Brexit – Own Goal Or Overhead Kick?

Posted November 27th, 2017 by Ros Deegan, in From The Trenches

This blog was written by Ros Deegan, CBO of Bicycle Therapeutics, as part of the From The Trenches feature of LifeSciVC.

On June 27, 2016 England’s soccer team was knocked out of the European Championships by Iceland – a tiny island nation with a team coached by a dentist. This national embarrassment would have remained front page news for days except for the fact that 72 hours earlier, the country had knocked itself out of a more significant European club, taking its less than united kingdom with it. 18 months on, and viewed through the lens of biotech and pharma, I ask myself: was the United Kingdom’s departure from the European Union a sloppy own goal or a spectacular overhead kick?

Own goal

England’s Cambridge city center (Market Ward) includes some of the most pro-EU constituents in the nation. More than 87% of its voters chose to remain in Europe, with the potential for Brexit to negatively impact academic and industrial science at the forefront of local concerns. Visit the UK headquarters of my employer, Bicycle Therapeutics – which is located just outside the city of Cambridge – and it’s easy to understand this nervousness: 8 out of 23 Bicycle employees were born outside of their current country of residence with many coming from Europe.

Bicycle’s Eurocentric workforce is not an anomaly. For example, 15% of academic staff at UK institutions are EU nationals. This figure rises to 20% at elite universities. An exodus of talent triggered by Brexit would undoubtedly leave national academia as well as UK biotech struggling to remain competitive. And it’s not just about providing legal guarantees to existing UK residents. It is also about making people feel welcome. Menelas Pangelos, an Executive Vice-President at AstraZeneca (where around 10% of the workforce are Europeans living in the UK and vice-versa) recently told the House of Lords’ Science and Technology Committee that mainland Europeans are turning down jobs located at the company’s UK sites.

In addition to brain drain, a key concern for both academia and biotech is funding. This is especially crucial at universities. Prior to the referendum, a survey administered by the Campaign for Science and Engineering indicated that 93% of UK-based research scientists felt that EU membership was a major benefit to the UK’s research community. Hardly surprising, given that between 2007 and 2014, the EU awarded €8.8bn to the UK in research funding, 1.6 times more than the UK government put into the pot. Following Brexit, there were several reports of UK academics being jilted by European colleagues who decided that bidding for EU grants with UK partners was too risky. The UK government has since promised to underwrite existing EU research projects.

A reduced investment in UK-based biotech is also possible. Many European life sciences venture funds accept money from the European Investment Fund (EIF). This funding is expected to be reduced for UK VCs. In addition, the EIF typically requires that fund recipients invest two euros in the EU for every one euro that they receive, thus reducing the attractiveness of UK investments for European VCs. The angel funding market may also take a hit if the banking sector relocates its European activity away from London, given that most angels come from this sector.

Talent acquisition and funding are problematic. But an even bigger headache for pharma and biotech is regulatory uncertainty. If the UK wants to avoid the reach of the European Court of Justice, it will have to leave the European Medicines Agency (EMA) – the organization responsible for authorizing the use of medicines across the EU. Yet a separate marketing authorization process just for the UK would diminish the importance of the UK market and likely result in delayed product launches. UK ministers have proposed a close working relationship with the EMA, even going so far as to suggest that companies could send identical proposals to Brussels and London for authorization. This approach may prove unacceptable to European regulators and could expose the UK to EU regulatory changes.

As the UK considers its post-EMA choices, the London-based EMA has been considering its post-Brexit location. A survey conducted amongst EMA staff revealed that just 6% of its workforce were prepared to move to some of the 19 cities that competed to be the next host of the organization. Amsterdam and Barcelona both fared well in the poll. The current political situation in Catalonia may be one reason why Amsterdam was selected in November. The esteemed Spanish city could conceivably be out of the EU before London!

Clinical trials offer another area of incertitude. New clinical trials regulations providing for a single application for clinical trials across the EU, and an associated EU-wide database, are under implementation. However, the UK will no longer benefit from these initiatives. Questions have also arisen in relation to data protection, particularly as it relates to clinical trial data and the use of personal data. Clinical trial participants may need to re-consent to research in which they already engaged so that they are informed of their new data protection rights. The UK could also lose the potential benefit of the single pan-EU unitary patent system.

