CSEP Blogs

Finding and fixing leaks in the UK’s pharmaceutical pipeline

Professor Michael Hopkins (SPRU, University of Sussex Business School)

Dr Philippa Crane (SPRU, University of Sussex Business School).

How did you come to this topic?

We began working together over 15 years ago at the Science Policy Research Unit (SPRU), University of Sussex, researching trends in the financing of the UK’s emerging small innovative life sciences firms and publishing on this topic for academic and policy audiences. At the time, soon after the 2008 financial crisis, the UK was just putting together its first sector-specific industrial strategies. Last year, when we heard about CSEP’s research programme, we thought our deep sector-specific experience and prior research could be of interest in understanding the progress of the sector and how well the latest iteration of the Government’s industrial strategy might support these firms.

What is the focus of your project under this collaboration with CSEP?

Our research looks back to the emergence of the UK’s very first “biotech” firms, in the early 1980s, and follows the growth of what are now well over seven hundred firms that all share a common purpose – the desire to bring innovative new medicines to market. Our data captures whether these companies are still active, and if not, what happened to them, thereby charting the dynamics of the industry, including how the introduction of successive industrial strategies has impacted these dynamics.

For instance, while scaling up of UK based SMEs is an explicit objective of successive UK Life Sciences industrial strategies (2016 and 2025), which direct policy levers can policy makers use in the face of the many acquisitive overseas firms that pick off the UK’s leading firms through acquisition?

How does this research align with CSEP’s mission?

A key theme in CSEP’s mission is to show how the UK can build on science, engineering and technology capabilities to improve the competitiveness of the economy. Our research is situated within the context of the UK’s aspiration for R&D-driven economic growth, which rests disproportionately on the nation’s ability to translate biomedical research into new pharmaceutical products and retain value within the UK.  CSEP’s 2024 report on the performance of the Life Science sector notes that ‘while the UK performs well on basic science, attention is needed to grasp the opportunities and translate potential innovations into commercialised products and services’ (CSEP 2024:39). Our study takes a pipeline perspective to determine how and why potential UK economic returns from the life sciences ‘leak away’, and what could be done to improve the situation for the benefit of UK PLC, economic growth and productivity.

What makes this work innovative or timely?

The latest UK Industrial Strategy sets out a ten-year goal for the country to become Europe’s foremost life sciences hub and to rank third globally, behind only the US and China. Yet there is little longitudinal research that has actually looked at how the cohorts of UK firms emerging over the years have performed. Our research can show this performance, which we will share with stakeholders and together we can develop lessons based on previous governments’ attempts to improve the performance of the UK biotech sector, and seek to influence how the present industrial strategy could be further developed.

 

Read CSEP Cross-Institutional Partnerships: University of Sussex Business School in full

Can you describe your research journey and the key themes that define your work in health economics and public policy?

I am a Research Associate in the Economics and Public Policy department at Imperial College London, jointly affiliated with the Centre for Sectoral Economic Performance (CSEP) and the Centre for Health Economics & Policy Innovation (CHEPI). I completed a PhD in Health Policy and Economics at the LSE, where my dissertation examined how patient organisations shape pharmaceutical innovation and access. Methodologically, that work combined quantitative analyses with qualitative evidence to capture how incentives, information, and advocacy intersect across the R&D and reimbursement lifecycle. I also interested in how governance processes can be embedded within the pharmaceutical sector, particularly around transparency requirements and where they fall short. My research has been published in The Lancet Oncology, Social Science & Medicine, Value in Health, and BMJ Open, and I continue to collaborate with colleagues across disciplines to address policy-relevant questions in this space.

Your work bridges health economics and innovation policy—how are you currently exploring the role of emerging technologies, like AI, in shaping pharmaceutical R&D productivity and access to medicines? 

I am currently working in a CSEP–funded programme on pharmaceutical R&D productivity that analyses how technology adoption and market structure shape drug development performance in the UK life sciences sector and internationally. I am also supporting a European Commission–funded project, called Hi-PRIX, which investigates how incentives for innovation can be aligned with equitable and timely patient access to effective medicines. A particularly interesting aspect of this agenda is the opportunity to explore the rapidly evolving AI tools landscape in the pharmaceutical sector, for example, evaluating how different AI tools are being integrated across target identification, trial design, and evidence synthesis, and what this implies for productivity. The sector is experiencing a period of rapid change, and I feel it is extremely important to think how the research we produce can be translated into recommendations that regulators and policymakers can act on to improves people’s health.

