Rishi Sunak has pledged to make the UK a ‘science and technology superpower’, following in the footsteps of prime ministers including David Cameron, who called the life sciences the ‘crown jewel’ of our economy. But Britain’s pivot away from Europe has cast a shadow and raises questions for domestic champions such as AstraZeneca, the country’s biggest drugmaker, which reports third quarter results this week.
One of the most damaging upheavals of Brexit was the ejection of UK researchers from the EU’s Horizon funding scheme. In August, Sunak promised a ‘better UK alternative’ and to ‘reduce the time it takes for new drugs to become available to the NHS’.
One idea floated at the Tory conference was to dust off former business secretary Greg Clarke’s 2017 strategy to boost productivity and embrace technological change. A vision for life sciences, developed with industry input and published last year, hopes to build on this.
However, speculation is mounting that in his November 17 autumn statement, Chancellor Jeremy Hunt could cut the government’s research and development (R&D) budget to help plug a large hole in public finances. As chancellor a year ago, Sunak deferred £2billion in annual public spending on R&D when he cut the 2024-25 commitment from £22billion to £20billion.
Business leaders are also worried about the end of the government’s ‘super deduction’ tax relief next March, when corporation tax is set to drop from 19% to 25%.
The Association of the British Pharmaceutical Industry (ABPI) sees “real potential in realizing the vision of life sciences”, but executive director Elliot Dunster says there are “alarm bells ringing in the data”. While pharmaceutical companies are the largest private sector investor in UK R&D, the UK’s global share of pharmaceutical R&D investment fell in 2019 to just over 4%, from 7.7% in 2012 .
Commercial clinical trials in the NHS have declined during the pandemic and have not recovered, dropping the UK from fourth to 10th in the world for the number of late-stage clinical trials undertaken between 2017 and 2021 ABPI says this is a key priority, linked not to funding but to improving processes for prioritizing and conducting research. It is also calling for more internationally competitive R&D tax credits.
Despite this and the deteriorating economic backdrop, AstraZeneca’s financial update, due on Thursday, should be positive. Analysts forecast a 9% increase in total revenue to $10.8 billion and a 43% increase in basic earnings per share to $1.54.
Under Pascal Soriot, who inherited a struggling business in 2012 and fended off a hostile takeover bid from Pfizer in 2014, the British-Swedish lab reinvented itself, carving out a niche for itself in specialty treatments including against cancer.
It increased its R&D spending by 40% to $2.4 billion in the second quarter, or 23% of sales, one of the highest levels in the industry. Last year, it spent nearly $10 billion on research in its three areas – biopharmaceuticals, cancer and rare diseases.
AstraZeneca became a household name when it developed, with the University of Oxford, one of the first Covid vaccines and distributed more than 3 billion doses around the world, although this was overshadowed by bad publicity on a rare link with blood clotting.
Rivals Moderna, Pfizer and BioNTech have tweaked their mRNA vaccines and developed versions that target the Omicron variant, which are now being used in booster campaigns in the UK, Europe and the US. AstraZeneca has been left behind and only has its original vaccine, which is still used in the rest of the world.
Soriot recently said in a recent interview that the company may not stay in the vaccines business long-term – unlike its British rival GSK, one of the world’s largest vaccine makers. AstraZeneca hopes its Covid-19 antibody drug, Evusheld, can make up for the jab’s declining sales.
Its core portfolio is strong and its share price has quintupled under Soriot to around £107, giving the company a market value of £167bn. This exceeds the £59bn achieved by GSK after its spin-off from its £31bn consumer health business. Following GSK’s strong quarterly results and improved outlook last week, Britain’s big pharma industry appears to be in poor health. But the rest of the sector may need vital support from the Sunak government.
