Archives for the month of: March, 2015

Several enhancements to the Seed Enterprise Investment Scheme (SEIS), Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs) were announced as part of this year’s Budget. Here, Richard Turner, Managing Director for Tax and Innovation at FTI Consulting, gives his view on the latest SEIS/EIS consultation.

You can see our response to the previous consultation here and also our press release mentioning this point in response to the Budget statement here. If you are interested in inputting to the latest consultation, please get in touch with Pamela Learmonth.

This year’s Budget announced several enhancements to the Seed Enterprise Investment scheme (SEIS), Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs). On balance the changes are positive. For Life Science companies the transition between SEIS and EIS will now be smoother and new thresholds will favour knowledge intensive companies that should apply to most companies in the sector. The draft legislation did not appear within the Finance Bill but was published as a separate document on the 24th March, available here.

In summary the new legislation, which remains subject to State Aid approval, will:

  • increase the employee limit for ‘knowledge-intensive’ companies to 499 employees, from the current limit of 249 employees;
  • remove the requirement that 70% of the funds raised under SEIS must have been spent before EIS or VCT funding can be raised;
  • limit initial EIS or VCT investment to companies whose first commercial sale took place within the previous 12 years except where the investment will lead to a substantial change in the company’s activity;
  • introduce a cap on total investment received of £15 million, increasing to £20 million for ‘knowledge-intensive’ companies.

This is largely good news but it brings with it a raft of new definitions and the odd tripwire. Believe it or not, many advisers would wish dearly to answer a simple question such as ‘will the company qualify for EIS status’ with a resolute ‘yes’ or ‘no’ but, unfortunately, the checklist gets ever longer.

By way of illustration, the definition of a ‘knowledge-intensive’ company requires it to satisfy one or both of two ‘operating costs conditions’ in addition to one or both of the new ‘innovation condition’ or the ‘skilled employee condition’. Broadly speaking, to satisfy the ‘operating costs conditions’ at least 15% of the company’s operating costs must be attributable to R&D in one of the preceding three years or at least 10% in all of the three preceding years. The ‘innovation condition’ is that the company must be engaged in IP creation and the ‘skilled employee condition’ is that at least 20% of full-time employees are ‘skilled’ whether that be a single company or within a group.

Perhaps understanding and learning the definition of a knowledge-intensive company should be enough to satisfy the condition in its own right.

The draft legislation introduces eight substantially new definitions including new concepts such as; the ‘FTE group skilled employee number’, a ‘relevant HE qualification’ and an ‘independent expert.’ This can all be worked through and, in most cases, the final answer will be the same as an intuitive guess.

It is unlikely that many life sciences companies will be caught by the 12 year rule due to the simple fact that most will not yet be making commercial sales. It is also important to note that the 12 year rule only applies to the first EIS of VCT investment. If the test is passed on the first round, follow-on funding will not be caught.

Notwithstanding these grumbles, the incentives remain highly attractive and worthwhile, but for those companies wanting to benefit from them on a recurring basis, here are four tips:

  1. Set out all the qualifying criteria
  2. Document the basis on which you satisfy each one
  3. Set out all the reasons why qualification might be withdrawn
  4. Keep it handy and check it every few weeks

This way, the details will become less intimidating and the incentive should hopefully continue to drive new investment.

MHRA_banners_720x215_find_moreAs is typically seen in run up to the end of a parliament and the official government announcement shutdown called “purdah”, we saw a flurry of last minute government announcements released last week. It was great to see BIA members Autifony Therapeutics and eXmoor Pharma Concepts amongst the industry winners in the latest round of Biomedical Catalyst funding. With total investment now at £350 million, the Biomedical Catalyst has helped accelerate the development of a number of innovative treatments and products to enable real patient benefits over the last few years. It’s critical that whoever holds the keys to power after the General Election gets behind the continuation of this scheme that has done so much to drive innovation.

Also on funding, the latest round of Industrial Biotechnology Catalyst awards were announced last week, and Vince Cable revealed details of 20 projects given conditional offers for the Advanced Manufacturing Supply Chain Initiative (AMSCI) – including an exciting new manufacturing design processes project campaigned for by the Medicines Manufacturing Industry Partnership (MMIP). This is a fantastic achievement arising out of the MMIP. The investment is a positive step towards increasing the UK’s prominence in medicine manufacturing and also in safeguarding and creating jobs. It was also great to see a further £6.2 million grant awarded to a consortium of BIA members – the Centre for Process Innovation, UCB Celltech, Lonza Biologics, Sphere Fluidics, Horizon Discovery and Alcyomics – as part of a project to adopt innovative technologies emerging from UK SMEs to improve the supply chain for biologic medicinal products.

Congratulations to all who received funding, and also to RedX Pharma who successfully listed on AIM last Friday.

