Emergent Markets: Bio Pharmaceuticals

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Biopharmaceuticals

The biopharmaceutical market is a sub-segment of pharmaceuticals, which deals with the development and manufacturing of medical drugs and vaccines using biological sources and/ or is semi-synthesised using biological sources.

Introduction

This is one of the 16 market profiles produced as part of the Economic Market’s foresight study commissioned by the North East LEP. It provides an overview of the future growth prospects for the Biopharmaceutical market globally, a summary of the enterprise base serving the market in the North East and relevant regional assets, and an analysis of how the continued convergence of global trends will affect future market development.

These markets were selected as those most likely to present opportunities for future regional growth in the North East LEP. This was done based on a trends analysis conducted by Frost and Sullivan, which identified 37 high impact trends driving continued change and growth in these markets globally. A shortlist of markets from this trends analysis was then cross-referenced against the current North East position by Cambridge Econometrics. This analysis identified the most significant opportunities for the North East LEP.

Each of these profiles also uses findings from the Data City platform to quantify the number of firms serving the Biopharmaceutical market in the North East. This platform links companies house data to companies’ websites and uses the website text and machine learning to classify firms into Real Time Industrial Classification Codes, which can allow analysis of markets often too emergent to be precisely measured in SIC codes. The data from this platform has been triangulated against ONS data to consider a variety of perspectives on the market.

More detail about the methodology can be found here for the 16 market profiles.

Description and global outlook

Market drivers

Biopharma is among the fastest growing markets within pharmaceuticals due to its efficacy, higher safety records and ability to treat complex conditions.

In recent years, there has been greater adoption of biosimilars (biologic medicines that are highly similar to a previously approved reference biologic currently on the market) due to the lower clinical costs and R&D costs that result in lower prices.

Trends impacting the biopharma markets are increasing adoption of technology, data management and COVID-19 for which biopharma products demonstrated higher effectiveness.

The biopharma market is increasingly focused on:

Implementation of real-world evidence as a critical part of the process
The integration of digital platforms for efficient product development and marketing
Joint ventures across research and development (R&D) activities.

The market is expected to grow across developing economies due to the increased focus on providing healthcare.

Major challenges for the market include:

The increasing application of biosimilars leading to erosion of exclusivity
Cybersecurity threats
Increasing cost of product development.

This is further compounded by the lowering demand for prescription drugs and entry of low cost non-branded products.

Scale and scope of global market

The global biopharma market was estimated to be US$ 270bn in 2020, with the expected annual growth rate of 10.6% for the period 2021-2027.

The US is the largest biopharma market owing to the presence of a large number of global companies and a strong supply chain, backed by R&D and favourable regulations. North America and Europe are expected to continue as the leading biopharma markets at a global scale, but in recent years China has emerged as a leading market.

The UK’s biopharma market has been among the industry leaders with long track-record of successful innovation. The industry is widely supported by government support, a dynamic supply chain, and a mature value chain. The UK life sciences sector, employs over 248,000 in over 5,800 life sceinces companies and has two of the top three universities in the world for life sciences and ranks first in the G7 for life sciences impact by citations.

Another strength lies in applying convergent technologies to the life sciences market. Adjacent research and business areas support the growth of convergent technologies and combination products such as advanced engineering, nanotechnology and micro-electronics.

One in four companies featured in the 2020 Global Digital Health 100 list are from the UK. Beyond these assets are the sector specific support networks and research funding charities, and consumer markets such as the National Health Service (NHS).

During the COVID-19 pandemic, the UK’s biopharma sector was able to deliver critical research and innovation to contain and treat the virus spread.

Some of the leading companies in the global biopharma market are Eli Lilly, Pfizer, AbbVie, Johnson & Johnson, Novartis, Roche, Takeda, GlaxoSmithKline and Sanofi.

$270 bn

Capital flows and FDI

National levels of private capital investment in biotechnology and pharmaceuticals has grown rapidly since 2017, with COVID-19 imperatives helping to drive a 100% rise year-on-year against 2019 levels. It remains of national interest, but also draws heavy support from national government funding through UKRI and InnovateUK grants and matched funding calls.

FDI opportunities are significant, and the North East is well placed to continue to attract the interest of multinational biopharma blue-chips and startups, where a liquid market exists for sales to the end customer (NHS or private medical facilities).

