The State of the Uk Healthcare & Life Sciences

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The State of the Uk Healthcare & Life Sciences THE STATE OF THE UK HEALTHCARE & LIFE SCIENCES SECTORS MYTHS, REALITIES AND CHALLENGES Produced by www.biotechandmoney.com ABOUT THE AUTHOR Elizabeth Klein is a highly-rated Biosciences investment analyst with twenty years’ experience in the City. Prior to founding her own consultancy – Klein-Edmonds Associates – which advises organisations and firms in the Biosciences sector, Elizabeth was a senior research analyst at N+1 Singer where she developed an extensive network of client relationships and focused on the Healthcare and IP Commercialisation sectors. Before that she was at Teathers, Bridgewell, R.W. Baird and Dresdner Kleinwort Benson. She was No 1 Healthcare Sector StockPicker in the Starmine Awards for 2006 and 2013 and was in the Top 10 team in the Extel survey for much of the last decade. Elizabeth holds a 1st Class degree in Applied Biology with Genetics, an MA and an MBA. A LETTER FROM BIOTECH AND MONEY The genesis of this report can be found in the made money from the sector discussions and debate that occur in Biotech and • deep analysis of the myths, misconceptions and Money’s CEO and Investor Forum - a Chatham House realities of investment in the sector Rule exclusive gathering of some of the industry’s leading CEOs and stakeholders that meet to discuss • analysis of access to capital in the UK, including VC their common challenges and strategies to help grow investment trends the industry. • comprehensive current market overview and assessment It became apparent very quickly that there is a huge disconnect between the realities of the sector and the • investor insight from Neil Woodford understanding investors have of the opportunities and • perspectives on the future of life science risks involved. Too often, myths and misconceptions investment in the UK about the challenges, benefits and potential of returns on investment in the UK healthcare sectors have • analysis and conclusions on the attractiveness of deterred the financial community from supporting the UK healthcare opportunities sector. It was with this in mind that the idea was born We would like to acknowledge and thank each of pulling together a report that would demystify the contributor for their effort and our analyst author sector, expose and debunk myths, showcase success Elizabeth Klein for her tireless efforts. I would like to stories, and provide the fundamental truths that also thank our company endorsers and members of investors need to know about investing in healthcare. the CEO forum, as well as Melanie Toyne-Sewell of Over thirty of the sector’s leading CEOs have joined Instinctif Partners without whose support this report forces with stalwarts such as the Minister for Life would not be possible. We are particularly indebted Sciences, the BIA, EY, LSE, Imperial Innovations, and to Darrin Disley, CEO of Horizon Discovery Group Neil Woodford to endorse and contribute to this bold and Peter George, CEO of Clinigen Group for their initiative. Biotech and Money is extremely proud to act vociferous support and enduring commitment to the as the vehicle for this endeavour. project. So what can you expect? Terence O’Dwyer, Neil Darkes, • hard facts, data and in-depth case studies Co-Founders - Biotech and Money demonstrating how and where investors have 2 CONTENTS 4 THE LIFE SCIENCES IN THE UK: LETTER FROM GEORGE FREEMAN, MINISTER FOR LIFE SCIENCES 6 INTRODUCTION 7 THE UK BIOTECH ECOSYSTEM IS FLOURISHING AND CONTINUES TO LEAD EUROPE: STEVE BATES, CEO OF THE UK BIOINDUSTRY ASSOCIATION 9 SECTION 1. THE TRUTH ABOUT THE UK’S HEALTHCARE AND LIFE SCIENCES SECTORS 12 SECTION 2. CHALLENGES 14 SECTION 3. THE UK LIFE SCIENCES AND HEALTH SECTORS ARE WELL-POSITIONED 23 CREATING THE OPTIMAL ENVIRONMENT FOR INVESTORS AND ISSUERS IN LIFE SCIENCES: CHRIS MAYO, PRIMARY MARKETS, LONDON STOCK EXCHANGE 28 IP COMMERCIALISATION BUSINESSES ARE A UNIQUE RESOURCE FOR THE UK’S HEALTH SECTORS: NIGEL PITCHFORD CIO, IMPERIAL INNOVATIONS 34 SECTION 4. ACCESS TO CAPITAL IS KEY TO SUCCESS 35 THE CURRENT STATE OF THE MARKET: ANDREW JONES, DIRECTOR, EY TRANSACTIONS ADVISORY 39 BRITISH SCIENCE IS IN GREAT SHAPE: NEIL WOODFORD, HEAD OF INVESTMENT, WOODFORD INVESTMENT MANAGEMENT 41 IN SUMMARY – THE SECTOR IS A KEY INVESTMENT OPPORTUNITY 42 SECTION 5. CASE STUDIES – THE SUCCESS STORIES 43 BTG PLC 50 CLINIGEN GROUP PLC 56 HORIZON DISCOVERY GROUP 63 MIDATECH PHARMA PLC 70 SKYEPHARMA 76 APPENDIXES 85 REPORT DISCLAIMER 3 www.biotechandmoney.com n [email protected] n phone: +44 (0) 207 193 9690 or (0) 207 193 9685 THE LIFE SCIENCES IN THE UK: A LETTER FROM GEORGE FREEMAN, MINISTER FOR LIFE SCIENCES I am delighted to contribute to this report, and to do • £2bn in public investment in health life science so as the UK’s first Minister for Life Sciences. research via the Research Councils and National Institute for Health Research Programme; There is a huge amount to be proud of in UK life • Over £250m awarded to 318 early stage