In other government news, the Regenerative Medicine Expert Group (RMEG) report was published on Tuesday. As part of the panel, alongside BIA’s Cell Therapy and Regen Med Advisory Committee Chair Professor Chris Mason, I’ve been closely involved with the group, representing the needs of the UK’s regen med industry. The report addresses important issues that directly affect the UK’s attractiveness as a location to develop regenerative medicines – one of the Chancellor’s eight great technologies – and it rightly recognises that effective uptake in the NHS is absolutely critical for this. You can read more on our response to the report in our press release, and BIA member Pinsent Masons have written us a guest blog discussing the report, which you can find here. A member briefing is being prepared by our Head of Regulatory Affairs, Christiane Abouzeid.

Also taking place last Tuesday, I was delighted to be invited along to Guy’s hospital to hear more about Life Science Minister George Freeman’s Accelerated Access Review of Innovative Medicines and Medical Technologies (formerly known as the Innovative Medicines and Med Tech Review). In his speech, Freeman was keen to emphasise that the review would focus on tangible outcomes – the overall objective being for the UK to be the best place in the world to innovate and develop med tech and medicines and for “the FDA to look to the UK with fear”. Interim recommendations are expected to be published around September/October. We also heard details on the appointment of the Advisory Board – a stellar cast of 17, to include Kate Bingham, of BIA member SV Life Sciences. The Advisory Board will split itself and the work, as set out in the Terms of Reference, into workstreams which will be developed in partnership with the civil service secretariat team during purdah. The BIA will continue to engage with the review and we’ll keep you updated on any developments as and when they occur.

In another move to inspire innovation across healthcare in the UK, NHS England and the government  have launched their ‘test bed’ initiative to trial new ways of improving care for patients as part of the NHS Five Year Forward View, and are calling for expressions of interest from innovators from any sector in the UK and overseas who want to test their ideas to deliver health services in better ways at scale and in a real clinical setting. You can find out more on the initiative here.

There was also progress on the 100 000 Genomes Project, as Genomics England announced the first ten companies – including BIA members AbbVie, AstraZeneca, Biogen, GSK, Takeda and UCB – to come forward to create the GENE Consortium. The consortium will undertake a year-long industry trial involving a selection of whole genome sequences across cancer and rare diseases, discovering how best to collaborate with clinicians and researchers, and identify the most effective way of bringing industry expertise into the project in order to realise the potential benefits for patients.

On the regulatory front, the fifth MHRA Innovation Office case study, featuring BIA member BTG and developed with the support of our Manufacturing Advisory Committee, was published on Thursday. The study details the MHRA’s involvement in the development of a UK manufacturing site for a novel drug-device combination product – click here to view the case study and have a read.

From next week government goes into purdah, so we can expect a bit of a breather from announcements. We’ll continue to work on the ongoing Nurse Review and the NHS England consultation on specialised services. If you’d like to engage please contact Zoe Freeman.

A quick reminder that if you missed Thursday’s webinar on the Budget, it’s now available to view online here. And finally, Newscast will be taking a break over Easter – we’ll be back on 13 April.

Enjoy the Easter break,

Steve

OneStart, co-organised by SR One and the Oxbridge Biotech Roundtable, is the world’s largest life science startup accelerator programme. This year the competition received 638 applications, across 50 different countries.

On the 6th and 7th of February, 35 of the best startups were invited to London to take part in a ‘Biotech Bootcamp’ – two intensive days of seminars, panel discussions, pitching and networking – designed to equip young entrepreneurs with the skills to nurture their innovative ideas into a biotech company.

Watch the video below to learn more about the initiative, featuring footage from the Bootcamp.

Footage of the seminars and panel discussions from the London Biotech Bootcamp can be found here.

Do you have a video you would like the sector to see? Contact us.

Earlier this week, the Regenerative Medicine Expert Group (RMEG) published their report ‘Building on our own potential: a UK pathway for regenerative medicine’. The report is the culmination of work by the RMEG, in consultation with other stakeholders, to develop a strategy and action plan to make the NHS ready to deliver regenerative medicines. In the post below, Helen Cline, Legal Director, Pinsent Masons takes a closer look at the report.

Complex regulation must be streamlined and commercial incentives improved for the UK to remain a hub for regenerative medicine.

The UK Government has identified regenerative medicine as one of the UK’s “Eight Great Technologies”, due to its “huge opportunities for technological advance” and potential economic benefit. The RMEG report rightly concludes that the UK has the “industrial base, the academic excellence and the clinical know-how that is necessary” as well as previous experiences of success in advanced medicine and treatments to “consolidate and build upon its position as a world leader in regenerative medicine”. Even so, challenges remain.

