Science and TechnologyWritten evidence submitted by the Ethical Medicines Industry Group

In response to the Science and Technology Select Committee’s call for evidence, the Ethical Medicines Industry Group (EMIG) has prepared the following submission that looks primarily at the current issues recognised by EMIG members in the commercialisation of research. Please note that EMIG has only provided a response to the questions for which it is appropriate to do so.

By way of background, EMIG is the trade association that represents the interests of over 170 pharmaceutical companies and allied organisations based in the UK. EMIG member companies range from start-ups to highly developed research-intensive businesses delivering essential products to patients, while continuing to invest heavily in the fight against disease.

They are commonly, but not exclusively, small to medium-sized enterprises (SMEs) which specialise either in the discovery and development of medicines to treat rare and underserved diseases, or focus their efforts on discrete disease areas, for example diabetes and respiratory disorders. EMIG member companies employ approximately 20,000 people in the UK and have a combined annual turnover of £4 billion.

Key Recommendations

The NHS must become a full and integral part of the medicines development process with SMEs. It must institute a wide-spread, commercially-aware culture that embraces research and organisationally enables this to be performed throughout its entire infrastructure, especially at a local level.

EMIG welcomes the proposals set out in the Government’s Life Science Strategy aimed at increasing collaboration between the public and private sectors. However EMIG believes that a range of de-risking measures are also needed to ensure the wider commercialisation of R&D, especially by SMEs. Best practices can be adopted from successes in other sectors. In particular the Technology Strategy Board (TSB) should have a greater brokerage role in forging new collaborative projects. SMEs need direct assistance to navigate the range of collaboration possibilities with the public sector.

HM Treasury should be prepared to provide direct funding for aspects of early phase clinical work performed by SMEs. In time, this would reap greater tax returns due to more products coming to market more quickly.

Regulatory authorities must be an integral, and not arms-length partner in the development of new ways of working between the public and private sectors. The Medicines and Healthcare products Regulatory Agency (MHRA) should engage with SMEs in a new, open and wide-ranging dialogue on ways to safely deliver new medicines to patients (and especially those with significant unmet medical need) more efficiently.

EMIG Response to Committee Questions

Pharmaceutical companies are among the highest investors in R&D. In addition to the well-known larger companies, there are numerous SMEs which, typically, lack the resources required to conduct all necessary steps from basic research to the marketing and distribution of finished products—essentially the commercialisation process. Outlined below are what EMIG believes to be the main factors behind this, and possible solutions to alleviate the current problems.

1. What are the difficulties of funding the commercialisation of research, and how can they be overcome?

1.1 Firstly, EMIG believes that there is a worrying lack of interaction and integration of the NHS with the development of the pharmaceutical sector and research institutions. The NHS should be fully integrated from the beginning of the R&D process in order to help identify where the future focus of research should lie. Having commissioned the targets, the NHS should also be integrated into all the development stages—from target concept to reality.

1.2 Furthermore, the financial and regulatory challenges associated with the commercialisation of research demonstrate the need for future progress to be made through greater collaboration between organisations in the public, private and charitable sectors. EMIG welcomes the proposals set out in the Government’s Life Science Strategy aimed at increasing collaboration between the public and private sectors. However, a range of de-risking measures are also needed to ensure the wider commercialisation of R&D, especially by SMEs.

1.3 The current levels of Risk and Return on Investment (RoI) is another key area which the Committee may wish to examine as part of its inquiry. In terms of the UK bio-pharmaceutical sector, drug discovery and development is a challenging and expensive business. This situation is compounded by the fact that most public sector funding bodies take the research from concept through to proof of concept but do not proceed any further. There is then an expectation that private sector funders will take on the commercially attractive projects and take them to market. However, this by and large is not happening for a variety of factors, in particular the fact that the early stage funders of research do not have a specific market in mind when they fund the initial research.

1.4 The long gestation time between a novel idea and its translation into a final product therefore carries huge uncertainty and risk en route with regard to the probability of there ever being an end-product that is commercially viable.

1.5 EMIG believes that a variety of reduced risk ‘pro-collaboration’ strategies are therefore needed. In particular, EMIG believes that the Technology Strategy Board (TSB), which positions itself as a catalyst for the commercialisation of innovative research and an honest broker between industry, academia and government, is ideally placed to play a critical role in the development of these collective reduced risk activities.

