that Brexit would not have as severe an impact on life sciences as many have assumed. But others, such as JMP analyst Michael King, think that Brexit "will likely push the pause button on biotech for a while." Three of the biggest fears for the biotech sector that arise from this largely unexpected break-up are whether the anti-immigration sentiment will deter talent, if there will be a reduction in funding and investment in the biotechnology sector, and if these factors will limit the country's role in future regulations affecting R&D. 

An exodus of talent triggered by the Brexit vote is an obvious concern following Britain's vote to leave the EU, which may leave the biotechnology industry with its human resources ticker in the red. Deloitte has labelled the risks on the labour force as ‘high’. It may not be immediately obvious how much the UK relies on foreign skill but approximately 15% of academic staff at UK institutions are non-UK EU nationals. This figure rises to 20% among elite universities. To curb this potential exodus, EU workers must be assured that they are welcome to stay in the UK and still retain favourable job prospects and opportunities. Ironically, the Brexit vote - harbouring an anti-immigration sentiment - leaves the UK in a position where it must fight even harder to attract skilled researchers from abroad to remain competitive in biotech, an industry that is global in its nature. The selection process may no longer favour EU nationals as it did before and a substantial reduction in immigration will undoubtedly leave the biotech industry in an unfavourable position. Continued collaboration beyond UK borders would be vital if Britain is to remain at the forefront of the biotech industry.

We must also consider what the post-Brexit investment landscape will look like. A potential loss of billions in EU funding will be felt in both academia-industry collaborations and direct contributions to start-up biotech companies. The UK received back approximately 1.6 times more than it contributed in science funding from the EU between 2007 and 2013. This gap in funding can potentially be made up – in part or whole – from the approximately €17 billion contribution it gives to the budget as an EU member. But will this money be reinvested in biotech grants? Researchers are hopeful that the funding lost from the EU will be replaced by industry contributions and new government programs. To avoid a pause in cash flow, fledgling biotech companies may leave the UK for countries with easier access to European grant programmes and funding for start-ups and R&D. In addition, large companies might move their entire operation to mainland Europe in order to maintain access to the 500-million-person EU market – leaving the now considered second-tier market of the UK . This is not a new problem for Britain which frequently loses promising spinouts to foreign buyers, leaving the UK without large biotech companies on the scale of US groups such as Amgen, Biogen and Gilead. A new generation of UK life science companies, including Immunocore and Oxford Nanopore, which have attracted hundreds of millions of dollars of investment over the past two years, have raised hope for the future of British biotech. But Brexit may slow down this recent advance.

However, the impact of Brexit on investment in pharma and biotech may be limited when compared to other industries. The biotechnology sector tends to rely most heavily on the U.S. for investment and this contribution is not likely to change in the future, especially considering English is the standard language in an industry where communication is vital. Devaluation of the pound makes the post-Brexit Britain look attractive for investment but the effect of the swinging currency on biotech is difficult to define. A weak pound makes the UK more affordable and it will likely bolster investment from foreign entities. On the other hand, biotech companies rely on continuous funding from venture capitals and others, which are likely to be put off by the uncertainty brought on by Brexit. 

Most biotech firms derive a substantial majority of their revenue from the U.S.

Most biotech firms derive a substantial majority of their revenue from the U.S.

Lastly, despite being a giant science hub with a prominent biotech industry, the UK has lost its voice in determining industry regulations. If they want to sell in the European market, British companies will have to comply with laws that they cannot lobby against. This may end up being a lose-lose situation for both the UK and the EU who, in turn, has lost a powerful political voice in support of science. However, the dissociation will allow the UK  to tailor its home regulatory system to its own needs. This can be beneficial if the country takes an aggressive approach to stay at the forefront of emerging technologies such as cell therapy and can open up easier access to GMO research and human clinical trials, an area that has been largely shut down the by EU regulation. Still, the government and its citizens must  actively take steps to make the UK a world leader in these fields. Currently, the European Medicines Agency (EMA) can grant pharmaceutical companies a single marketing authorisation to operate across the EU, providing faster access to the whole market. Headquartered in London at the moment, the EMA will have to relocate in light of the referendum vote, which can be devastating for drug approval in the UK. 

The level of disruption following  Brexit depends largely on whether the UK remains part of the European regulatory framework and retains access to the single market and EU funding programs. Theresa May's signalling of a 'hard' Brexit makes this option seem unlikely, but the legislation surrounding the break-up is muddy. In the event of a hard separation, the government will have to actively support the biotechnology industry. The first and only minister of life sciences in the UK, George Freemen, has announced a joint government-industry steering group to "set out key priorities for the U.K. life sciences sector" in the upcoming divorce negotiations with the EU. The group will be co-chaired by Andrew Witty, the CEO of GlaxoSmithKline and Pascal Soriot, CEO of AstraZeneca. 

The impact of Brexit on biotech will be interlinked with its impact on academia and government policy. The consequences of the referendum vote will remain unclear until the terms of the break-up are outlined, but one thing is already glaringly obvious: biotech is a global enterprise and isolationism is not an option if the industry is to thrive. With May announcing the start of the Brexit process by March 2017, the games have just begun. Will post-Brexit biotech come out on top? Only time will tell. 

Sources:

https://www.bloomberg.com/gadfly/articles/2016-06-24/brexit-s-effects-on-biotech-pharma

http://www.nature.com/nbt/journal/v34/n8/full/nbt0816-787.html?WT.ec_id=NBT-201608&spMailingID=52025126&spUserID=ODkwMTM2NjI1NQS2&spJobID=981583612&spReportId=OTgxNTgzNjEyS0 

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http://www.fiercebiotech.com/biotech/uncertainty-and-market-volatility-as-u-k-to-exit-eu-prime-minister-to-resign 

http://www.nature.com/articles/nplants201422 

http://blogs.deloitte.co.uk/health/2016/02/what-would-brexit-mean-for-the-pharma-industry.html
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http://www.biotechandmoney.com/blog/topic/brexit-consequences-biotech

http://www.nature.com/nbt/journal/v34/n8/full/nbt.3657.html
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