The RMEG is tasked with developing an NHS strategy for regenerative medicine, which it defines as “methods that replace or regenerate human cells, tissues or organs in order to restore or establish normal function”. The report sets out what additional steps are necessary to help researchers develop, and clinicians utilise, technologies that improve the human body’s ability to repair itself.

Regenerative medicine is the “future of medicine” and the proposals in the RMEG report to make navigating the regulatory environment easier are welcome.  Regulation in the area of regenerative medicines is complex, reflecting the nature of the technologies and their risks. For example, in the UK there are four regulatory bodies, each regulating distinct aspects of the development of regenerative medicine under different pieces of legislation, as well as a range of other agencies with an oversight role. One of the practical problems for researchers in regenerative medicine is the division of regulatory responsibility between these different bodies. There have already been steps taken towards the streamlining of regulatory advice, with a single point of access, for advice on regenerative medicine rules, available from the Innovation Office within the Medicines and Healthcare Products Regulatory Agency. Regulators have also collaborated on providing guidance on regenerative medicines issues, including developing the UK Stem Cell Tool Kit  to provide clear guidance on the regulatory pathways that must be followed in developing a regenerative product derived from stem cells. However, the RMEG’s report correctly highlights that “further steps are needed to ensure that standardisation of processes, and streamlined regulation, are guiding principles in advancing regenerative medicine”.

The RMEG, like the House of Lords’ Science and Technology Committee in their 2013 report,  also identifies funding issues as a barrier to the growth of regenerative medicines, and calls on the UK government and industry to come together to develop “an innovative business model that supports the early adoption of regenerative medicines”. It also calls for reviews to be carried out on “the funding for excess treatment costs for cell therapy trials”, with the aim of finding “a mechanism … to ensure that meeting of these costs is not a barrier to clinical trials or the early adoption of technologies”.

While debate in the past has been on the legality of funding research, at least in the US, debate today is on how best to regulate the clinical translation and support the commercialisation of these innovative technologies.

The nature of regenerative medicine research involves creating personalised precision therapies that may provide a cure rather than merely alleviating symptoms. There are, in many cases, high up-front costs associated with these individualised therapies that raise challenges around evaluation, funding and adoption. Unnecessary, excessively complex or burdensome regulation, together with unclear evaluation and funding pathways, could stifle the promise of regenerative medicine. That said, moves to streamline regulation to enable innovation must not put patients at risk of harm and damage the reputation of this field of research at a crucial point in its history.

Ethical and patent issues have also created challenges in the development of regenerative medicines. A ruling by the Court of Justice of the EU last year on the patentability of inventions that emerge from research on human embryonic stem cells highlights some of the divergent opinions on the issues.

Research in the field of regenerative medicine is emotive, especially when it concerns human embryonic stem cells. The debates around regulation and commercialisation include a diversity of opinion on the many ethical, regulatory and legal considerations; one example being patient consent in clinical trials, as the line between research and treatment is blurred in this area of medicine.

The UK Government has demonstrated its commitment to the growth of regenerative medicines research in the UK. Centres of excellence around cutting-edge technology are being assembled with a view to combining research and catapulting it forward; examples include the Cell Therapy Catapult and the new Precision Medicines Catapult. However, for regenerative medicine to flourish, and for the UK to retain its strong position in Europe and globally, a strict but enabling legislative and regulatory framework that facilitates innovation is essential. The current approach to regulation of medicines poses particular challenges in the era of ‘stratified medicines’. There are practical challenges in building the clinical evidence base necessary for approval under current regulatory mechanisms where patient populations are very small. The current regulatory and evaluation processes and policies need to evolve in response to, and in anticipation of, scientific developments that will be critical for the development of the UK’s regenerative medicines industry and the move to a stratified and more personalised approach to developing precision medicines.

The original article is available from Out-Law.com, legal news and guidance from Pinsent Masons.

Read the BIA press release welcoming the publication of the report here.

Online technologies are transforming the field of biology, facilitating research in areas such as genomics – and it’s not just the professionals getting involved. The biohacking community continues to expand across the globe as the practice evolves to utilise online platforms. Here, BIA member CMS explores the biohacking revolution and the legal challenges it poses.

What is biohacking?

Biohacking is not a clearly defined concept but as the name suggests it can be generally defined as applying the hacker ethic to biology. Opinions differ, but anything from experimentation with synthetic (artificial) DNA through to worryingly named ‘DIY’ body enhancements, may be considered biohacking. This emerging and growing practice is normally associated with independent biologists and scientists ranging from professionals to curious amateurs: these are the biohackers.

Already the biohacking movement is giving rise to a wide spectrum of legal issues, and its rapid move online may throw up more yet. How the law develops and whether it can keep up will be interesting to see, particularly as the practice of online biohacking gains potency.

