New tax credit scheme a lifeline for British biotech, say execs
By Natalie Grover
LONDON (Reuters) - Britain's budget has offered a shot in the arm to research-intensive biotech and life-sciences sector, company executives said on Wednesday, as the government seeks to put the industry in the global vanguard.
Finance minister Jeremy Hunt said if 40% or more of expenditure of small and medium-sized enterprises (SMEs) was on research and development (R&D) and they were not yet profitable, they could claim credit of 27 pounds ($33 ) per 100.
The announcement was met with considerable relief by small drug developers who can take years, typically spending millions, before ever seeing a medicine hit the market.
The new credit scheme goes a long way to quell the concern around lowering of some R&D tax relief for SMEs announced last October, said Kevin Pojasek, CEO of Oxford-based Enara Bio.
It should also encourage investors who will see more value for their money.
"The government were basically saying 'we care about life sciences' but pulling away one of the greatest levers that we had to attract investment," said Iain McGill, CEO of London-based Quell Therapeutics, referring to last year's changes.
"So this coming back ... is a real lifeline."
There are about 6,548 businesses in the UK life sciences industry, of which 70%-80% are SMEs, government figures show.
SECTOR UNDER PRESSURE
The devil will be in the details, such as whether the scheme requires SMEs to have not made a profit for a year or for longer, warned Hugo Fry, CEO of London-based RQ Biotechnology.
But it appears to be as good a system, if not better, than what was in place before, he said.
It would allow his company to buy more equipment, employ a couple of extra scientists, and pay for up to an additional five months of research, he added.
The UK life sciences sector has been under pressure.
It was heavily exposed to the now collapsed Silicon Valley Bank, but crisis for the industry was narrowly avoided thanks to HSBC's buyout of the bank's troubled UK arm on Monday.
And although the UK has renowned scientific research centres, it has long struggled to attract the level of funding U.S. biotech hubs in Boston and San Francisco have.
"Have we reached the heights of Massachusetts? No, we haven't. But this (budget) is going to help," said RQ Bio's Fry.
Another bright spot in the budget was 10 million pounds in extra funding for the UK drugs regulator, the MHRA, over the next two years to hasten the approval process.
However, whether drugs are deployed in the country depends on the watchdog NICE which determines whether the benefit of the medicines is worth their cost, executives highlighted.
A key worry has also been the sharp rise in a so-called "clawback tax" on branded drugs.
The tax, designed to make branded drugs more affordable, caps annual increases in National Health Service (NHS) drug spending, but if that limit is exceeded the government recoups the excess from suppliers.
The payback rate jumped from 5% in 2019 to 26.5% this year. That problem still needs resolving, executives said.
($1 = 0.8276 pounds)
(Reporting by Natalie Grover in London; Editing by Andrew Cawthorne)