In the hours after the June referendum, google searches surged with questions such as: ‘What happens if we leave the EU?’ You’d be forgiven for thinking that citizens should have asked this question before they voted. 18 months later and no-one knows the answer, and we won’t know for some time. Yet if business doesn’t like uncertainty, why did GlaxoSmithKline’s (GSK‘s) stock price go up the day after the referendum? Was Brexit in fact not a sloppy own goal but a spectacular overhead kick?

Overhead kick

A successful Brexit is comparable to an overhead kick because voters could not see the goal when they marked their ballot papers. Voting to leave without knowing the impacts of such a decision is akin to asking your board to approve a transaction before any terms have been negotiated. Ultimately, Brexit will come down to negotiation leverage, and the UK has plenty.

The UK’s biotech sector boasts the strongest new drug pipeline in Europe. UK biotech companies also top the charts in venture capital financing, receiving more than a third of the total raised across Europe. The UK and Switzerland (itself a non-EU nation) attracted £1,065 billion of biotech venture funding in 2016, against £860 million for the rest of Europe. Switzerland, like the UK, boasts a world-class pharmaceutical industry, providing strong evidence that companies in this sector can thrive outside of EU regulation.

The UK is a major destination for EU pharmaceutical products, running a trade deficit of €114 billion against the other EU27 countries. Not only that, but the UK is a leader in clinical trial activity: it is the most popular location in Europe for phase 1 trials, and ranks second for phase 2 trials. Europe has just as much to lose as the UK if Brexit is poorly implemented.

The aforementioned post-Brexit stock price rise for GSK can predominantly be rationalized in terms of a weak pound (good for companies reporting profits in dollars but not ideal for loss-making UK biotech where much of the spend is international). The initial collapse of sterling has helped the UK economy to stay competitive and to weather initial post-Brexit storm clouds.

Although the benefits of a weak pound are likely to be short-lived,. Brexit may deliver long-term advantages. The first of these will be the UK’s ability to differentiate itself once it controls its own destiny with, for example, liberal regulations in areas such as clinical trial data, stem cell research and genetic modifications. The UK could also offer a faster authorization process for clinical trials in contrast to the centralized European process, thereby making the UK ever more attractive as a clinical trial center. Another opportunity presents itself in relation to current EU limitations on state aid that inhibit the UK from directly supporting science-based industries. If the UK marries Swiss-style, light touch regulation with generous state aid, Brexit could further elevate the UK’s position as a global leader in life sciences.

Ironically, another area where the UK can win is with its future immigration policy. Freedom of movement within the EU has reduced the UK’s focus on attracting the finest scientific minds beyond the European mainland. An enlightened immigration policy could entice skilled workers from countries such as China, India and the US to move to the UK.


We don’t yet know if the UK will experience a hard Brexit but we do know that Brexit will be hard. Much of the uncertainty that exists today can be overcome by making good decisions. Although academia, biotech and pharma in Britain and Northern Ireland will miss out on EU research money, the UK has the option to channel additional pounds into innovation and scientific discovery. The government could also prioritize the research and development of drugs that make the most sense for its citizens. The nation already boasts world-class bodies such as the Medicines & Healthcare products Regulatory Agency (which to date has played a disproportionally large role in the EMA), the National Institute for Health and Care Excellence, and the unfairly maligned National Health Service. The UK is well positioned to lead the rest of Europe in life sciences for many years to come.

18 months on from that fateful match against Iceland and England’s soccer teams have won the FIFA Under-20 World Cup, the UEFA European Under-19 Championship and the FIFA Under-17 World Cup. I take that as a good omen. If Bicycle Therapeutics succeeds in retaining its fantastic pan-European team, benefits from additional US investment strengthened by the weak pound and continues to lead the way in a newly differentiated UK biotech industry, then the company – along with the rest of UK biotech – could avoid scoring a post-Brexit own goal. After all, an alternative term in soccer for an overhead kick is a bicycle kick.


Thanks to Kevin Lee and Kenny MacLeod for reading drafts of this post.

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