1.6 In terms of financial support, for SMEs such as EMIG members there is no substitute for direct research funding support from Government. This should include effective longer-term funding from the Government at the early stage of companies’ development. Tax breaks or co-funding arrangements are also useful, however it is often only large pharma, with their large legal/financial infrastructures who have the know-how and resources to access them.

1.7 Additionally, we are aware that a great amount of EU-level funding is potentially available through the Framework programmes and that much of this is to be targeted at SMEs. However, the EC definition of an SME actively excludes a large number of (descriptively) small/medium-sized companies from accessing it. EMIG therefore asks the Government to lobby for a widening of the EC SME criteria. A review is surely due as the SME definition was introduced in 2003.

1.8. Ideally, we would like to see HM Treasury seeking innovative ways to help fund especially early phase clinical work. The potential tax revenues after some years would be much increased as more innovative medicines are produced. This is because much of the required new clinical science can cost up to £10 million in order to gain some evidence of activity or lack of side effects and this part of the process is hugely risky.

1.9 There are a number of initiatives that could ease the funding gap, but not take it away totally. Tax incentives and Government schemes aimed at academia and start-up companies are part of the solution. However, established pharmaceutical businesses (small, medium or large) have a key role to play as they understand the market beyond the UK NHS and have the resources to drive efficient manufacturing and distribution. A degree of matched funding from Government may also prove to be part of the solution—the NHS would then benefit from preferential pricing and a proportion of the revenue from the product (medicine, device or diagnostic).

1.10 We would also support the view promulgated by our sister organisation, the BIA, that a Citizens’ Innovation Fund should be introduced.

1.11 Finally, regulatory authorities must also be an integral, and not arms-length partner in the development of new ways of working between the public and private sectors. The MHRA should engage with SMEs in a new, open and wide-ranging dialogue on ways to deliver safely new medicines to patients (and especially those with significant unmet medical need) more efficiently. One key area is to progress a dialogue on how to incorporate “real-world data” in a smart and consistent manner throughout the drug development process. With its enormously heterogeneous population, the UK could be the world leading place to conduct such research.

2. Are there specific science and engineering sectors where it is particularly difficult to commercialise research? Are there common difficulties and common solutions across sectors?

2.1 Given the expensive and uncertain nature of commercialising research, EMIG believes that the pharmaceutical sector has to be included in this category.

2.2 The causes of these uncertainties are multiple and well-described. The solutions are therefore also multiple but should focus on the “inventor” having discussions with the “buyer” from the outset of the discovery process and for that process to be conducted in a more open and progressive way throughout.

2.3 Drug discovery and development is now too difficult and resource intensive for industry, academia or health services to try to do it alone. More people are needed who understand the interface between science and technology, and commerce as we have outlined in section 1.5.

2.4 Pursuant to this theme, funding models and other incentives (eg market-driven mid-stage funding from bodies such as the TSB), are only part of the solution. Indeed we believe that recent Governments have done the biotechnology sector a very good service with the R&D tax credit system and the new patent box legislation being good news for all entrepreneurs in research intensive industries.

2.5 For start-up companies there is a limit to the degree that Government intervention can make these businesses a success. The business model and its execution are what matters and they depend on the quality of management for success. Many start-ups therefore fail due to incompetent and sometimes avaricious management, rather than lack of funding or inherently poor technology.

2.6 The leadership of any start-up company must comprise experts in (1) commerce and business development (2) finance and (3) science and technology. It cannot be assumed that a seasoned academic, whose passion is a specific technology, possesses the right balance of skills to lead that technology to commercialisation. If such balance of expertise cannot be found, then that business needs mentorship by people with the requisite skills. As such, it was very much welcomed to see EMIG’s suggestion for business skills training for start-ups to be actioned in the recent Life Sciences Strategy.

3. What, if any, examples are there of UK-based research having to be transferred outside the UK for commercialisation? Why did this occur?

3.1 The recent and continued exodus of late-stage pharmaceutical clinical research from the UK on grounds of time, cost, reliability and sometimes quality, highlights a major problem to the commercialisation of research for UK bio-pharmaceutical companies.

3.2 The UK is a disproportionately expensive place to conduct clinical research, with SME pharmaceutical firms left feeling completely disenfranchised by the continuing practice of adding huge and no-added-value overheads to clinical research fees. EMIG believe this needs to be addressed as an immediate priority.