Your work touches on several aspects of the pharmaceutical sector. Can you tell us about the key themes or focus areas of your research, and how they inform policy and practice in health economics?

My work spans three interlinked strands: (i) pharmaceutical innovation and R&D productivity, including the drivers of success and attrition across the pipeline; (ii) regulation and health technology assessment (HTA), with an emphasis on evidence standards, uncertainty, and value for money; and (iii) the commercial determinants of health, particularly how market power, pricing practices, and strategic behaviour shape access and affordability. I am especially interested in how emerging biomedical technologies and stakeholder incentives interact to determine which medicines are developed, how they are evaluated, and how quickly patients can access them.

How do you see your role contributing to CSEP’s mission?

CSEP’s mission is to generate sector-level insights that inform policy and practice. My contribution is to bring an applied empirical toolkit, econometrics, document and text analytics, and policy evaluation, to help diagnose bottlenecks in drug development and to understand which policy levers are most likely to improve innovative output and patient access. I also enjoy collaborating across disciplines and supervising junior researchers, which helps grow CSEP’s capacity to deliver timely, policy-relevant research.

In what ways do you hope your work at CSEP will contribute to improving how health systems balance innovation, affordability, and access to medicines?

First, to deepen the evidence base on how technology, organisational capabilities, and market design impact biopharma productivity in ways that are compatible with affordability and equitable access. Second, to strengthen the bridge between research and implementation by working closely with partners in government and industry so that our findings inform regulation, HTA processes, and funding models. An additional benefit of being at CSEP is exposure to diverse methodological approaches across sectors. For instance, AI-enabled techniques employed by colleagues analysing firm-level data in the aviation sector have proven directly transferable to one of our pharmaceutical projects, which I believe is a great example of how cross-sector collaboration advance research.

Read Meet the CSEP Team Series: Dr Arianna Gentilini in full

Author: Professor James Barlow

In 2024, the UK dropped out of the top ten countries in global manufacturing rankings.[i] The decline reflects long-standing structural weaknesses that stretch back decades, including a lack of coherent industrial strategy and inconsistent policies, inadequate adoption of innovation and productivity-enhancing practices, and insufficient investment in workforce training. These have left many of our manufacturing industries without a solid foundation for global competition. Compounding these challenges, geopolitical shifts have also led to other countries overtaking the UK – Russia’s surge in defence industry spending, a manufacturing boom in Mexico spurred by Chinese investment seeking to bypass US tariffs, and Taiwan’s continued dominance in semiconductor production.

Innovation without impact

Does this matter? According to a widely held narrative, the UK lies at the global scientific frontier in key technologies such as life sciences and advanced computing. Yet, the UK often struggles to translate this cutting-edge research into commercial success, limiting its ability to produce world-leading companies. There are also concerns that even the belief in the UK’s scientific performance may be misplaced. Recent research[ii] on some of the priority technologies described in the UK’s 2021 National Integrated Review (engineering biology, AI, and quantum computing) concluded that while the UK performs reasonably well despite low investment, there are real questions about our ability to remain competitive in the long term. Addressing this will require attention to the level, focus and nature of science funding in the UK. But it also requires an ability to turn scientific breakthroughs into companies that grow into global players.

Life sciences: opportunities to unlock growth

A case in point is life sciences, where the UK is recognised for its strengths. Much of this science feeds the biopharma sector, where the UK has two of the world’s largest companies, AstraZeneca and GSK. However, growth in biopharma gross value added (GVA) has stalled and the UK has fallen behind other competitor countries in international rankings.[iii] Moreover, much of our pharma manufacturing capacity has been transferred abroad and the environment for conducting clinical trials has been problematic for several years.

