The UK has a thriving health & life science sector that is a highly productive, R&D intensive cornerstone of the UK economy.
Numerous challenges await small and medium sized enterprises (SMEs) seeking to explore and develop innovative new products such as attracting skilled workers, identifying the right geographical location and ecosystem for the company along with the scientific and technical challenges posed by the innovation itself.
One challenge that all SMEs typically face is in finding the money to pay for commercial research & development projects, particularly ones that are at an early stage of development and have a high degree of scientific or technical risk that would put off the most ardent investor.
The Biomedical Catalyst (BMC) is a joint programme run by Innovate UK and the Medical Research Council (MRC) and was launched in 2012. It was part of a wider package of measures to support the life sciences sector under the Government’s Industrial Strategy with the aims of:
- Delivering growth to the UK life sciences sector;
- Delivering innovative life sciences products and services more quickly and more effectively into healthcare; and,
- Provide support to academic and commercially led R&D in a seamless, effective and efficient manner.
Funding for commercially led R&D was designed to enable companies to de-risk innovative projects and make them more attractive to external investors.
The programme supports a ‘technology agnostic’ and supports a broad range of projects including gene therapies, drug discovery, vaccines, medical devices, diagnostics, stand-alone digital health including artificial/augmented intelligence.
Why was the Biomedical Catalyst programme created?
The creation of the Biomedical Catalyst was partly motivated by major strategic issues faced by the UK life science industry in the early 2010s. At the time, the sector faced challenges including an extended period of declining R&D productivity and expected loss of revenues from the expiry of patents on ‘blockbuster’ products.
This led to disinvestments in R&D by large pharmaceutical businesses which were partly offset by a growth in biotechnology start-ups and the emergence of new industries (e.g. digital health). However, the global financial crisis of 2008 led to a widespread withdrawal of the risk finance upon which these businesses depended to fund their activities, placing constraints on their growth.
How does the programme work?
In essence, the programme is a partnership between UK Research & Innovation organisations with MRC funding academic led projects whilst Innovate UK fund commercially led projects.
Innovate UK have four streams of the Biomedical Catalyst programme that focus on providing non-dilutive grant funding at different stages of development from feasibility (total project costs £250K) through to late stage projects (total project costs £4 million).
Typically, competitions for grant funding are run every 3-4 months and consist of two streams that companies can apply for e.g. feasibility and early stage,
Since 2012, Innovate UK has provided £210 million in grant awards to UK companies and the programme is open to any eligible SME who can apply for grant funding for 70% of the total project costs.
What impact has the programme had since it started?
The programme uses UK taxpayer money to fund innovative and high risk projects so it is crucial that we understand the impact that the funding has had and whether it provides value for money.
In November 2014, Ipsos MORI were commissioned to undertake an independent evaluation of the programme. An interim report was published in 2016 that explored the impact and processes used during the period from 2012 to 2015.
A second and final report from the evaluation was published in October 2019 and focused on the longer-term impact of the programme in stimulating R&D investment and accelerating the development of biomedical technologies led by industry and academia.
Grant funding through the Biomedical Catalyst had an enduring effect on commercial R&D spending. It is estimated that the programme:
- Led to an increase in overall R&D spending of £248m to £350m by 2018.
- Levered an additional £0.76 to £1.48 of private R&D spending per £1 of public sector spending.
- Increased employment by 11 to 15 percent over 3 to 5 years (net of deadweight), equivalent to the creation of 234 to 330 jobs.
The programme also had a significant positive effect on the ability of businesses to leverage additional venture finance from the private sector. It is estimated that:
- The 150 firms benefitting from the programme raised between £563m and £710m in private investment as a direct result of the programme.
- The estimated leverage ratio was between £3.99 and £5.09 per £1 of public spending.
Overall, Ipsos MORI found that the Biomedical Catalyst had been successful in stimulating investment in the life science sectors and accelerating the development of healthcare technologies.
Comparisons with evaluations of other initiatives suggest the programme has been, at minimum, as effective as R&D tax credits in stimulating private R&D investment.
A cost-benefit analysis of the grants awarded to businesses by Innovate UK related the benefits of the programme embodied in the increase in the value of businesses supported suggested that the BMC also offered strong value for money, with a central estimate of the benefit to cost ratio (BCR) of £4.72 per £1 invested. This substantially exceeds the hurdle rate of return typically applied in the approval of the Business Cases for these types of scheme.
What does the future hold for the Biomedical Catalyst?
Since the programme started in 2012, the number of applications from medical device and diagnostics companies including stand-alone digital health has increased dramatically and approximately half of recent competition awards have been made to companies working in these areas.
The geographical distribution of funding has also changed since 2012 when funding almost exclusively went to companies in the ‘golden triangle’ of Oxford, Cambridge and London. Around 40% of recent grants went to companies outside of the golden triangle. Although the reason for this change has not be evaluated, it is likely due to a combination of factors with a key one being the investments and development of innovation ecosystems in the other parts of the UK.
At the time of writing, the programme has fully distributed the £100 million ring fenced funding that it was allocated in 2016.
The last round of the competition was in 2019 when £10 million in grant funding was made available. In total, the competition received 357 applications from companies who sought a total of £116 million in grant funding.
In order to be eligible for funding, applicants have to score a minimum of 70% in the written assessment. The total amount of funding sought by companies who met this standard was £80 million.
The drivers behind the creation of the Biomedical Catalyst are still present and demand for non-dilutive funding from companies in the health & life science sector is still strong.
Further funding to continue the programme has been requested by Innovate UK and given the importance of this sector to the UK economy, we are hopeful that the Biomedical Catalyst will continue.
Author: By Dr Michael Kipping, Innovation Lead at Innovate UK part of UK Research & Innovation