North East presence and capabilities

Regional overview

The North East has an established pharmaceutical manufacturing base; emerging biotech cluster and companies developing diagnostics, medical devices and equipment. The NHS and university research environment is considered a springboard for firm level innovation to underpin exports. One in four students in North East England study Life Science topics with over 100 specialised courses to choose from.

Top-rated universities

In the 2014 Research Assessment Exercise, 28.9% of research in biological sciences in North East universities was rated 4* or higher. 21.7% of research in psychology, psychiatry and neuroscience was rated 4* or higher.

In The Witty Review, North East universities were in the top 20 for research publications for 11 subjects including life sciences and regenerative medicine. Amongst top 20 research subjects university research council funding by subject area were metabolic and endocrine, neurological, inflammatory and immune system, biochemistry and physiology, and cancer.

Between 2007-2017 North East universtieis accessed £94m from the BBSRC and £118m from the MRC. Health research and NHS healthcare organisations include Newcastle University (Medical School, Institute for Genetics, NIHR Clincical Research Facility, Diagnostic North East, NIHR Innovation Observatory and Genomics), Northumberia Univeristy (Faculty of HLS and research specialisms in health and integrated socail care and bio-economy); Durham University (Biophysical sciences, medical humanities, synthesis of pharmaceatical intermediaries and CPI) and Sunderland Univrsity has recently opened a new school of medicine in 2019. Other research centres include the Wellcome Trust Centre for Mitochondrial Disease and the MRC Single-Cell Functional Genomics Unit.

Strong biopharma sector

In the North East in 2019, there were 71 companies in biopharma employing 4,000 and 91 companies in medtech employing 2,600. Export revenues were worth £0.4 bn, in 2020. 50 life sciences companies formed between 2007 and 2016.

Strong pharmaceutical manufacturing sector

There is a strong pharmaceutical manufacturing sector. This consists of 15 manufacturers, employing between 4,000 to 5,400. The sector manufactures 90+ clinically approved drugs and commercialised products. Over 9.85 bn tablets are produced from four sites, with 4.8 billion produced on one site alone The sector is heavily export oriented – with 86% products exported, 64% of exports going to the USA.

Key business and industry networks

Key business and industry networks include:

BioNow: Sponsored by AstraZeneca, Lancaster University, University of Liverpool, University of Manchester, Newcastle University, Durham University and Manchester Metropolitan University, BioNow is a membership organisation for businesses in the biomedical and Life Science sectors in the North.
AHSNs: Academic Health Science Network North East and North Cumbria, Innovation Agency Academic Health Science Network for the North West Coast, Yorkshire & Humber partners Academic Health Science Network, Greater Manchester Academic Health Science Network.
MedConNect North
FUSE: Centre for Translational Research in Public Health
First for Pharma
NEPIC
The Northern Health Science Alliance

Key sites and assets

NETPark: The North East Technology Park in Sedgefield, County Durham
Newcastle Helix (Science Central) – home to National Innovation Centre for Ageing and Data, The Core (knowledge based science and technology SMEs), the Urban Sciences Building
The Biosphere (Newcastle): Grade A offices, conference space, biology and chemistry labs

Analysis of GVA and employment by SIC sectors

The tables below summarise the findings from socio-economic data and economic forecasts, presenting headline findings for the healthcare industry and pharmaceuticals. The healthcare industry has below average productivity and is a very large employer, with 75,600 employees in the North East LEP area. The sector is a slight specialism for the North East – with a Location Quotient of 1.1. Healthcare has experienced significant employment and GVA growth since 1981, with continued growth forecast.

The pharmaceuticals industry has a much higher level of productivity than average and is a modest employer, with 3,500 employees in the North East LEP area. The sector is a major specialism for the North East – with a Location Quotient of 2.5 – demonstrating that there as a 150% higher share of employment compared to the UK average. Pharmaceuticals has experienced significant employment and GVA growth since 1981, with continued growth forecast.

Healthcare

Pharmaceutical manufacturing

The Data City findings

The Data City provides company data based on an AI-driven taxonomy search of terms and content on company websites. This is then connected to Companies House data for each company – and allows an aggregate analysis for new industry and market definitions. The data captures the number of business branches in the North East LEP area. It should be noted that all employment, turnover and profits values refer to UK figures.

