Dechert LLP

[co-author: Antony Vitanov]

On 7 July 2021, the UK 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 healthcare problems of our generation” by building on the UK’s advantages in genomics, data and research, as well as the UK’s world-leading response to the COVID-19 pandemic in vaccines development and manufacturing, therapies and diagnostics. The publishing of the Vision comes at a time when the UK experienced the highest total quarterly amount invested in UK biotech companies, standing at £1.56 billion between March and May 2021, with a total of circa. £2.4 billion raised in H1 2021, compared to £2.81 billion raised during the entirety of 20201.

In this OnPoint we summarise how the Vision seeks to achieve the Government’s goals for the industry by (among other things) improving the access to private and public capital for the UK’s most promising life sciences companies (“LSCs”).

The Vision’s Mission Statements

The Government will focus on specific missions that are technology or disease specific, in each case taking a “task force” approach by empowering a decision maker to mobilise private and public science and investment. These missions are:

  1. Improving translational capabilities in neurodegeneration and dementia.
  2. Enabling early diagnosis and treatments, including immune therapies such as cancer vaccines.
  3. Sustaining the UK position in novel vaccine discovery development and manufacturing.
  4. Treatment and prevention of cardiovascular diseases and their major risk factors, including obesity.
  5. Reducing mortality and morbidity from respiratory disease in the UK and globally.
  6. Addressing the underlying biology of ageing.
  7. Increasing the understanding of mental health conditions, including work to redefine diseases and develop translational tools to address them.

The Government has set an ambition for the UK to be a “Science Superpower”, and for the UK (across Government, industry and philanthropy) to invest 2.4 percent of GDP in research and development by 2027.

Access to Finance

In order to attain the status of “Science Superpower”, the Vision recognises the UK’s need to (i) improve access to finance for the life sciences sector, in particular by identifying the shortage of long-term private capital and public capital to finance growth; and (ii) enable LSCs to scale in the later stages of their growth cycle without recourse to overseas money (typically from the U.S.).

According to the Vision, the funding gap between the UK and the U.S. is most evident when comparing the venture capital, LSC valuations and liquidity levels:

  • Between 2016 and 2020, the U.S. has seen a 201 percent increase in the average size of venture capital raised by LSCs (from £6.8 million to £20.5 million), compared to just 63 percent in the UK (from £5.3 million to £8.8 million), during the same period;
  • LSCs raising funds via public markets can expect 20-30 percent higher valuations on Nasdaq compared to listing on the London Stock Exchange (“LSE”); and
  • The levels of share trading for LSCs on the LSE is often limited and lower than equivalent companies on Nasdaq.

In seeking to address the shortage of capital, the Government is providing £200 million in funding through the Life Sciences Investment Programme (“LSIP”), £800 million through a commitment by the Abu Dhabi sovereign wealth fund Mubadala (via the UK-UAE Sovereign Investment Partnership) and with further work underway to support greater investment into LSCs by institutional investors and pension funds. The Vision states the Government’s intention to work with the life sciences sector to:

  1. Establish a Life Sciences Scale Up Taskforce to drive progress on improving the ecosystem for LSCs to start, grow and scale up in the UK;
  2. Support the development of a world leading UK life sciences venture capital ecosystem, which will include focused work on attracting talent from Boston and San Francisco and supporting the upskill of generalist investors;
  3. Successfully launch the £200 million LSIP in summer 2021;
  4. Strengthen the public markets 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 list in the UK.

Conclusion

In summary, the Government is seeking to achieve its mission statements in part by improving access to both private and public finance for LSCs seeking to grow and scale up. It intends to do so by (i) establishing a Life Sciences Scale Up Taskforce; (ii) closing the funding gap between the UK and U.S. venture capital and public markets by attracting international talent and upskilling generalist investors; (iii) launching the LSIP in order to make circa. £1 billion of funding available to LSCs; and (iv) implementing the Lord Hill UK Listing Review recommendations to support more LSCs to list in the UK.

Footnotes

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-just-three-months.html

2) https://www.dechert.com/knowledge/onpoint/2021/3/uk-listings-review---the-post-brexit-hill-review-s-recommendatio.html

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