The report rightly notes that despite the UK having a strong track record in Life Sciences companies emerging, very few of those have survived through to become scaled-up entities capable of post-approval product commercialisation.
So it’s welcome news that this report gives attention to the need to build long-term capital pools to encourage investment in the sector – and tax relief is an obvious way to incentivise investors to engage in such pools. The report makes a number of seemingly sensible initial suggestions on this front, which can be further developed with the input of industry, investors and government.
But properly scaled-up entities will only result if the right environment is in place to support growth throughout their development – from nascent commercially-focused venture to fully fledged corporate listed on the UK public markets. It won’t be enough to focus just on long-term capital pools or even on improving the efficiency of the UK public markets for Life Sciences companies (which the report mentions too briefly).
Only by focusing on all stages in the growth cycle of a Life Sciences company can four £20bn+ UK companies be created in the next 10 years.
In no small part, that means incentivising investors to stick with the company they have already backed, while it continues (for example) to press through Phase III trials in search of that all important marketing authorisation. As the report notes, when investors have already had to stump up £100-500 million, providing further funding can seem a tall order and high risk in comparison to a sale of the company to a prospective purchaser. So there has to be an equally high reward to encourage them to do so (such as still more favourable tax treatment).
Of course, there will be a multitude of factors which influence the decisions a company makes about its future at each stage of its development. The sale of the company may likely still be the most commercially sensible strategic option and it almost certainly will be for the majority of companies – the development of a product can often be accelerated with the support of a much larger organisation with all its expertise and pre-existing marketing and supply chain infrastructure.
But it’s important that the environment is in place to empower companies and investors to make the right choices for long-term success – whatever those choices may be. Only then can the report’s strategic goal in this area hope to be achieved.