London – To the imponderables of the Brexit vote to leave the EU, U.K. biotech investors must now add the uncertainties generated by U.S. President Donald Trump\u2019s pledge to bring down drug prices.<\/p>\n
There are threats and opportunities in both, according to directors of the U.K.\u2019s new breed of patient and consistent capital funds. The crux of taking advantage \u2013 or not \u2013 will lie in building on an excellent science base to deliver innovative therapies that truly add value.<\/p>\n
\u201cKeep the focus on innovative science and you will still get good returns,\u201d Nigel Pickford, chief investment officer of the quoted university technology commercialization company Touchstone Innovations plc, told delegates at the Biotech and Money conference which convened in London in February. \u201cWe are purely focused on innovation,\u201d he said.<\/p>\n
Large and unprecedented investments in biotech since the referendum last June are being held up as evidence that the U.K. life sciences industry is Brexit-proof. However, it is likely those investments were in the works and would have happened anyway. On the other hand, it is not known how many would-be investors have changed their minds or are pausing to see how the consequences of Brexit unfold.<\/p>\n
For Pickford, an immediate concern is that the well-spring of innovation in the country\u2019s science base could be undermined if scientists from other EU member states decide to leave. To date, the U.K. government has refused to give any assurances about working rights and it has even been suggested that EU nationals working here are bargaining chips in the Brexit negotiations that are due to get underway this month.<\/p>\n
Over and above the status of individual scientists, Pickford said their families must be made to feel welcome, so they want to stay. \u201cWe have to nail that pretty fast,\u201d he said.<\/p>\n
Kate Bingham, managing partner of SV Life Sciences, agreed that where the U.K. has a leading edge in biotech is in the quality of its universities and the fact that academics are increasingly aware of how their science should be shaped so it can be commercially exploited.<\/p>\n
Another advantage is cost, with SV Life Sciences investee companies based in the U.K. requiring only 60 percent of the cash burned by U.S counterparts to advance programs to the same point. \u201cThe U.K. from a R&D perspective is very strong,\u201d Bingham said. \u201cIt is a more joined up system and it is cheaper.\u201d<\/p>\n
Layered onto the significant life science base in the U.K., there is now more optimism about the ability to deliver the commercial benefits, said Martin Murphy, CEO of Syncona Partners, the patient capital fund established by medical research charity Wellcome Trust.<\/p>\n
\u201cThe ambition has gone up; people have been in several companies and so have investors. They want to build companies that would not look out of place in Kendall Square [Cambridge, Mass.]. The environment to really develop opportunities from basic research is there.\u201d<\/p>\n
RELOCATION OF EMA<\/strong><\/p>\n Jim Mellon, chairman and co-founder of Mann Bioinvest, bashfully admitted he voted for Brexit, \u201cfor economic reasons,\u201d but said that \u201cone downside is the loss of the EMA.\u201d However, he said he believes the U.K. will be able to retain its influence in pharmaceutical regulation once the EMA relocates from London.<\/p>\n Bingham said it is crucial that the U.K. is aligned with either the FDA or EMA regulatory processes. \u201cYou can\u2019t have the U.K. out on its own; there needs to be a partnership with a central regulatory authority,\u201d she said.<\/p>\n Murphy said one way for the U.K. to retain its position as a market for launching innovative drugs is to establish mechanisms supporting early access that are linked to reimbursement.<\/p>\n \u201cDrugs have got to be paid for. If you get drugs into the system faster, then the U.K is an attractive place to bring drugs to market,\u201d Murphy said.<\/p>\n Mellon pointed to the steep drop \u2013 from 15 percent to 4 percent \u2013 of clinical trials worldwide that are conducted in the U.K. Most of the fall can be attributed to bureaucracy emanating from the EU, he said. \u201cIf Brexit happens, it will be good for clinical trials.\u201d<\/p>\n However, Pickford also pointed to a higher cost of carrying out trials in the U.K. compared to mainland Europe. \u201cWe need a reappraisal and a look at costs,\u201d he said.<\/p>\n READING THE TRUMP RUNES<\/strong><\/p>\n The indication that President Trump will give Medicare the right to negotiate prices underlines the importance of having innovative products, according to the panel.<\/p>\n \u201cIf you are developing the 13th me-too drug, with an incremental improvement, you will face downward price pressure,\u201d Murphy noted. \u201cIf your drug is innovative and there is no other product, there can\u2019t be counterbids, so innovative products will still be attractive.\u201d<\/p>\n For Mellon, it depends on the type of treatment. Drugs for rare diseases that require repeat dosing are likely to face greater pricing pressure than cell and gene therapies where a single treatment may deliver long-lasting effects. \u201cOrphan drugs are an obvious and easy target [for price reductions],\u201d he said.<\/p>\n While she welcomed \u201cputting the lid on\u201d egregious examples of overpricing, Bingham questioned whether Trump will have his own way on price cuts, given the power of the pharma industry. She pointed to last November\u2019s defeat of California\u2019s proposition 61, the \u201cDrug Price Standards Initiative,\u201d saying, \u201cDon\u2019t underestimate the pharma lobby.\u201d<\/p>\n However, she said she also believes the threat of pricing negotiations will force pharma to be better at explaining how it adds value. \u201cThe industry has to make coherent justifications for innovation,\u201d she said. \u201cI\u2019m happy to see [Trump] squash prices if we get innovation through.\u201d<\/p>\n Murphy suggested there will be repercussions for European biotech if President Trump changes the tax regime to encourage pharma to repatriate profits currently stored abroad. That will mean there are fewer incentives to buy biotech assets outside the U.S.<\/p>\n Pickford agreed that could prompt a slow-down in European merger and acquisition activity. \u201cMost of our companies we try to sell \u2013 if capital is repatriated to the U.S., there will be a quiet time for a while, as people work out what to do,\u201d he said.<\/p>\n