Biohacking in the technology age

Through online technologies such as cloud computing, biology itself is being transformed. Tech giants such as Google are creating cloud genomics platforms to facilitate genomic research. Start-ups are also taking a slice of the pie by creating web-based virtual labs, electronic lab books, cloud storage and open-source DNA design tools. These online platforms allow biohackers around the globe to experiment, collaborate and share research and resources to ‘hack’, sequence, reproduce, modify and/or create anything from living organisms or tissues, to medicines and foods.

Synbiota is an example of a biodevelopment platform which can also be used for biohacking. Mason Edwards, CTO of start-up Synbiota Inc, comments:

Accessible biohacking tools combined with the cost reductions of synthetic biology are spearheading the way for a new and dynamic industry. The rate of innovation is increasing and we’re on the cusp of a revolution that will dwarf the information age.

The regulation of biohacking

Whilst online biohacking activity is still an emerging trend, it is a fast-growing one. Despite this, online science platforms and biohacking communities remain largely unregulated, at least expressly.

It is conceivable that some biohacking projects may fall within existing biosafety, biosecurity or dangerous substances regulatory regimes which in part govern innovative technologies such as genetic engineering and nanotechnology. But like these technologies, biohacking may develop and evolve at such a rate that its governing legislation struggles to keep pace. Looking at genetically modified organisms (GMOs) for example, whilst Europe has some of the strictest rules concerning GMOs in the world, developments in technologies such as synthetic biology have meant that certain projects fall outside their regulatory remit, requiring legislative changes which still may not be watertight.

Other considerations may arise through, for instance, the online sharing and modification of an individual’s genetic data, which may warrant further advances in, for example, data protection laws (see our previous blog on Genomics).

IP issues also arise: the virtual connectivity and the instantaneous sharing of data enable scientists to ‘hack’ protected products and processes, for example, to produce genetically identical synthetic versions more quickly and efficiently and often at a significantly cheaper price. With so many scientists coming together to work on projects over virtual platforms, it may be difficult to track developments and identify infringers. Similarly, in the absence of defined rules or agreements, issues also arise for the biohackers themselves such as to how IP rights in newly developed products will be shared among online contributors.

The world has seen how social media has transformed social communication. We will now see how virtual labs, connectivity and clouds will transform the progression of science.

Authors: Sinead Oryszczuk, Lawyer, CMS; Louise Edwards, Lawyer, CMS

CMS will be hosting a series of webinars on some of the key trends impacting the life sciences sector this year. More details available here.

Budget2015Last Wednesday saw Chancellor George Osborne set out the final Budget of this Parliament, ahead of the General Election. I’ve outlined some of the more interesting announcements for the life science sector below, but do read our full summary for further information. We’ll also be holding a webinar on the topic this Thursday from 11am for those who want to find out more. Join us for a discussion hosted by myself and with the incoming Chair of our Finance and Tax Advisory Committee, Colin Hailey – we’d  be interested to hear your views.

From a life sciences perspective, there were some notable “wins” contained within the Budget off the back of previous BIA lobbying, including wins on advance assurance and the operation of tax advantaged venture capital schemes, following submissions to recent consultations. It’s great to see from this Budget statement that Treasury has listened to the BIA and its members – see our press release for more details on these topics.

However for a Budget that declared it was making new investments in science and manufacturing, some of the wider science community were left a bit wanting. Items of specific interest to the life sciences sector, and to be welcomed, include supportive government funds, measures to enable and improve investment, a supportive tax environment, and regional initiatives. Around a rhetoric of investing in the UK’s future scientific success, Osborne set out a number of areas of government support, including the reinvestment of up to £30 million from the sale of MRC assets to support research at the Francis Crick Institute, with matched funding from Cancer Research UK and the Wellcome Trust in an extra boost to the project’s long term security.

A number of other measures that may have indirect benefits for the life sciences industry include a near doubling of funding to UKTI for activities in China, including a focus on the advanced manufacturing, healthcare and life sciences sectors, and the announcement of a £195 million Fleming Fund to tackle antimicrobial resistance in response to initial recommendations of the O’Neill review.

Although this Budget will be delivered, debated and voted on in the form of the Finance Bill (to be published tomorrow), an emergency Budget will follow the General Election so the significance of this Budget and the pledges made within it – whether they will be upheld or rewritten – will not be certain until after the election. So watch this space for further developments through 2015, we’ll keep you posted.

In a boost for the life sciences sector across Europe, Irish investment company Malin raised €330 million in one of the continent’s biggest ever life science IPOs, backed by Neil Woodford amongst others – with plans to follow up with a dual listing in London. The company plans to invest in early-stage companies and has already committed money to seven firms, including BIA member Kymab. This is great news for the biotech ecosystem, supporting early-stage companies to get their promising products to market.

