[co-author: Antony Vitanov]
On July 7, 2021, the British government (the “Government“) published the UK Life Sciences Vision (the”Vision”) Setting out a 10-year strategy for the UK life sciences sector“ to solve some of the biggest health problems of our generation ”building on the UK’s advantages in genomics, data and research, as well as the leading UK response to the COVID-19 pandemic in the development and manufacture of vaccines, therapies and diagnostics. The Vision’s release comes at a time when the UK recorded the highest total quarterly amount invested in UK biotech companies, reaching £ 1.56 billion between March and May 2021, with a total of approx. 2.4 billion pounds raised in the first half of 2021, compared to 2.81 billion pounds raised over the whole of 20201.
In this OnPoint, we summarize how the Vision seeks to meet government goals for industry by improving (among other things) access to private and public capital for the UK’s most promising life science companies ( “LSC“).
The mission statements of the vision
The government will focus on specific missions that are technology or disease specific, in each case taking a “working group” approach by empowering a decision maker to mobilize science and private and public investment. These missions are:
- Improve translational capacities in neurodegeneration and dementia.
- Allow early diagnosis and treatment, including immune therapy such as cancer vaccines.
- Maintain the UK’s position in the development and manufacture of new vaccines.
- Treatment and prevention of cardiovascular diseases and their main risk factors, including obesity.
- Reduce mortality and morbidity from respiratory diseases in the UK and globally.
- Address the underlying biology of aging.
- Increase understanding of mental health issues, including work to redefine illnesses and develop translational tools to treat them.
The government aims for the UK to be a ‘science superpower’ and for the UK (through government, industry and philanthropy) to invest 2.4% of GDP in research and development. by 2027.
Access to financing
In order to achieve ‘scientific superpower’ status, the Vision recognizes the UK’s need to (i) improve access to finance for the life sciences sector, in particular by identifying the scarcity of private capital to long term and public capital to finance growth; and (ii) allow LSCs to develop in the later stages of their growth cycle without resorting to foreign money (usually from the United States).
According to the Vision, the UK-US funding gap is most evident when comparing venture capital, LSC valuations and liquidity levels:
- Between 2016 and 2020, the United States saw a 201% increase in the average size of venture capital raised by LSCs (from £ 6.8m to £ 20.5m), compared to just 63% in the United Kingdom (£ 5.3million to £ 8.8m). millions), during the same period;
- LSCs that raise funds through the public markets can expect 20-30% higher valuations on the Nasdaq compared to listing on the London Stock Exchange (“LSE“); and
- Stock trading levels for LSCs on the LSE are often limited and lower than those of equivalent companies on the Nasdaq.
In seeking to alleviate the capital shortage, the government is providing £ 200million in funding through the Life Sciences Investment Program (“LSIP“), £ 800 million through a commitment from the Abu Dhabi Mubadala sovereign wealth fund (via the UK-UAE Sovereign Investment Partnership) and additional work underway to support increased investment in LSCs by institutional investors and pension funds.The Vision sets out the government’s intention to work with the life sciences sector to:
- Establish a Life Sciences Scaling Working Group to advance ecosystem improvement for LSCs to start, grow and thrive in the UK;
- Support the development of a leading UK life sciences venture capital ecosystem, which will include targeted work on attracting talent from Boston and San Francisco and supporting the upskilling of general investors;
- Successfully launch the £ 200million LSIP in the summer of 2021;
- Strengthen the public procurement ecosystem, building on Lord Hill’s UK Listing Review (you can read our summary here2) to support more of the UK’s leading LSCs to register in the UK.
In summary, the government seeks to achieve its mission statements in part by improving access to private and public funding for LDCs seeking to grow and thrive. It intends to do this by (i) creating a life sciences scaling up working group; (ii) close the funding gap between UK and US venture capital and public markets by attracting international talent and improving the skills of generalist investors; (iii) run the LSIP in order to do this. £ 1 billion in funding available for LSCs; and (iv) implement the recommendations of Lord Hill UK Listing Review to support more LSCs to list in the UK.
1) Data from the BioIndustry Association and Clarivate: https://www.bioindustry.org/news-listing/uk-life-sciences-on-the-cusp-of-a-golden-age-as-16-billion-raised- in-only-three-months.html