Merck's UK Proposal: What's Attracting the US Giant To London For Innovation?
Executive Summary
Merck & Co. will build a new innovation hub in London – an act described by the UK government as a major strategic investment – despite widespread Brexit ambiguity and a potentially unstable economic situation ahead for the soon-to-be ex-EU nation.
In parallel with the UK government announcing its Industrial Strategy – long-term plans for how the UK can retain and recover its economic strengths in a post-Brexit world – US pharma giant Merck & Co. Inc. has revealed it will establish a "state of the art life sciences discovery research facility" in London, focused on early bioscience discovery and entrepreneurial innovation.
While this is good news for the UK life science sector, it raises questions as to why Merck (known as MSD outside the US and Canada) is investing so heavily in Britain at a time when others are not as confident of the country’s economic stability and future position within the European drug development landscape.
Merck's blueprints for a UK-based innovation center follow on from similar investments the company has made in new biomedical centers in the San Francisco Bay Area and in Cambridge, Massachusetts.
Despite Brexit disrupting long-term strategy planning for many business across numerous sectors, Merck is confident that locating a research facility in London will expand its opportunity to engage with leading researchers in the UK and other European countries. “We believe London to be a unique bioscience center of excellence and a key component of the established golden triangle for academic science of London-Oxford-Cambridge,” Louise Houson, managing director for Merck & Co. in the UK and Ireland, said in a Nov. 27 statement.
Additionally, the company told Scrip: "As a R&D led organization, we currently view the UK as a world-leader in developing science, underpinned by a strong R&D infrastructure, scientific skills base and clinical trial network. We want the UK to continue to maintain its world-leading status in developing science."
Merck also said the decision to invest in London specifically was the outcome of a long review process. "We have been reviewing our global R&D strategy for over two years and this is a culmination of a lengthy review process. We decided through this that London was the best place to site a new discovery center alongside those already announced in San Francisco and Cambridge, Massachusetts," the company's spokesperson said.
UK Government's Industrial Strategy In Brief
- The UK's Industrial Strategy, announced by the government on Nov. 27, includes four “sector deals," one of which focuses on life sciences and builds upon the Life Sciences Industrial Strategy document that was publishes in August this year. (Also see "Regulatory Alignment Of UK With EU Post-Brexit Seen As Critical" - Pink Sheet, 31 Aug, 2017.)
- The life sciences sector deal, which is expected to be signed in the next few weeks, is described as a “multi-billion-pound deal” that will help ensure pioneering new treatments and medical technologies are produced in the UK. It involves “substantial” investment from private and charitable sectors, and “significant” R&D commitments from the UK government.
- The Industrial Strategy also provides for a three-year, £725m Strategy Challenge Fund investment to “capture the value of innovation." This includes up to £210m for technologies that can improve early diagnosis of disease and the development of precision medicines for patients across the UK.
- The government's Industrial Strategy also proposes four “grand challenges” aimed at putting the UK at the forefront of "the industries of the future." These include artificial intelligence, which it says could help in diagnosing medical conditions more effectively.
The Association of the British Pharmaceutical Industry was cheered by the news of Merck's investment. "Today's announcement of major investment in new research and development facilities by global pharmaceutical company MSD is a vote of confidence in the strength of UK science and a signal of the government's ambition to compete on a global scale,” said Mike Thompson, the association’s chief executive.
Merck's Big Proposal
Announcing its plans for a new UK Discovery Center, Merck said the site will create around 150 new research jobs with the aim of "attracting the brightest and best research scientists to work in London." Access to talent has been a growing concern for many UK-based pharma companies during Brexit proceedings, with current negotiations between the European Union and the UK government having to date provided little comfort or clarity on what a post-Brexit Britain will look like for international employers.
Furthermore, news that the European Medicines Agency's headquarters will be relocated to Amsterdam, following a vote on Nov. 20 on the future of the London-based agency after Brexit, has inflamed concerns that the UK life science sector will be cut off from Europe's talent and innovation. Moving the EMA office from London to the Netherlands will results in the loss of hundreds of jobs; the decision on the relocation acted as a harsh reality check for UK-based businesses and agencies of how Brexit will affect the wider healthcare sector. ( (Also see "Amsterdam wins European Medicines Agency After Milan Loses Coin Toss In Tight Race" - Scrip, 20 Nov, 2017.))
As one example, in a recent interview, Anker Lundemose, CEO of Cambridge, UK-based Mission Therapeutics Ltd., told Scrip, "The uncertainty around Brexit right now makes it very hard to recruit into the UK from Europe in particular. We are seeing people going the other way… unless the uncertainty is taken away it could harm the life science industry in the UK." ( (Also see "Mission Therapeutics CEO On Clinical Strategy For DUB Drugs" - Scrip, 23 Nov, 2017.))
As well as 150 new positions, Merck's new London-based innovation center will accommodate approximately 800 staff from its Hoddesdon, UK headquarters. The big pharma is currently evaluating several potential locations in the London region and it expects the new site to be operational by 2020. In the meantime, Merck will establish a small temporary research facility in the area and is actively recruiting scientific talent.
Despite its confidence in the UK as a life science leader, Merck itself still has concerns about the impact of Brexit. "At this critical time for the future of the life sciences industry in the UK, we believe this country can be well-placed to lead the world in delivering high-quality care for patients. However, to meet this ambition, it is essential we address some very real concerns relating to the potential impact of the UK’s exit from the EU for our supply chain, regulatory environment and ability to attract talent to the UK," the company's spokesperson said. They added that ensuring UK regulatory alignment with the EU is essential to ensure patient access to medicines is not disrupted. "Addressing this issue will be fundamental to creating a stable environment for economic growth and to continuing to make a positive difference for patients."
Merck is a member of the UK government's Life Science Industrial Strategy (LSIS) task board. The company noted that it is "committed to continuing to work in partnership with UK government and the NHS to ensure the LSIS has a long-lasting and successful impact for patients and life sciences investment in the UK."
Relationships On The Rocks
Mission Therapeutics is not the only company to air its concerns about operating in the UK under the grey clouds of Brexit. Lars Bruening, who recently succeeded Alexander Moscho as Bayer AG's CEO for the UK and Ireland, recently spoke to Scrip about the challenges of managing the big pharma's operations when a route forward for the UK outside of the EU is not clear.
Brexit uncertainty has caused companies to hesitate with decision-making, Bruening said in an exclusive interview. As an example, he highlighted that while the UK was a strong location for clinical development, groups running clinical trials have asked if it is still the best decision to include the UK in programs. "These questions happen and so far, we are able to say ‘don’t worry’. However, we need to get out of this uncertainty phase to avoid long-term impact," he said. ( (Also see "Brexit Ambiguity A Top Priority For Bayer's New UK & Ireland CEO" - Scrip, 19 Oct, 2017.))
'Unsubstantiated' J&J Cold Feet Rumors
A couple of days prior to Merck committing itself to the UK, it was reported that another US company was less convinced about the future welfare of Britain's pharmaceutical sector, and was pulling out of a deal for a similar style innovation hub to the one Merck intends to build.
The UK-based newspaper The Telegraph reported on Nov. 25 that Johnson & Johnson had abandoned plans to build one of its JLABS innovation centers in Cambridge, UK.
However, J&J Innovation, the unit responsible for the group's JLABS initiative, told Scrip on Nov. 27 that this story was "completely unsubstantiated" and false.