UK Pharmaceutical Industry Outlook – 2020

Rapidly changing picture continues for the UK pharmaceutical industry in 2020

Protel tracks capex project activity across the main process sectors to help suppliers win new business. In this article we aim to present a quick and easy to digest run-down of the main trends and developments in a highlighted sector of the process manufacturing industries in one of our covered regions.

For more information on the areas we cover, click here.

Previously in 2019, the outlook for capex in the UK pharmaceutical industry was hampered by uncertainty and delay. Larger capex projects were proving far less likely to go ahead compared to those of a small scale, with many expected to remain delayed until 2020.

At the start of 2020 we saw a great deal of momentum after the conclusion of the UK general election. Capex plans seemed to be taken off the shelf and talk was of many projects finally moving from the initial phases into implementation. Unfortunately, the emergence of a global pandemic in the form of the Coronavirus seems to have added even greater uncertainty onto the outlook for the year to come and we are seeing now the same issues creeping back into the UK pharmaceutical industry. Where previously Brexit uncertainty was the main cause, many capex plans are now further delayed by uncertainty amid difficult global economic conditions.

The lack of clarity around the future regulatory and trade post-Brexit framework for the UK still persists and is continuing to impact the shape of capex investment in the medium to long-term. Many projects remain under review in 2020, after an already long initial feasibility or design phase. In general, the period between design and implementation is becoming longer.

Despite the above, we are still tracking and reporting on a significant quantity of new capex that is entering the project pipeline in 2020. The general size and scope of this capex has been further exaggerated by circumstances and skews toward smaller-scale projects. Capex is still occurring and needing to be implemented and as such projects that do reach sanction are moving extremely quickly.

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Larger new-build schemes are still alive and we have many on our system, but the pace at which these reach sanction continues to drag. That said, many schemes involving critical capex, for new product development, regulatory compliance or capacity bottlenecks, are likely to reach sanction as time passes.

We are also tracking growth in capex projects with public sector or University involvement, particularly in the area of research and development. Some of the major organisations are detailed below and represent significant potential for suppliers of capital equipment and services in the year ahead.

Major investors in capex projects emerging in the last 12 months include (data taken from our MyProtel project search engine, full details available to subscribers):

The Protel View

There are fewer large project schemes coming through the pipeline in 2020. In general, many large schemes linger under review while funding decisions or other master-planning activity is revisited. However, there are still a large volume of new schemes entering the project pipeline, albeit of a different scope.

Research and development is a huge growth area, and is one that has attracted significant Government buy-in under the Johnson regime following the general election result. As a result, many public sector or venture capital backed private research and development schemes continue to emerge. Many are linked with Universities and have a wide scope of requirement for suppliers of capital equipment and machinery (full details available to subscribers to our project database).

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These government led schemes are tending to move extremely quickly, meaning suppliers must get involved as early as possible to ensure they can become specified before a project starts to make procurement decisions (particularly on long-lead items). It is also vital to stay up-to-date on when decisions are made, and at Protel we are working extremely hard at present to focus on rapidly updating project schemes as and when new information emerges.

Engineering House Activity

The tumultuous year has of course extended to providers of engineering and associated services. There is a great degree of change and reorganisation among engineering houses as larger companies aim to respond to trends in the changing landscape of the UK pharmaceutical industry. Personnel have been redeployed to other European countries where skills are transferable.

The need for diversification has also seen pharmaceutical stalwarts move toward other sectors that have crossover, such as advanced cleanroom manufacturing (details of some of these schemes are released by us in our private LinkedIn group – join now).

Mergers & Acquisitions

2019 was a busy period for merger and acquisition activity in the UK pharmaceutical industry. Many small to medium size players have become targets for large pharmaceutical companies as they seek to acquire innovative drugs and technologies to commercialise.

A summary of some major changes below (details of resulting capex plans available to subscribers):

• Bristol Myers Squibb => Celgene
• Abbvie => Allergan
• FujiFilm => Biogen Manufacturing
• Wasdell Group => Honeywood Ltd
• Recipharm => Sanofi Holmes Chapel
• Recipharm => Consort Medical (BesPak)
• Cognate Bioservices => Cobra Biologics
• Permira Funds => Quotient
• Altaris Capital Partners => 3m Healthcare Drug Delivery

Major Trends

We have touched on the growth in R&D capex. Further to this, we also expect to see continued focus on pilot scale plants, with capex spend in the region of £1m-£5m. These projects contain strong potential in 2020/21 but will require fast and agile tracking as organisations seek to commercialise rapidly following investment.

There is an expected to be continued focus on cell, advanced therapy projects and new oncology areas in 2020. Government support for the UK pharmaceutical industry continues to abound under the new aspirations to make the UK the ‘best place in the world’ for research and development by piling an additional £24bn per year into R&D by 2024-25.

As manufacturers seek to reduce downtime and increase efficiency, a focus on single use components is growing as an area of potential improvement. Automation is another area where manufacturers seek to make efficiency gains with an aspiration toward greater capacity for continuous manufacturing.

Conclusion

The overall outlook for the UK pharmaceutical industry in 2020 and beyond is mixed. There is a reduction in the number of large-scale new build projects entering the pipeline, and those already in initial phases are taking longer to reach sanction than initially expected.

However, there are signs of positivity. We have seen growth year on year on the number of projects we are reporting on, and the overall potential capex value has increased by nearly £800m into 2020. Many projects are expected to move quickly from design to implementation, but they will generally be either pilot scale, upgrades or R&D focused rather than brand new manufacturing plant.

As ever, suppliers will need to ensure their focus is on the right projects, and be ready to move quickly in advance of when capex budgets are sanctioned. There is still opportunity available for the year ahead, but it may be that suppliers need to be flexible in the type of project opportunity they target and prioritise.

Much of the outlook depends on the scale and extent of the rapidly development coronavirus outbreak, this has brought into stark focus the importance and relevance of the pharmaceutical industry to the UK and wider world, now and in the future, as public health is challenged.

UK Pharmaceutical Sector: Our Project Coverage

At Protel, we are currently tracking 223 active pharmaceutical projects with a combined potential investment value of just over £4.8bn in the UK

For more information on any of the organisations, projects or trends mentioned above, including key information required to target specific projects, please contact us.