3.3 EMIG would however like to praise the Government’s recent efforts in increasing the competitiveness of the UK life sciences sector, and looks forward to the implementation of the measures outlined in the Life Sciences Strategy. As ever, it is the implementation stage as opposed to the initial rhetoric whereby the impact of such measures can be assessed.

4. What evidence is there that Government and Technology Strategy Board initiatives to date have improved the commercialisation of research?

4.1 To its credit, the Government has introduced a number of measures aimed at addressing this issue. For example, the creation of the Health Research Authority (HRA) is a move that was warmly welcomed by the wider sector, and EMIG has had some productive conversations with the newly established body on ways to improve the clinical environment for the commercialisation of UK R&D.

4.2 EMIG looks forward to working closely with the HRA on this issue in order to ensure that the recommendations laid down by the Academy of Medical Sciences (AMS), and adopted by the Government as part of the 2011 Growth Review, are implemented in full, in particular the development of a more proportionate and streamlined system of regulation.

4.3 Furthermore, EMIG believes that the recent publication of NIHR recruitment performance league tables should be welcomed by industry, with top-performing Trusts being rewarded appropriately by Government.

4.4 EMIG also very much welcomes the appointment of Candy Morris as the NIHR’s NHS Trust Research Champion. We believe this will provide an increased focused on the benefit of research across the health service which is a move that should be welcomed by industry.

4.5 Whilst the TSB has had its criticism, the experiences of EMIG members who have had opportunities to engage with it are largely positive.

4.6 One EMIG member has recently been an assessor for three recent Life Science competition awards, including that for Regenerative Medicine. In all of these the TSB took care to ensure that the applicants for grants understood the parameters for awarding grants and that the assessors knew what the applicant’s submissions should provide as evidence for their worthiness. This was a well-planned and well-executed government effort to stimulate young companies to work with universities to translate science into commercial reality.

4.7 In addition, applied ‘innovation platforms’ such as those for Assisted Living and Stratified Medicine have helped create consortia which have considerable commercial potential.

4.8 The TSB should therefore be congratulated on its efforts and continue to receive government support where appropriate. As referenced in section 1.5, the TSB is well positioned to take a wider brokerage role in research consortia formation and EMIG would welcome greater opportunities for engagement with it.

5. What impact will the Government’s innovation, research and growth strategies have on bridging the valley of death?

5.1 EMIG welcomes the Government’s recent commitment to the development and sustenance of a vibrant life sciences industry in the UK and the measures to be taken to achieve it, which were described in the 2011 “Plan for Growth”.

5.2 However EMIG is concerned that the new streams of available funding proposed in the 2011 Autumn Statement are barely sufficient to sustain, let alone stimulate the desired levels of growth in life science R&D.

5.3 It is vitally important that the focus on improving the commercialisation of research continues beyond the current Parliament. A short-term approach to this issue will not deliver a profitable life sciences ecosystem for the UK which is the fundamental critical factor for the long-term success of the sector.

5.4 A solution could include a new “open” structure for drug discovery and development. One suggestion for a model could be: Zone 1—Target discovery, assay development and validation; supplied by academia, research councils and translational medicine organisations. Zone 2—Candidate Hit, Lead and Optimisation through to end Pre-clinical; supplied by SME’s with specific therapeutic area/technology foci. Zone 3—Clinical Development, Formulation development, Regulatory; supplied by established pharmaceutical research businesses.

6. Should the UK seek to encourage more private equity investment (including venture capital and angel investment) into science and engineering sectors and if so, how can this be achieved?

6.1 EMIG believes that the UK should look to encourage more private equity investment in order to ensure the wider commercialisation of clinical research. Matched funding or grants with shared risk and reward are essential to stimulating investment.

6.2 There may also be another option which involves more direct investment in small companies. The old SMART R&D scheme was comparatively generous in its funding and was prepared to take risks. It enabled many companies to get established and then grow their business without diluting their ownership. This was a very attractive and successfully run scheme, and EMIG members would therefore support its re-introduction.

7. What other types of investment or support should the Government develop?

7.1 An additional idea could be to award ‘innovation vouchers’ to potential high growth companies which can be spent on accessing equipment support and services from universities.

February 2012

Prepared 11th March 2013