Also on funds, it was great to hear Jeremy Hunt announce details of a $100 million venture capital fund for dementia research, with investment from major worldwide pharmaceutical companies – including a number of BIA members – alongside the government and charity Alzheimer’s Research UK. Bringing together a raft of expertise from government, industry, charity and financial backgrounds, the Dementia Discovery Fund once again highlights the UK’s leading efforts in tackling this global issue, investing in the pioneering research which could ultimately lead to the development of a new, effective treatment to tackle dementia.

Last week we joined in the celebrations for the EMA’s 20th anniversary – a great day with the opportunity to both reflect on how far the industry has come over the last two decades and to look forward to future goals, with some interesting speakers and presentations. A video from the day will be available shortly, and you can already access slides and related information from the EMA website. The Agency has also produced a 20th anniversary book, which captures the important progress in regulatory science and changes in medicines regulation in the last 20 years – worth a look if you haven’t already.

Until next week

Best,

Steve

We are becoming increasingly aware of the dangers associated with antibiotic resistant bacteria. Professor Laura Piddock looks at how bacteria becomes resistant and uses this as a basis for the discovery of new drugs.

She discusses her research into multi-drug resistance and transferable resistance and explains how governmental agencies are changing policies and legislation in light of the discoveries made by Laura and her team.

Do you have a video you would like the sector to see? Contact us.

Following on from his account on Tuesday of BioMoti’s experience with the Biomedical Catalyst, here CEO Davidson Ateh relays his personal thoughts on how the scheme could be re-targeted to specifically support early-stage companies.

My prescription

It is no secret that finance is not easy to come by in early stage biotech. Yet I am of the view that biotech is the most appropriate vehicle to transition new discoveries from the university to large pharma. I believe we need to face reality and acknowledge that significant government funding is required for a vibrant early stage biotech sector. ‘The Entrepreneurial State’, by Mariana Mazzucato, elegantly showcases that the state is at the root of most innovations in society, providing capital at the earliest and riskiest stages. We need to be bolder in advocating for formal government support so that a scheme like the Biomedical Catalyst comes to be viewed as a permanent funding fixture for early biotech albeit with the requirement for matched risk capital to ensure genuine commercial need; a public-private hybrid approach that safeguards initial government investment into the science base. Multiplying early stage ideas leaving university will increase failures but ultimately underpin a sustainable and mature UK biotech industry with more ideas de-risked. I think the Biomedical Catalyst’s yearly budget should be increased 10-fold and relaunched with major changes:

  1. Exclusively for early (preclinical) stage biotechs yet to raise significant investment

I feel that early stage companies like BioMoti stand little chance competing against extensive data packs from our excellent clinical stage biotechs who have already raised £20 million in risk capital or are GSK spinouts. Ironically, the grant funding is in fact required for us to develop to that level. Otherwise, the grant is simply a ‘nice to have’ for the elite and does not bring in genuinely new investment or grow a diversity of opportunities. It could be argued that if this does not change, early companies should be dissuaded from applying.

  1. The major awards committee’s role and composition should be revised

In our experience we have seen a major awards committee dominated by leading academics and career pharma expert types with little experience of new capital-efficient virtual models of biotech. I suggest that successful early stage entrepreneurs, investors and relevant clinicians ought to dominate, in order to avoid the committee resembling a typical risk-adverse panel where awards are made to sure bets (see first point above).

The MAC currently overrules the full stage review, and make up their mind based on a 30-minute interview, so a good score like ours may count for little. Instead, the panel should only test the odd case of a dishonest or clueless team; by the time you reach that stage of the competition, the effort is such that a much higher success rate should occur. The emphasis should be on a strong post-award monitoring schedule, whereby projects that do not deliver on milestones without remediation, are pulled, ensuring sanctity of public funds.

  1. There should be a low value feasibility award linked to a higher value award

There is currently no link between receiving a low value Biomedical Catalyst feasibility award (up to £150,000), how that project progressed, and, your chances of receiving a higher value follow-on award (up to £2.4 million). I suggest a revised Biomedical Catalyst should require all projects to start from the feasibility point and – subject to performance – be eligible for a single larger award per company that enables them to de-risk their lead asset at early clinical trials. Companies should be able to independently raise further investment by that stage without recourse to more public funds.

Concluding thoughts

I cannot help but be optimistic as an entrepreneur and there are already signs the industry is entering a new era with a handful of great stories emerging. I believe that, if we nurture our earliest and most vulnerable companies, the whole UK community will benefit from a diversified and increasingly sustainable biotech ecosystem. The larger investors and players will have to restrain themselves from the natural desire to take all now but will no doubt be rewarded for their patience by a diverse abundance of future quality opportunities. There may be a case for government intervention at later stages of development but that should be away from the Biomedical Catalyst, in a for profit growth fund for example.

