MPs publish report on bridging the “valley of death”

Posted on March 14, 2013 by

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The House of Commons Science and Technology Committee has published the report of its inquiry “Bridging the valley of death: improving the commercialisation of research”.

In the report, the group of MPs said that there is a multitude of barriers that prevent discoveries being fully exploited by British companies and that the UK is not doing enough to exploit its strong science base. To tackle this they called for innovative small and medium sized  businesses to be given more support to get new technologies to the market, including greater access to finance, more supportive regulatory and tax regimes, and for the government to make it easier for them to get government supply contracts, including NHS contracts. The report also highlighted the important role of the Technology Strategy Board and called for more money to be invested in promoting the translation of research, including support for facilities needed for the testing of new technologies, and for the government to explore new ways to encourage the exploitation of IP.

George Osborne will be delivering the Budget next week on Wednesday 20 March – we’ll be listening out to see what he says about how the government is taking steps to address these issues and promote growth.

Background

If scientific research is going to deliver improvements for society (better healthcare for example) and be a growth area for the UK economy, we have to be good not just at doing the research but also translating what we’ve found out into commercial applications, i.e. things we can make and sell and which can help patients – new drugs and treatments etc. At the moment there are barriers to this translation process which have created a gap between the discovery end of research and the market end. This gap is often called the”valley of death”.

The Commons S&T Committee launched its inquiry to better understand these barriers in January 2012. They looked at all scientific research – not just medical – and called for evidence to answer the following questions:

  1. What are the difficulties of funding the commercialisation of research, and how can they be overcome?
  2. Are there specific science and engineering sectors where it is particularly difficult to commercialise research? Are there common difficulties and common solutions across sectors?
  3. What, if any, examples are there of UK-based research having to be transferred outside the UK for commercialisation? Why did this occur?
  4. What evidence is there that Government and Technology Strategy Board initiatives to date have improved the commercialisation of research?
  5. What impact will the Government’s innovation, research and growth strategies have on bridging the valley of death?
  6. Should the UK seek to encourage more private equity investment (including venture capital and angel investment) into science and engineering sectors and if so, how can this be achieved?
  7. What other types of investment or support should the Government develop?

89 organisations and individuals, including several charities and AMRC, submitted evidence. And the Committee also heard from witnesses in person, including plenty of people from the medical research and biotech world and the Science Minister, David Willetts.

What did we say in our evidence?

Translating research into meaningful improvements for patients is really important for charities and many are using innovative approaches to bridge the valley of death. We took these as examples to support our key points:

  • Supporting medical research is the most popular reason for people to donate to charities in the UK. Therefore charities have a strong mandate to ensure their investments deliver better healthcare for patients. Successful commercialisation of research is key to achieving this.
  • Therefore charity and industry priorities to commercialise research overlap.
  • Government must focus on providing the infrastructure to underpin collaboration and successfully drive commercialisation. This includes measures underway to streamline regulation and create a research-friendly NHS, and also proactive work to increase market certainty, focus funding to increase research capacity in key areas and boosting academic engagement in commercialisation.
  • Charities are hubs of expertise playing a unique role as an honest broker between patients, academia and the commercial sector.
  • Charities pull innovation through the system by identifying and championing investment opportunities and developing valuable market data. As experts in their disease area they can identify gaps in research and capacity and proactively drive exploration of opportunities with researchers, universities and commercial investors.
  • Charities de-risk investments by providing vital funding for early stage research. Charities of all sizes can work constructively with private investors to de-risk their investment.
  • Charities provide a patient focus. This can improve design of research studies, recruitment of patients and uptake of commercial products, combating market uncertainty.
  • The Life Sciences Advisory Board membership should include charities who can represent the patient voice. The third sector offers valuable expertise in developing innovative funding strategies focused around patient need.

You can read our full submission here.

What did the report say?

Many witnesses giving evidence to the Committee stressed that there is not just one valley of death, but in fact many. There are different barriers at different stages of the technology development pathway and some of these are specific to certain sectors, sizes of companies or the types of technology involved. The Committee made a range of recommendations to address these challenges.

Investment in technology companies

Small companies need access to money to develop their ideas but this can too often mean selling out to bigger companies or becoming victims of the short term view taken by many venture capitalists. The Committee recommended a few ways finance could be opened up in a more sustainable way for small and medium sized enterprises (SMEs):

  • Vince Cable’s proposed bank for business  should be used to promote a bond market to give SMEs a new source of funding without loosing equity in themselves
  • Pension and insurance funds should be encouraged to invest long-term in European SMEs
  • The government should explore ways to help investors understand innovative technology companies better to encourage responsible investment
  • The government should review the funding it provides SMEs to ensure that it suits the wide range of UK businesses
  • The R&D Scoreboard should be reinstated – this was a list that showed the R&D spend of different industries to aid both public and private strategic investment decisions

The need for physical infrastructure

Many companies and charities (including us) said that the government must invest in infrastructure – such as research facilities and test sites – that can be used by researchers and SMEs to develop technologies. Many of these facilities are not commercially viable and so need state support the MPs said.

