Plummeting SME financing threatens UK llfe science, warns report

A combination of inflation and geopolitical instability is to blame for the massive fall in investment, says the study. Titled Fostering a Dynamic, Sustainable Medicines Discovery Sector, it has been published in conjunction with the UK BioIndustry Association and the Association of the British Pharmaceutical Industry

The authors warn that the contraction threatens to prevent the UK from making some of its biggest potential breakthroughs in the sector, given that SMEs comprise around three quarters of the sector’s nearly 7,000 businesses.

Overall, in 2021, UK life science companies generated more than £108 billion turnover and accounted for more than one in three (35%) of all life science start-ups created in Europe since 2012.

MDC's analysis reveals the UK’s SME funding in the sector dropped from £3.04 billion to £1.7 billion between 2021 and 2022, thanks substantially to a reduction in public equity funding.

However, this was combined with inflationary increase in R&D costs and compounded by shortages of skilled staff and laboratory space, says the report. It warns the result has been a ‘vicious circle’ whereby firms companies cannot afford to generate data that establishes to investors they are investment-ready.

The study urges the sector adopts a shift in mindset and takes steps to help boost investment. These include partnerships with translational experts, who can take early-stage discoveries through to late-stage clinical development allowing SMEs reduce investment risk. 

Additionally, it flags the need for high-quality laboratory facilities plus increased availability and access to funding support for SMEs and for more private/public initiatives. 

CEO of Medicines Discovery Catapult Professor Chris Molloy, warned: "If we want to keep the life sciences sector healthy and able to compete on a global stage, it is not enough to ask investors to simply become more comfortable with high-risk investments. We need to de-risk the innovation as much as we can.”

Early stage companies needed to receive more coordinated access to the skills and technologies, he said. Investors needed to be provided with a holistic picture of the health landscape and the UK medicines discovery pipeline so they have more insights to make funding decisions.

UK BioIndustry Association CEO Steve Bates added: "SMEs are at the forefront of innovation, with the majority of new medicines in the global pipeline originating from their labs. Their agility and cutting-edge research are propelling us forward in oncology, infectious diseases and neurological disorders. Their success is not just a win for the sector but a beacon of hope for patients worldwide."

Pic: Alev Takil