I have been extremely impressed by the attitude of the medicines and healthcare team at Innovate UK, who are very open to new ideas and are engaging deeply with the UK biotech community to ensure the Ipsos MORI review collects all opinions and informs the right solution. I would strongly encourage you to participate.

These are Davidson’s own suggestions; we’d love to know what you think – contact the BIA policy team.

Budget_2015_Osborne_600This Parliament’s final Budget

In his announcement at lunchtime today Chancellor George Osborne set out the final Budget of this Parliament. Although this Bill will be delivered, debated and voted on in the form of the Finance Bill (to be published next Tuesday 24 March), an emergency Budget will follow the General Election so the significance of this Budget and pledges made within it – whether they will be upheld or rewritten – will not be certain until after the election.

Some general measures that had been doing the rounds on the rumour mill materialised, including an increase in the personal tax allowance (to £10,800 in 2016 and £11,000 in 2017), the 40p threshold to rise above inflation to £43,300 by 2017/18, a new Help to Buy ISA and the abolition of the annual tax return.

These announcements had to an extent the feel of the usual giveaways one would expect ahead of a General Election. However the Chancellor continued to tread the established narrative of responsible economic management, highlighted the £30 billion of further savings to be made by 2017/8 (through a combination of government cuts, reduction in welfare spending and aggressive tax planning) and seemed to make a stark warning of the need to stay on this fiscal path, come what may in the General Election.

Devolution was also a key theme, extending the overarching political narrative with the “Northern Powerhouse” theme holding pride of place with separate devolutions of powers to other parts of the United Kingdom including corporation tax to Northern Ireland, a devolution deal to West Yorkshire covering skills, business support and transport and further powers for the Mayor of London in regards to skills and planning.

From a life sciences perspective, there were some notable “wins” off the back of previous BIA lobbying (see our earlier press release on wins on advance assurance and the operation of tax advantaged venture capital schemes). However for a Budget that declared it was making new investments in science and manufacturing, some of the wider science community were left a bit wanting.

To hear or take part in the discussion on what this Budget means for the sector, join our next BIA Webinar ‘The 2015 Budget Update: What this means for the sector’ on 26 March (11am) – register here. In the interim, we hope this is helpful and do get in touch with questions or thoughts. Full documentation from today’s Budget can be found here.

Good news for the life sciences sector

topline_Budget2015Items of more specific interest to the life sciences sector, and to be welcomed, include supportive Government funds, measures to enable and improve investment, a supportive tax environment, and regional initiatives.

Government funding support

Around a rhetoric of investing in the UK’s future scientific success, Osborne set out a number of areas of government support.

  1. ‘To improve access to finance for smaller firms, theBritish Business Bank is launching a pilot ‘Help to Grow’ programme to increase the supply of growth loans to firms that need between £500,000 and £2 million to achieve their potential. Budget 2015 announces a request for proposals to deliver the pilot, which will facilitate up to £100 million of finance for growing businesses.’
  2. Having already made major investments in science in London, the government will ‘reinvest up to £30 million from the sale of Medical Research Council assets to support research at the Francis Crick Institute, with matched funding from Cancer Research UK and the Wellcome Trust’ in an extra boost to the project’s long term security.
  3. Government ‘will commit £400 million to 2020-21 for the next round of funding for cutting-edge scientific infrastructure’ through a competitive fund based on scientific excellence across the UK. These Grand Challenge projects will seek matched funding from industry and charities.
  4. A further £100 million will be invested in cutting-edge research projects through the current UK Research Partnership Investment Fund round. Current funded projects, including many in biomedicine, ‘will leverage over £350 million of private sector investment and are being led by universities from across the UK.’
  5. Postgraduate loans: Following on from the Autumn Statement announcement of loans for postgraduate Master’s degrees, the Budget announced strengthened support for postgraduate research. Acknowledging that ‘demand for individuals with doctorates is outstripping supply, both inPG_loans_Budget2015 the UK and internationally’, the government proposes to introduce income-contingent loans of up to £25,000 to support PhDs and research-based masters degrees, and launch a review into how they can ‘strengthen funding for postgraduate research’, assessing options around partnerships and co-funding between government, industry and charities.