Taxation and regulation

The R&D tax credit, which allows firms to reduce their tax bill if they are conducting R&D, was praised as a good idea but the MPs said the government should look at whether it is being implemented in the most efficient way to help UK businesses. Specifically, they said that innovation policies should better distinguish between small and medium sized companies in order to help both effectively.

In their evidence to the inquiry, the Wellcome Trust raised the issue of the loss of exemption from VAT in charitable buildings where commercial activity will also take place, which is perversely discouraging commercialisation:

zero rating for new charitable buildings can only be retained if the building is used 95% for non-business charitable purposes. In the case of the Francis Crick Institute, this will restrict the ability to conduct on-site technology transfer and commercialisation activities.

The Committee concluded that the government should look to address this disincentive for organsiations that wish to do both “research for the public good” and commercialisation. We are currently responding to another VAT issue which may act as a disincentive to research funders. The HMRC is consulting on changes to VAT exemptions and we are raising concerns that these changes should not adversely impact on charitable funding of research in universities.

The Committee also looked at regulation and how this can hinder innovation and commercialisation. They noted the concerns of the medical research sector, quoting evidence given by Action on Hearing Loss:

Hearing research that does take place in the UK can be undermined by an overly complex regulatory and governance environment. An Action on Hearing Loss funded project […] has been held up for over two years due to the complicated bureaucracy involved in conducting clinical research at multiple sites in the UK and the lack of support to help researchers navigate the regulatory process.

The Committee suggested that the Technology Strategy Board (TSB) undertake a review of regulatory burdens on innovation in the UK, including identifying which institutions should take the lead in any reform. We  reported not long ago about a pilot announced by the Health Research Authority to streamline permissions for clinical trials, which will hopefully help with problems such as that reported by Action on Hearing Loss.

Intellectual property and technological transfer

Universities produce 19% of patents but it is not being exploited, the Committee heard. The Committee suggested a number of ways to encourage the commercialisation of  intellectual property (IP). This included that the TSB should review whether its funding is sufficient to support “proof of concept” work by universities and small companies and they suggested the government look at extending the Easy Access IP consortiumscheme (set up between a group of universities to share their IP with each other) to help share IP more widely with those who can commercialise it. The MPs were also concerned by planned changes to the Higher Education Innovation Fund to target money towards universities with a good track record of commercialisation. This could leave many other less experienced universities behind they said.

But they also heard that protecting patents is costly and many SMEs do not have the resources to to so. The Committee praised the UK Intellectual Property Office’s mediation service and said that its use should be more heavily encouraged, perhaps making it a requirement before a case proceeds to a court (the costly bit).

The UK innovation ecosystem

The TSB and its Catapults (multidisciplinary research translation centres) were praised by the Committee as the right approach being taken by the government but they were also concerned that the TSB is not well enough resourced and that the Catapult centres may be expected to become self-financing too early and fail as a result. The government should invest more into translation of research but not at the expense of the research council’s science budget they said, and recommended that the TSB develop regional contact points to support local businesses.

The role of universities

The UK has a strong science base upon which we must work harder to capitalise, the report says. Universities should become more open to staff from industry to help bridge the gap between academia and industry, but pushing universities too hard to pursue commercial activities could backfire. They quoted the Wellcome Trust, which said in its evidence:

Universities should be recognised for the broader value they add to the economy, for example through tacit knowledge and the provision of skilled graduates, rather than just the external revenue they generate.

You can read the full report and all the evidence the Committee received here.

Government procurement 

Government departments, the military and the NHS are huge potential customers for small businesses. The Committee believed that government procurement should be reorganised to favour British SMEs by training staff to understand the value of supporting emerging technologies and restructuring the system to be more transparent. A minister from the Treasury should be given responsibility for this they said.

The NHS should be more open to the adoption of new technologies the report argued, quoting AMRC:

To attract investment into commercialisation of research there needs to be an end market. Our members have expressed frustration with the products of their research […] not being adopted throughout the NHS. Strict commissioning guidelines are needed to ensure approved innovations are rapidly taken up across the NHS

Conclusion

The report concluded that the government needs a clear vision and strategy to take advantage of the UK’s strong science base to grow wealth-creating companies and thus the economy.

There needs to be a coherent strategy across the whole of UK industry to provide UK business with confidence in where they might expect Government support for the medium and long term—whether through procurement, R&D focus or fiscal policies.

What next?

This report is really helpful in highlighting the many problems we face in getting the fundamental science – funded by charities and other organisations – translated into products that help people. The MPs call for a clear vision and strategy, pulling together the many valuable initiatives that are underway and building on these is welcome – it can be a maze out there and many of our members find it difficult to navigate through the multiplicity of initiatives.

The Chancellor of the Exchequer, George Osborne, will be presenting the Budget this coming Wednesday, in which he will set out what the government is doing to promote growth. He is expected to respond to Lord Heseltine’s  report on how the UK can promote economic growth, which made  recommendations covering many of the same areas singled out in this report.

Posted in: Policy