sciences. We have one of the strongest and most companies and university ventures under the dynamic life science industries in the world. The sector Biomedical Catalyst, attracting £120m of further generates an annual turnover of £56bn and ranks industry investment and over £1bn in post-project top in Europe in attracting foreign direct investment. financing through licensing deals and acquisitions; Our life science companies, at all levels, compete confidently in global markets. In 2014, the total • Over £200m dedicated to sequence 100,000 value of health and life science goods exports was whole genomes, with a commitment to further approximately £27bn – 10% of all UK manufactured funding made in the recent Spending Review; product exports. And the very latest trade data shows • £55m to develop the Cell Therapy Manufacturing a 23% growth in exports of pharmaceutical goods in Centre; the first three quarters of 2015. • The Patent Box incentive that gives an effective Underpinning this success is strong and consistent 10% corporation rate tax incentive for qualifying investment in R&D. The UK pharmaceutical sector profits on products derived from UK or EU patents. alone accounts for 20% of all UK business R&D, more This has been particularly welcomed by the than any other sector. Standing behind this industry pharmaceutical industry (in the words of the GSK investment is the UK’s world class science base and [GlaxoSmithKline] Chair Sir Andrew Witty, “The an increasingly strong and informed relationship introduction of the Patent Box has transformed between our universities and the wider life sciences the way in which we view the UK as a place for community. It is fantastic that life science companies new investments”). comprise by far the highest proportion of spin outs from UK universities – 42% over the past ten years, More broadly, the Government’s recent Spending and 48% since 2012. Review has strengthened the research foundations on which the life sciences sector is built. The Science The Government is clear that life sciences is a priority Budget has been ring-fenced in real terms, we will sector for the UK economy. Since the Prime Minister invest £6.9bn in science capital between 2015-2021, launched the Strategy for Life Sciences in 2011, we and spending on the UK’s Catapult network will have built a long term partnership between Industry increase during this Parliament. and Government and provided direct and enabling support to unlock new growth and innovation. This So what does the future hold? How can we ensure that has included: UK life science continues to compete successfully in a global healthcare market forecast to grow up to 10% www.biotechandmoney.com n [email protected] n phone: +44 (0) 207 193 9690 or (0) 207 193 9685 4 per annum over the next ten years? Continued data. I am delighted that the UK life sciences industry investment in R&D, innovation, productivity and skills is contributing so actively to the Project through the are clearly all vital. As well as this, there are a number Genomics Expert Network for Enterprises (GENE) of specific areas where the Life Sciences Industry consortium – a unique partnership between the NHS’s and Government are working closely together, which Genomics Medicines Centres, industry and academia offer strong potential to improve patient outcomes focusing on unlocking patient benefits from the data. and deliver economic growth. I would like to highlight some of these here. Finally, it is important that we grasp the health and innovation potential to UK life sciences from Digital The first is the Accelerated Access Review that I Health. Developments in data analytics, mobile announced in November 2014. The review, which is technology and personalised medicine offer us major independently chaired by Sir Hugh Taylor, has seen opportunities to improve patient experience and an unprecedented coming together of patient, NHS, outcomes, driving economic growth and reducing industry and academic voices behind a common goal NHS costs. McKinsey have estimated that savings – to revolutionise the speed at which 21st Century of between £8bn and £14bn could be generated innovations in medicines, medical technologies and for the NHS by 2020/21 by new digitally enabled digital products get to NHS patients. The AAR’s core services. The Government’s Office for Life Sciences assumption is that what is good for patients will also is working closely with industry and NHS partners be good for growth, by making this country the world to unlock opportunities in this area, feeding into a leading place to design, develop and deploy medical cross-Government Digital Transformation Plan to be innovations. I am delighted that UK life science published shortly. businesses are playing a full part in the review and contributing to solutions to simplify the pathways to Whilst these are exciting and challenging times, I am regulatory approval so that patients get earlier access confident about the future of UK life sciences, and to good products.
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