Readmission on the Horizon: How EU funding can boost British biotech
In the second edition of Money Moves, we look at how European funding could help British biotechs during a challenging time on the market.
Amid high inflation, the latest banking crisis, and the continued repercussions of Brexit, the talent pool at British universities remains a major draw for British biotech. Now, the country’s possible participation in the EU’s Horizon Europe scheme would serve to boost the industry during a challenging time.
Recent negotiations between the UK and the EU have opened the country’s prospects to re-joining the Horizon Europe program, which has been welcomed by biotechs and institutions alike. Despite delays, the current aim is to finalise negotiations before the summer, the Financial Times reported.
The possibility of additional funding comes at a time replete with investor uncertainty as a result of ongoing financial instability in the market, which has been compounded by the collapse of Silicon Valley Bank (SVB) and Credit Suisse.
Still, the UK’s access to talent from its universities and lower wages continue to make the UK attractive for international biotech players seeking to expand into other countries.
Horizon Europe presents advantages
“There is no doubt [that] if the UK can be readmitted to the [Horizon Europe program] then it will be hugely beneficial…but it’s not just about the money, but also being able to freely collaborate with those talented scientists,” says Ivan Wall, PhD, professor in Regenerative Medicine at the University of Birmingham.
While the UK fully left the EU in January 2020, Britain was to take part in the Horizon Europe scheme as an associated country. Similarly to its predecessor, Horizon 2020, Horizon Europe is the EU’s research and innovation funding program, with a €95.5 billion ($103 billion) budget. The program supports new research on innovations and promotes collaborations. Organisations such as Universities UK, which represents 140 British universities, have described the “full association with Horizon” as the “best outcome for both the UK, and for our research partners across Europe and beyond.”
In February, a diplomatic breakthrough between the EU and the UK allowed for negotiations on the future of Northern Ireland and its trading status, to culminate in the adoption of the Windsor Framework by both. While Northern Ireland is one of the UK’s constituent countries, its shared border with the Republic of Ireland and past agreements between the two countries made it a point of fierce negotiations during Brexit. As such, the EU blocked Britain from participating in the Horizon Europe program until these matters were settled.
Historically, the UK has been successful at serving as a hotbed of collaborators from across Europe, says Wall. This is also why more attention should be placed on the way that Horizon Europe facilitates collaborations rather than just funding, notes Wall.
The UK government also has its own plans for funding research. If the Horizon Europe negotiations do not pan out, the UK plans to push the Pioneer program, for which it would invest roughly £14.6 billion ($18.2 billion) by 2030. Horizon Europe has a budget of €95.5 billion ($103 billion) set for 2021–27.
However, some view the UK’s new programs as a mere substitute for what was already in place prior to Brexit. “The new schemes put in place by the government are often replacing, and only partially, European initiatives [that] the UK tech ecosystems thrived on for decades and cannot access anymore,” Pierre Socha, partner in the Early Stage Fund of the venture capital firm Amadeus Capital Partners, writes to this news service.
“Money is only part of the challenge. Science doesn’t happen in a vacuum; the real value lies in bridges with European labs that cannot be rebuilt overnight,” he adds.
These Horizon projects connect British scientists with some of the best European researchers and developers, which not only helps in skill development, but also boosts the knowledge base for a company, says Matt Lakelin, founder of TrakCel. TrakCel previously worked on a Horizon 2020-funded project that focused on chimeric antigen receptor T cell (CAR-T) therapies and involved a collaboration with the Cologne-based biotech Miltenyi Biotec.
Pull across the Atlantic
Nearly seven years after the referendum, Brexit continues to affect British biotechs. “The UK remains a premier place for fundamental research, but Brexit has made the domestic market trivial on the international stage,” writes Socha. “The destruction of wealth and influence from Brexit cannot be overstated,” he adds.
“Consequently, tech and bio companies will automatically look to relocate or scale in larger markets first,” notes Socha.
However, this does not mean that the UK’s biotech scene cannot compete with its international counterparts. There is a stark difference in favour of the UK biotech ecosystem in terms of expenses compared to the US biotech ecosystem, and specifically the New England region, says Mark Leuchtenberger, CEO of Oxford-based company SpyBiotech, a vaccine developer that plans to study a human cytomegalovirus infection vaccine in H2 2023.
The greater Boston area includes Cambridge, a city that houses Harvard University, the Massachusetts Institute of Technology, and biotech companies like Moderna. The biotech hub also houses venture capital firms, like Third Rock Ventures, which have funded numerous startups.
Still, funding can go further in the UK than in New England, which continues to be affected by ongoing talent wars, notes Leuchtenberger. For example, SpyBiotech’s clinical efforts would likely cost at least twice as much if it was based in the US, he adds.
Nevertheless, historically, the country has lacked entrepreneurial energy for later stage developments, says Jack O’Meara, CEO of the Oxford-based biotech Ochre Bio, which is developing RNA therapeutics for liver conditions
The transition to more advanced clinical phases remains a challenge for UK biotechs, says Robert Lyne, CEO of the London-based venture capital firm Arix Bioscience. While there are strong fundamentals in Britain, there are still issues with securing talent for companies that reach a certain stage of growth versus the US, says Lyne. Arix Bioscience focuses on investing in biotechs and its portfolio includes companies such as Disc Medicine, Ensoma, and Harpoon Therapeutics.
Additionally, Lyne says going public on the London Stock Exchange is still a challenge, and the trend of companies getting listed on NASDAQ will likely not end anytime soon. These difficulties create a pull towards the US, as that remains the best environment for these companies as they develop further, he explains.
Before the start of the bear market at the turn of 2021, US investors increasingly funded UK biotechs, says O’ Meara. However, the landscape has changed following other events that impacted the broader international biotech market. In March, a major startup funder SVB collapsed following a client bank run, resulting in its seizure by the California Department of Financial Protection and Innovation. SVB’s downfall sent ripples through the tech and life sciences sectors, and eventually the multinational bank HSBC acquired the British branch of SVB. Similarly, in March, UBS also decided to take over the Swiss investment bank Credit Suisse after past scandals and losses.
While the speed of the authorities’ response alongside HSBC helped to limit the damage from SVB’s collapse to the tech industry, the fall of Credit Suisse paused the sector, says Socha. To an extent, players in the sector stopped to consider if these were simply isolated events or the beginning of a systemic correction, he adds.
“Bank collapses, coupled with negative macro trends and volatile geopolitics, made investors look inwards, prioritising assets in portfolios over new investments,” he says. Still, Socha says this may ease in the near future.
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