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 Astra Zenecathe country’s largest drugmaker, which reports its third-quarter results this week.
One of the most damaging upheavals of Brexit was the UK researchers expelled from EU 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 of life sciencesdeveloped with industry input and released last year, hopes to build on it.
However, speculation is rife that, in his November 17 autumn statement, Chancellor Jeremy Hunt may reduce government research and development (R&D) budget help plug a big hole in public finances. As chancellor a year ago, Sunak has deferred £2billion in annual government spending on R&D when it reduced the 2024-25 commitment from £22bn to £20bn.
Business leaders are also worried about the end of the the government’s “super deduction” tax relief next March, when corporate tax will 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 is “some alarm bells 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 place globally in the number of late-stage clinical trials undertaken between 2017 and 2021. 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 by Pfizer in 2014the Anglo-Swedish drug has reinvented itself, carving out a place for itself in specialized treatments, particularly 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 stated 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 biggest 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. Next strong quarterly results for GSK and improved outlook last week, the big British pharmaceutical company appears to be in poor health. But the rest of the sector may need vital support from the Sunak government.