The potential for future growth in the sector is there. The Government’s proposed industrial strategy prioritises life sciences, including biopharma innovation. The UK could leverage its AI capabilities and the NHS’s extensive health data to accelerate drug development and enhance the flow of research breakthroughs into commercial applications. As well as AstraZeneca and GSK, around 500 smaller biopharma companies—three-quarters of which demonstrate measurable research output—indicate a strong foundation for growth.[iv]

A critical question is whether the UK can translate its scientific strengths into GVA for the UK economy. Small companies with promising products are often acquired by US and other foreign investors. While UK biopharma companies outperform their European peers in securing early-stage funding, they raise less late-stage growth financing. This makes it preferrable to seek acquisition by a large pharmaceutical company or possibly an IPO in the USA, where the average IPO size is significantly higher than in the UK.[v]

Between Q3 2023 and Q3 2024, there were 130 mergers and acquisitions (M&A) in the UK pharmaceutical sector, valued at $15 billion, with most involving foreign buyers. [vi] This activity is not inherently detrimental – it can bring capital and global collaboration opportunities – but it also raises concerns about the UK losing control over innovative assets, intellectual property, and the ability to independently drive growth. There are also risks of job relocations and profits being redirected overseas. The volume of

M&A activity signals the need for a strategy that ensures the UK retains the economic benefits of its life sciences innovation.

Delivering an industrial strategy

The Government’s proposed industrial strategy offers some hope. We welcome the framework provided by the overarching eight sectors set out in the Green Paper. We also believe that it is right to concentrate on sectors – such as biopharma – rather than technologies, as productivity growth is a function of how technology is used by firms to generate value. The approach provides a clear departmental sponsor for each sector.

However, two dangers risk the industrial strategy being blown off track:

• First, a limited understanding of the nature and dynamics of industries which are rapidly evolving because of technology innovation and changing markets. The eight sectors are very broad, comprising ecosystems of players spread across different industries. It is important that the next phase of the industrial strategy captures the distinctive features of each sector – the configurations of players and technology innovations that shape them. Some industries also form part of larger sectors that might currently be small in terms of their overall contribution to the UK economy but have significant growth prospects or the potential to drive growth elsewhere in the economy. These should not be neglected. Understanding the changing dynamics of sectors and ensuring that strategies are well-crafted (and industry-led) will increase the likelihood that they deliver the growth that is needed.
• Second, there are dangers that the ambitions of the industrial strategy are undermined by other policies. Fifty economists and other experts recently warned that easing post-2008 rules designed to prevent excessive risk-taking, and giving the Financial Conduct Authority a remit to promote growth in financial services, could harm efforts to stimulate the wider economy.[vii] Research suggests that once a country’s financial sector grows past a certain point, it can lead to productive investment being crowded out [viii], misallocation of resources [ix], and undue influence by a powerful financial sector on policymaking. Studies [x] suggest that large financial sectors have negative effects on economies when private credit is the equivalent of at least 100% of GDP – in the UK, this averaged 160% since 2000. For businesses, especially SMEs such as the biopharma companies discussed earlier, a tangible outcome is that there has long been a shortfall in investment to finance their growth.

Being ‘open for business’ should not mean blindness to the consequences of losing control over promising UK technology companies. Ensuring there is coherence in both industrial and financial policy will be key to success in the growth agenda for the UK economy.

About Centre for Sectoral Economic Performance (CSEP) at Imperial College London.

The goal of CSEP is to help improve the competitiveness of the UK economy and drive economic growth by bringing together the UK’s leading experts from science, technology and business. Since we started work last January, we have begun an ambitious programme of research and engagement with industry and government to co-design strategies for our key industries. Amongst our activities for 2025, we will be launching new reports on the UK’s aerospace, automotive, data science, telecoms, and tidal energy sectors. We are continuing our research on productivity in the biopharma sector and running a series of regional events to develop a health technology industry strategy.

 

 

[i] UK manufacturing seen ‘chronic underinvestment’, but Labour’s industrial strategy could be a ‘beacon of hope’

[ii] Paul Nightingale, James Phillips. Is the UK a world leader in science?

[iii] The UK Biopharmaceutical Sector 2024. CSEP, October 2024.

[iv] The UK Biopharmaceutical Sector 2024. CSEP, October 2024.

[v] McKinsey. The UK biotech sector: The path to global leadership. 2021.

[vi] GlobalData – Deals Database.

[vii] Response to Financial Services Growth and Competitiveness Strategy Call for Evidence.

[viii] For example, by focusing on short-term returns and financial metrics such as dividend payouts rather than productivity-enhancing investment.

[ix] Because financial institutions engage in extracting value from the economy rather than creating it.

[x] By the International Monetary Fund and Bank for International Settlements. See Positive Money.

Read From biopharma innovation to biopharma impact: Can the UK compete globally in 2025? in full