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Innovation in UK’s MedTech and biopharma sectors is in decline, what’s next?



HealthTech World hears from Imperial College London professor, James Barlow about a series of new reports that highlight a declining rate of innovation and competitiveness in the UK’s MedTech and biopharma sectors.

The UK is faced with a dramatic slowdown in its rate of economic growth, due in part to a decline in innovation and competitiveness across the medtech and biopharma sectors, according to a series of new reports published by Imperial College London.

This problem is common across G7 countries, the report stated, and many are responding with a more active industrial policy to help drive economic growth.

Notably, the US Administration’s CHIPS and Science Act and Inflation Reduction Act are designed to bolster US competitiveness and national security in key sectors such as renewable energy and semiconductors.

Over the past year, joint teams from Imperial College London’s Faculty of Engineering and Business School have examined the competitiveness of the UK’s industry, identifying biopharmaceuticals, medical technology and telecommunications as three sectors that are lagging behind.

The ‘Sectoral Systems of Innovation and the UK’s Competitiveness’ reports assess the value-added per capita of each sector compared to other nations and recommend various technological solutions and policy suggestions that could help boost innovation.

“The report aims to start a conversation, consolidate sector knowledge, and serve as a basis for further research and policy discussions,” said Professor James Barlow, co-author and professor of technology and innovation management (healthcare) at Imperial College Business School.

Professor James Barlow

Common themes emerged across all three sector reports.

The authors recommended the creation of more innovative, collaborative and flexible regulatory environments that can align with key markets such as the EU and the US.

Raising innovation productivity through targeted policy interventions and the adoption of new business models is also highlighted.

Professor Francisco Veloso, Dean of Imperial College Business School, said: “If the UK is to compete on a global stage, turbocharging key industries like Biopharmaceuticals, Medtech and Telecommunications needs to be a priority.

“That means targeted policy and support.

“These Imperial College London reports provide crucial insights into the needs, challenges and opportunities of these important sectors and the scope for industry, academia and government to work together to boost their productivity and drive economic growth.”

Sustaining innovation in the UK’s biopharma sector

The UK has a strong and longstanding reputation for the life sciences, two world-leading pharma companies, and many small start-ups and new players.

The biopharma sector contributes a GVA of around £15 billion annually to the UK economy and 400,000 jobs.

The sector has a 3.36 per cent compound annual growth rate (CAGR) since 2016.

However, there are concerns about sustaining the sector’s global competitiveness.

Pharmaceutical companies around the world are experiencing pressures associated with the declining productivity of drug R&D, tightening regulations and downward price pressure by health systems and governments seeking better value for money.

But several homegrown challenges also threaten to derail the UK’s ambitions in this sector.

These include a decrease in clinical trials conducted in the NHS, which raises concerns about the attractiveness of the UK for launching new drugs.

This has not been helped by the immense strain that the NHS is currently under, with waiting lists continuing to soar and resource and workforce shortages hampering its capacity to look beyond the immediate challenges.

Other issues highlighted in the report include regulatory divergence between the UK and other major markets, slower access to newly approved medicines compared to some other countries and the erosion of the drugs manufacturing sector.

On paper, the NHS should be a great market,” Professor Barlow said.

“It’s a single national health system and a massive market, potentially.

“If the NHS were a better place to do trials, those trials would then pull through into sales.

“It’s just getting more and more difficult to conduct clinical trials in the UK. And that’s not uniquely a UK problem.

“Clinical trials are becoming more difficult in every developed country.

“But getting them through the regulatory process in the UK and finding NHS Trusts and partners who can participate has been very difficult.

“When you’ve got stressed, overworked doctors and medical professionals, they don’t necessarily have the time and space to get involved in a trial as well.”

Offshoring of manufacturing capacity, particularly for generic drugs, has resulted in manufacturing volume falling by 29 per cent and 7,000 jobs being lost since 2009.

This has had a knock-on effect on the UK’s attractiveness for research and development.

Professor Barlow emphasised the importance of rebuilding a virtuous circle that encompasses a favourable regulatory environment for trials, a robust NHS for clinical research, sufficient R&D facilities and the ability to manufacture drugs close to home.

