The recommendations of a UK review of science and innovation policies, including stronger encouragement for knowledge transfer from universities and better investment incentives for early-stage high-technology companies, have been welcomed by the pharmaceutical and biotechnology industries.

The government has taken on board the recommendations of the review commissioned by then Chancellor Gordon Brown in November 2006. It has promised a new, detailed strategy for science and innovation in the UK and committed funding of £1 billion (€1.44 billion) over the next three years to a programme led by the Technology Strategy Board that aims to galvanise business innovation and technology development.

The review of the government’s science and innovation policies, The Race to the Top, was undertaken by Lord Sainsbury of Turville, who was science and innovation minister between 1998 and 2006. Its particular focus was on ensuring the UK remained competitive in an increasingly globalised marketplace, where pressure was building from low-wage emerging economies such as China and India.

The review’s premise is that the best way to maintain this competitive edge is not through a downward spiral of cost reduction – a “race to the bottom” – but by shifting emphasis to high-value goods, services and industries.

High-technology sectors such as pharmaceuticals and biotechnology fit into this pattern but tend to be overshadowed by successful but less research-intensive industries like oil and gas or financial services, the review notes. On the two most commonly used measures of innovation performance – the quantity of industrial research and the volume of patenting – the UK’s performance is “unimpressive”, it comments.

Perhaps surprisingly, given the accusations of aggressive or frivolous patenting often levelled at these industries, pharmaceuticals and biotechnology come towards the bottom of the scale on patent intensity as measured by the then Department of Trade and Industry’s 2006 R&D Scoreboard. R&D intensity means the number of US patents granted per £10 million investment in research and development. The low ratio for pharmaceuticals “reflects the substantial R&D investment needed to ensure a patented compound is effective and acceptable to regulatory authorities”, the review explains.

Doing better

Despite these sorts of caveats, and the call for more concerted incentives behind science and innovation, the review does acknowledge that “in a number of critical areas we are doing better than is commonly thought”.

In recent years “the share of high-technology manufacturing and knowledge-intensive services in the UK’s total value added has grown rapidly, there has been a dramatic increase in the amount of knowledge transfer from British universities and we are beginning to see the growth of exciting high-technology clusters around many of our world-class research universities”, it points out.

“At the same time, we continue to maintain our outstanding record of scientific discovery. In the future it will no longer be necessary to start every report of this kind with the dreary statement that, while the UK has an excellent record of research, we have a poor record of turning discoveries into new products and services.”

Among the key recommendations to build on and sustain these achievements are:

- A new leadership role for the Technology Strategy Board (TSB), created in October 2004 and converted into an executive non-departmental public body (NDPB) in July 2007. The TSB will work with Regional Development Agencies (RDAs), the Research Councils and government departments to co-ordinate public sector support for technological innovation, leverage public sector resources and simplify access to funds for business.

- Further encouragement for translational research by giving more support to ‘business-facing’ universities through the Higher Education Innovation Fund, setting targets for knowledge transfer from Research Councils, doubling the number of Knowledge Transfer Partnerships and extending these more widely to further education colleges.

- A “major campaign” to enhance the teaching of science and technology, including raising the numbers of qualified STEM (science, technology, engineering and mathematics) teachers and young people studying triple science, improving careers advice, establishing a National Science Competition and rationalising schemes aimed at encouraging careers in science and engineering.

- Embedding innovation in the strategic objectives and procurement practices of government departments as well as reforming the Small Business Research Initiative (SBRI) – under which government departments spend 2.5% of their R&D budget on research contracts with small and medium-sized enterprises (SMEs) – so that it more closely resembles the US SBRI scheme. The UK scheme should be managed in conjunction with the TSB and should fulfil departmental objectives while providing valuable support to early-stage high-technology companies, the review says.

- Sharpening the focus of RDAs on science and innovation by encouraging them to put additional resources into TSB programmes, Knowledge Transfer Partnerships, high-technology clusters around world-class research universities, and proof-of-concept schemes meeting a nationally agreed specification.

This last component was particularly welcomed by the BioIndustry Association (BIA), which has been pushing for a national proof-of-concept fund akin to the one already operating in Scotland. The BIA has also called for a US-style Small Business Research Innovation programme as part of its efforts to keep early-stage biotechs afloat as independent entities. In this respect, the association was pleased too with the recommendation in the Sainsbury Review that the UK’s Enterprise Investment Scheme (EIS) should be reviewed in terms of its speed-of-use requirements.

Specifically, companies operating under the EIS must start trading within two years of receiving funding for the investors to secure the available tax reliefs, while 100% of the money raised must be spent within two years. “Investors should not, however, be forced to invest too quickly, and biotechnology companies in particular work on much longer timescales: after initial investment, a typical business plan will require early-stage investment over a four to five year horizon, often running to very large sums, before trading takes place,” the review comments. “The Bioscience Industry Association reports that two-thirds of its members claim this causes difficulties in acquiring funds.”

The BIA further welcomed the recommendation that the government should consider using the European Union’s Young Innovative Enterprises (YIE) definition to provide targeted support for investment in high-technology businesses. The definition introduces concessions on state aid (e.g., tax relief) to YIEs, which are companies up to six years old and investing a minimum of 15% of their expenditure on R&D.

Skills are key

The Association of the British Pharmaceutical Industry (ABPI) joined the BIA in applauding both the conclusions of the Sainsbury review and the government’s response to it. Especially welcome, it said, was the focus on ensuring that the UK improved its ability to encourage appropriate science and technology skills.

“The issue of skills remains key,” commented Dr Philip Wright, ABPI Director of Science and Technology. “Many countries – especially those with growing science and technology bases – are seeking to overtake us, and are providing the skills and new facilities that will enable this unless we take action. The UK needs to up its game in encouraging hard science skills at all levels and also in providing easier access to new knowledge.”

According to the association’s measurements, collaboration between the pharmaceutical industry and academia has been on the decline since 2003. “The trend must be reversed as it has been a foundation of the success of the development of new medicines in the UK,” the ABPI warned.