Luke Hamm, CEO of GovGrant, explains why investment in R&D remains vital in shaping how businesses will fare beyond COVID-19, particularly for crucial industries such as medtech.
As we start to emerge bleary eyed from the COVID-19 crisis, it is clear that the UK’s economy has taken a significant hit. When the UK was plunged into lockdown in March, economic output ground to a complete standstill.
With the virus escalating and uncertainty around a second lockdown upon us, the outlook may seem bleak. But the current situation also presents unique opportunities, especially to those operating in the medical sphere. R&D and innovation, particularly in the biopharma and medtech fields, will be crucial to our ability to seize the moment and build a better future.
Growing sectors
The UK’s biopharma and medtech industries will have a crucial role to play if we are to get the UK economy – and society as a whole – back on its feet quickly.
The UK life sciences industry employs 248,400 people in 5,870 businesses and generates a turnover of £73.8 billion. The core medtech sector is the largest by employment (97,600 or 39% of the industry) and core biopharma is the largest by turnover (£33.4 billion or 45% of the industry).
This high-tech, innovation-driven field is in a strong position to contribute to the economy of the future, reaching all corners of society, and going beyond the people directly employed by these industries. However, recognising the power of innovation – and knowing how to make the most of R&D investment – will be central to their success.
Opportunities and challenges
Recent years have seen a blurring of the lines between medicine and technology, creating both opportunities and threats for the businesses operating in the sector. Learning from their peers in the FMCG and consumer tech sectors, any medtech companies are now incorporating sensors and software into their products to generate, gather, and analyse vast reems of user data. Their hope is that this will give them an edge, as they jostle to compete with an influx of seasoned innovators from ‘Big Tech’ – Google and Amazon in particular – who are using their knowledge, data and expertise to move into the medical field.
This amalgamation of tech and medicine is helping to create a healthier world by, among other things, advancing diagnostics, accelerating clinical trial timelines, and boosting patient engagement. But working within one of the world’s most heavily regulated sectors doesn’t come cheap. Strict rules and the requirement for high-quality robust data often lead to protracted development times and tight margins.
For an increasing number of businesses, the solution is collaboration. Successful organisations are aware that no one can know everything, so they are pooling their knowledge and sharing ideas both within and outside of their traditional siloes.
As a result, medtech companies will not only need to invest in technology, but also in talent, partnership models, and processes to collaborate and compete with non-traditional competitors. In other words, if they are to keep up and remain competitive, medtech companies need to focus on R&D and innovation – and they need to do it fast.
Using resources wisely
As we seek to rebuild the economy after the initial outbreak of COVID-19, supporting biopharma and medtech is paramount – not least because this will encourage outside investment. These sectors are driven by the very innovation we need to create sustainable growth and future jobs. They are natural producers of intellectual property (IP), including copyrights, patent systems, trademarks, and designs, which contribute strongly to the value of UK plc.
What’s more, sectors like medtech and biopharma are well-placed to spread significant economic gains across the country. The government is aware of this fact and has therefore put a range of incentives in place, such as R&D tax credits, to encourage this activity.
Despite these incentives, numerous businesses within the sector still don’t claim the amount they are truly eligible for. Instead of being a valued source of vital funding, applying for R&D tax credits is often seen as a ‘tick box’ exercise. It’s this complacency that’s causing businesses to inadvertently limit the amount they claim.
The misconception around what can be regarded as innovation contributes to this further – it’s not all about huge leaps forward in finding a vaccine or a cure for a disease. Small changes that build the foundations are also accounted for by the government’s definition of innovation, and it is essential companies take these into account if they’re going to take full advantage.
Not only that but treating the scheme as an afterthought in this way means the conversation stops before IP is even considered, when in reality it is a huge source of funding that is being underutilised.
IP as an asset
These are businesses rich in IP, but the nature of their work means they are minded to think about it from an academic background rather than through a commercial lens. This means they only use patents to protect IP from being copied, but fail to recognise the huge value a patent can bring to the business. IP should be driven by how they can improve margin and treated as an asset. If not done properly, companies risk losing the value of their hard work.
One way of doing this is via the government’s Patent Box scheme, which allows companies to apply a lower rate of corporation tax to profits earned from its patented inventions. Whilst obtaining a patent can be perceived as time consuming and expensive, this tax reduction has the potential to easily outweigh these drawbacks and could generate a substantial cash injection to a business.
As we continue to cope with the economic fallout of COVID-19, UK plc needs the medtech and biopharma sectors more than ever before. These high-tech, IP-driven industries have the potential to create sustainable growth and jobs, attract overseas investment, and ensure the results reach the whole of the country.
And for their part, businesses have an unprecedented opportunity to grow. By extracting every penny of value from R&D investment, innovative companies can seize the day and help build a healthier, more prosperous future for everyone.
