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Bailey Montagu Life Sciences’ Insight

In the first of our ‘Bailey Montagu Life Sciences’ Insight’ series, Andrew Linger, Partner in Health and Life Sciences, looks at the challenges facing R&D and, considering the risks, the importance of effective growth hiring strategies.

Pursuing research and development (R&D) effectively can be challenging and complex. It is vital that organisations plan for unforeseen challenges and complexities to help ensure ultimate success.

As we move through 2024, several key areas have been identified as potential risks to R&D.

Slowdown in R&D spending

The UK government has positioned R&D at the centre of its plans for economic and social recovery and growth. In 2017, it set an ambitious target for the total R&D spending to reach the equivalent of 2.4% of GDP by 2027, and 3% in the longer term.  For many organisations, investing in R&D will be necessary to remain competitive. However, the beginning of 2024 has been marked by a slowdown in R&D spending, underscoring the challenge the government faces in meeting its target 2.4 percent target by 2027.

The slowdown in the R&D spending environment has been owed to lower-end market pricing. There are also large differences in R&D spending across the UK. In 2021, for example, R&D performance in London, the East and South East of England was work £3.4bn, equating to 52% of the total, and 42% above the national average. On the other end of the spectrum, in Wales, it was 46% below the UK average.

Material reduction in amount of biotech funding

Challenges also persist for biotech funding. After years of abundant funding, biotech capital has witnessed significant decline. In 2023, access to capital became more constrained than it had been in recent years. In the first quarter of 2023, aggregate venture capital funding was reportedly well off its peak. This subsequently led to an increase in restructurings, shutdowns, and ‘strategic alternatives’ across the industry. Companies continue to feel the pinch of this material reduction in the amount of biotech funding.

Increased competitive pricing pressure in clinical CRO industry

The biotechnology and pharmaceutical sectors are both dependent on the Contract Research Organisation (CRO) market for their continued success. In offering research and development services to biotechnology, pharmaceutical and medical device industries, typically on a contractual basis, CROs are vital for R&D.

However, CROs have undergone significant disruption in recent years, which has presented challenges. Much of the changes have resulted from technological advancements, while others have arisen in response to market pressure, as well as the Covid-19 pandemic. From commoditisation to evolving patient engagement models, CROs continue to face a variety of challenges.

Despite their ability to provide biotech and pharmaceutical industries with cost-effective solutions, CROs are subject to their own cost pressures. Increased competitive pricing, and the ability to compete with other CROs in terms of pricing, is one of the biggest challenges facing the sector.

Amid the risks, there are great opportunities for innovation, delivered by top quality management teams, to develop new services and products, and improve existing ones.

The risks facing R&D highlights the importance to hire the right people to navigate the challenges and nurture growth. Individuals with R&D backgrounds can significantly enhance an organisation’s R&D efficiency.

Bailey Montagu partners with organisations to provide them with the right leaders to deliver comprehensive and effective R&D to ultimately deliver growth.

Andrew Linger