The Data City suggests that there were 25 active biopharmaceuticals firms in the North East LEP area in June 2022, 2% of the total firms in this market in the UK.

Local authority location quotients

The findings from the Data City suggest that Newcastle and Northumberland are areas with a specialisation in biopharmaceutical’s manufacturing, both local authorities have location quotients above one. The rest of the local authorities have location quotients below one, and there were no firms with locations in South Tyneside.

Location quotients

The findings from the Data City suggest that Newcastle and Northumberland are areas with a specialisation in Biopharmaceutical’s manufacturing, both local authorities have location quotients above one. The rest of the local authorities have location quotients below one, and there were no firms with locations in South Tyneside.

Out of region locations

60% of firms with a location in the North East LEP area had an additional location outside of the wider North East region, compared to 28% of firms nationally having locations in more than one NUTS region.

The most common region for North East firms to have an additional location in was London, but the North East had a higher proportion of firms with locations in Yorkshire and the Humber and Wales than the national distribution.

Sector crossover

One of the innovative features of the Data City methodology is that it allows firms to be classified in multiple sectors. The platform does so through real time industry classifications (RTICs), which are constantly evolving classifications generated by an AI from companies’ websites. Firms can be classified under multiple RTICs at any one time.

This means the data can be used to demonstrate interdependencies where sectors overlap. In the case of Biopharmaceutics there were few sector crossovers compared to other sectors, with North East LEP firms only operating in 8 subsectors. This may suggest there are more opportunities for this sector to input technology from other areas in the North East LEP.

Locations map

Biopharmaceuticals firms are concentrated in Newcastle, potentially influenced by the concentration of universities in the city and other assets such as the Newcastle Helix site. Northumberland also has a relatively large number of firms operating in Biopharmaceuticals.

Regional prospects

A critical part of this study is to shortlist which emergent markets represent “hot prospects” for the North East economy in the future. Using the findings from the study, and the assessment framework below, biopharmaceuticals is rated as a market with:

Emergent status in the North East
National scope in terms of firm activities and ownership, with strong specialisation in Pharmaceuticals
Moderate presence in the North East, 2% of firms with a location in this market have a location in the North East LEP

Existing regional specialisms

Strong: high location quotient; high employment and company presence

Firms

Moderate: 1 to 3 major firms and/or start-ups and SME presence

Value chain cluster

Moderate: 1 to 3 major firms and/or start-ups and SME presence

Innovation / technology

Moderate scale of R&D activity, with national leadership

Skills and human capital

Complementary: associated and foundational skills with infrastructure and provision

Local institutions

Related: can be adapted

Local assets

Relevant minor assets: of regional significance

Click here to download the assessment framework.

Strategic commentary

The continued development of global trends and the core strengths of the North East in this market means that biopharmaceuticals represents a clear growth opportunity for the North East LEP. Biopharmaceutical ventures have historically been highly capital intensive, but financial barriers to entry are falling, and smaller ventures may increasingly find access to capital improves over the decade ahead. This may give rise to some innovative business models and technology concepts.

The potential for growth in this market and its importance for wider regional outcomes has been reinforced by the some of the trends emerging in the aftermath of COVID-19. Regional pharmaceutical exports from the North East reached a new quarterly high in Q2 2022, driven by increased demand from the United States. The key sector enabled by the development of biopharmaceuticals is also healthcare services, which has important implications given the recent increases in the number of working age adults remaining economically inactive due to poor health. Beyond healthcare services there are opportunities for cross-sectoral application of pharmaceutical research to support agri-tech innovation for the region.

As highlighted in the table, the key dependencies in the continued development of this market are related to applied digital technologies and robotics, including aata analytics, cybersecurity and cloud computing. The research-centric strategy of the region’s healthcare sector and academic facilities means there is potential for greater sharing of knowledge between organisations and researchers in the digital and biotechnology markets. This should ensure that developments in these areas are swiftly applied in within biopharmaceuticals. However, this dependency highlights that to maintain its competitive advantage biopharmaceuticals in the North East must continue to develop its strengths in digital technologies too.

Introduction