Enabling investment

  1. In line with the BIA’s recommendations, in respect of the Seed Enterprise Investment Scheme (SEIS), Enterprise Investment Scheme (EIS), and Venture Capital Trusts (VCTs) government announced that it will bring the schemes into line with the latest state aid rules and support high growth companies by:
  • requiring that companies must be less than 12 years old when receiving their first EIS or VCT investment, except where the investment will lead to a substantial change in the company’s activity;
  • introducing a cap on total investment received under the tax-advantaged venture capital schemes of £15 million, increasing to £20 million for knowledge-intensive companies;
  • increasing the employee limit for knowledge-intensive companies to 499 employees, from the current limit of 249 employees;
  • and smoothing the interactions between the schemes by removing the requirement that 70% of the funds raised under SEIS must have been spent before EIS or VCT funding can be raised.
  1. Osborne made a soft commitment on the Annual Investment Allowance (which allows companies to claim tax relief on capital investments such as plant and machinery) saying that, although this was a discussion for the next Autumn Statement, he knew there was significant opposition to dropping the allowance back to £25,000 (as scheduled following a temporary increase to £500,000 last March).
  2. Government will extend the list of qualifying investments for ISAs to include ‘small and medium sized enterprise (SME) securities (not just equities) admitted to trading on a recognised stock exchange’ from summer 2015, and will make ISAs more flexible from autumn 2015 following consultation with ISA providers.

The tax environment

  1. Following the BIA’s submission to a recent HM Revenue and Customs (HMRC) consultation calling for an extended advance assurance scheme for SMEs, the Chancellor has today announced that government will introduce voluntary advance assurances lasting 3 years for smaller businesses making a first R&D tax credit claim from autumn 2015 and reduce the time taken to process a claim from 2016. There will also be new standalone guidance aimed specifically at smaller companies.
  2. There were also new announcements regarding entrepreneurs’ relief. The government would like to ensure that academics and researchers are appropriately rewarded when they contribute towards valuable intellectual property used in spin out companies. The government will therefore review the availability of capital gains tax (CGT) entrepreneurs’ relief on disposals by academics of shares in such companies. The government has also announced that to ensure the relief remains well-targeted, it will target structures set up so that people with only a small indirect stake in a trading company can benefit from the relief. The government will also ensure that entrepreneurs’ relief on the disposal of personal assets used in a business is only available when someone is making a meaningful withdrawal from that business.
  3. Tackling tax avoidance was a key theme of the Budget with the government stating that it will legislate next week on the Diverted Profits Tax aimed at multinationals shifting profits offshore, and bring it into effect at the start of April. Tax rules are to be tightened to prevent contrived loss arrangements, use of foreign branches to reclaim VAT on overheads and there will be a clampdown on “umbrella companies”. Measures on tax avoidance and evasion are set to raise £3.1 billion over the forecast period.
  4. The Chancellor has confirmed that the corporation tax rate will be cut to 20% effective April 2015.
  5. A major review of business rates was announced with pilots underway (see regional support section for pilots in east and north of England).
  6. The Budget statement confirmed that the timescale was on track to devolve corporation tax to Northern Ireland by the end of this Parliament.

Regional support

Building on the Northern Powerhouse announcements made in the Autumn Statement, this Budget sets out further measures for national recovery ‘by investing in infrastructure, housing, science and innovation across the whole of the UK’.

  1. In the Northern Powerhouse, the Government has committed ‘£20 million to Health North, to enable better care for patients, and to promote innovation through analysis of data on the effectiveness of different drugs, treatments and health pathways.’ The government will also provide £3.5 million of funding in 2015-16 to deliver a series of overseas trade and investment missions in key sectors, focusing on the north.
  2. The Budget builds upon the devolution of skills, transport and health budgets to Manchester with a pilot scheme to enable Greater Manchester and Cheshire to retain 100% of additional growth in business rates.
  3. In the East, the business rates 100% retention pilot will also apply to Cambridgeshire and Peterborough, and Osborne noted that his ‘door is open’ to other regions interested in this scheme which promises that local areas ‘will see the full benefits of policy decisions that increase the local growth rate and business rate revenues, sharpening incentives to boost jobs and growth.’
  4. The government aims to build on strengths in the South East by extending the Enterprise Zone for BIA member Discovery Park, subject to a business case, to allow it to expand its operations in life sciences and environmental technologies.
  5. There’s good news for another BIA member too as government commits to provide £1 million to the Centre for Process Innovation (CPI) to support innovation and knowledge transfer in the North East’s chemicals sector.

Other areas of relevance

A number of other measures that may have indirect benefits for the life sciences industry spanned the disparate areas of export, removing barriers to innovation, antimicrobial resistance and gift aid.