“A problem in the UK is the erosion of drug manufacturing,” Professor Barlow added.

“If you haven’t got the manufacturing capacity, then you’re less attractive for the R&D as well.

“You need a virtuous circle of a good regulatory environment for doing trials, a good NHS environment for doing trials, good R&D facilities and funding, and then the ability to manufacture close to home.”

Supporting scale-ups through the “valley of death”

Despite a strong research base, the UK has not been successful in growing large UK biopharma companies.

Rather, the sector is dominated by small and medium-sized enterprises (SMEs) that are frequently acquired by companies from the USA or elsewhere before they scale up.

“I think in the UK, one thing we are good at is scientific research, drug discovery,” Professor Barlow said.

“The early stage R&D is still very strong.”

“There isn’t a problem with funding for the basic science. We do have pretty strong research funding.

“It’s when you have to prove the concept on a larger scale in the field that it gets very expensive.”

The report calls for policymakers to improve financial support for the scale-up of promising small companies or risk early technologies and IP being sold prematurely to foreign companies.

This is one of the key areas where policy intervention is needed, Professor Barlow said.

“We spend a large amount of money supporting these companies and then the benefit goes elsewhere once they go to market,” Barlow added.

To break this cycle, start-ups need more support in navigating the so-called “valley of death”.

This is where the prototype has been developed and the concept had been proven but a gap in funding leaves companies struggling to stay afloat.

“It’s too early for large-scale funds from investors, but too late for grants. It’s that point where financial support is important, but also mentoring these companies through the trials process,” Professor Barlow said.

“Making it easier for them to navigate the regulations and get access to trial sites within the NHS.”

The growing potential of data science

Advancements in data science and artificial intelligence (AI) present opportunities for the pharmaceutical industry as the sector increasingly relies on computer-based modelling and AI tools in drug discovery and development.

By analysing vast databases of molecules, proteins and scientific reports, researchers can expedite early-stage drug development.

The UK is well-positioned to thrive in this growing sub-sector.

A significant proportion of companies specialising in AI for drug development are based in the UK and could play a role in boosting the country’s global competitiveness.

The challenge lies in ensuring these companies remain in the UK.

“Increasingly, the early stages of drug development can be done on the computer rather than in the lab and that may be reflected in the small uptick in the number of new molecules coming through the pipeline in the last few years,” Professor Barlow said.

“On the back of the technology, you’ve also got companies beginning to emerge which specialise in the data science.”

“Data science is certainly an important part of the picture. I think the UK is actually very well-placed.

“We’re very good with AI, machine learning and digital tools. There are the beginnings of a subsector of the pharma industry, which is made up of data science companies.”

Missed opportunities in med tech

Report authors Professor James Moore Jr and Yunus Kutlu, say that the MedTech sector shows promising growth.

Despite being primarily formed of SMEs, the sector contributes £13.5 billion to the UK economy (gross value added), with a GVA/employee of £100k.

Sector GVA had a 19 per cent compound annual growth rate between 2016-2020.

Despite this apparent success, in part thanks to a strong contribution from university spinouts, the report also highlights missed opportunities that could further enhance the sector’s performance.

Of particular concern is the uncertainty surrounding the UK’s post-Brexit medical device regulation, including challenges associated with EU regulatory practices and expertise for processing regulatory applications.

The report’s recommendations include improving the regulatory environment by finalising the post-Brexit transition for the Medicines and Healthcare Products Regulatory Agency (the UK’s regulatory body) and clarifying the fast-tracked route of devices approved by the US, EU and Japan.

The report urges policymakers to find ways to encourage NHS adoption of innovative MedTech devices and advises working with NHS staff to identify and address unmet clinical needs.

Recommendations also include greater MedTech-specific funding, the establishment of courses that include regulatory training in relevant technology areas and the improvement of technology transfer policies and procedures so that university spinouts are well set up for success.

Despite the array of challenges highlighted in Imperial’s new reports, Professor Barlow believes the UK is at the “bottom of the trough” and the future looks brighter for the MedTech and biopharma sectors.

It will not be a quick fix, but there is hope for revitalising the UK’s innovation ecosystem.

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