  1. Export: Towards improving economic ties with major emerging markets, UK Trade and Investment will receive a near doubling of funding to £7.5 million in 2015-16 for activities in China, including a focus on the advanced manufacturing, healthcare and life sciences sectors.
  2. Removing barriers to innovation: In order to ensure that regulations do not restrict the creation of valuable and innovative products, services and business models, government will engage with industry ‘to determine where regulations inhibit innovation, including disruptive technologies, and develop a programme for addressing this in the next Parliament.’
  3. Research Councils: Government will also remove some central controls to provide greater freedoms to Research Institutes on how they spend their current budgets ‘to ensure they can attract the brightest minds, make timely investments in cutting edge equipment and re-invest commercial income.’
  4. Antimicrobial resistance: In response to initial recommendations of the O’Neill review on antimicrobial resistance, ‘the government will work with the Wellcome Trust, the Bill and Melinda Gates Foundation, the Institut Pasteur International Network and other partners to launch a ‘Fleming Fund’ with a total of £195 million of overseas development aid over the next 5 years to build laboratory capacity and surveillance networks in developing countries to address the issue of antimicrobial resistance and infectious diseases which threaten us all.’
  5. Gift Aid for charities: In a move that will be welcomed by medical research charities, secondary legislation will be introduced to increase the maximum annual donation amount which can be claimed through the Gift Aid Small Donations Scheme to £8,000 with effect from April 2016.

The Biomedical Catalyst is a government funding initiative jointly run at arms length by Innovate UK and the Medical Research Council (MRC) and designed, in the words of Prime Minister David Cameron, to get “the best ideas through the proof of concept stage, so we can get them into clinical development and get our entrepreneurs selling them around the world.” The scheme is generally considered hugely useful to UK biotech, with over £100 million in grant funding awarded to the industry to date, at a time when it has been difficult to attract private risk capital to the sector. Innovate UK and MRC are now formally reviewing the Biomedical Catalyst in association with Ipsos MORI.

In recent weeks we hosted a guest blog by Sam Williams, CEO of Modern Biosciences, about how his company has benefited from the scheme. Here, Davidson Ateh, CEO of BioMoti, relays their Biomedical Catalyst experience.

Our story

BioMoti is an early stage biotech with an exciting technology platform to focus anti-cancer drugs at tumour sites by targeting a receptor-ligand system hijacked by cancer cells to promote proliferation, metastasis and immune-escape. The potential is for us to significantly increase the efficacy of cancer drugs whilst reducing their side effects and turn a tumour’s ‘trick-of-the-trade’ against it. The core of our Oncojan™ technology platform was developed from a single observation during an experiment I ran as a post-doctoral researcher at Queen Mary University of London.

Non-dilutive grant funding from research councils, charities, university and major pharma co-sponsored studies all contributed to excellent proof-of-concept on our lead ovarian cancer candidate. BioMoti is ready for prime time, but we have been quick to discover just how hard it is to attract private risk capital into an early stage biotech.

Our Biomedical Catalyst experience

Against the backdrop of the economic downturn, we were over the moon when the Biomedical Catalyst, a scheme we lobbied hard for, as did the BIA, was announced. We successfully applied for a £150,000 feasibility grant, which enabled us to quickly complete a matched business angel seed round. We moved into The QMB Innovation Centre, recruited our first staff members and made a commercial case including further confirmatory studies, a development plan and a comprehensive and promising market research report.

We now need £10 million to take this lead candidate to phase 2 clinical trials, a significant value inflexion point and potential exit point. However, we have continued to find it extremely difficult to attract funding from large investors or pharma partners (although there is always interest in the data and novel biology). For this reason, in 2014, we focussed on securing next stage Biomedical Catalyst funding, an early stage grant, that can be used for formal preclinical development including cGMP and GLP toxicology.

Our application to the Round 4 call for just under £4 million (with private investment to contribute 40% of that) scored well (72.6%) at the full stage expert review but unfortunately just missed out at the major awards committee. Armed with useful feedback and an invitation to resubmit, we worked very hard to put in a much-improved application having assembled further data, a great project management team and potential matched investment from a US source. Again we scored very highly (80.4%) at the full stage expert review and thought we had done everything within our power at interview, but we were disappointed to miss out again. In my view the feedback was tepid, thanking us for addressing earlier concerns and expressing what we viewed as minor issues.

We have lost the patience of our existing small investors, who, understandably, will only re-invest as part of a larger series A round and it continues to be difficult to engage investors without the carrot of significant grant funding. To preserve cash, we returned BioMoti to virtual status including the unpleasant task of terminating good staff. We are seriously considering a less profitable merger with a better-established player or re-locating to the US.

Despite our experiences I am a fervent supporter of the Biomedical Catalyst and the benefits it is bringing to our sector and ultimately to patients. The independent review of the scheme provides an ideal opportunity for us all to consider how the Biomedical Catalyst might be refined. I personally think that rather than supporting more established clinical stage companies, the scheme ought to focus government support to the earliest stages of biotech, right at the ‘valley of death’. With the review in mind, I’ve thought about three key changes I would recommend to achieve that aim, which I will set out in my next guest post.

Thursday’s post will conclude with Davidson’s personal views on how the Biomedical Catalyst scheme could be re-targeted to specifically support early-stage biotechs. (Sign up below to follow the blog and receive alerts for new posts).

UPDATE: Read Part Two of Davidson’s blog here