Brexit Fallout and the Impact on the Life Sciences Market

The EU referendum result has posed many more questions than the one it answered. There now follows a new period of uncertainty for the UK, its trading partners and investors, not least those involved in the life sciences sector which according to the UK government generates more than £60 billion and over 220,000 jobs for the UK economy each year.

Immediate concerns have included loss of access to EU funding programmes such as Horizon 2020, under which nearly £70 billion of funding is available, how drugs manufactured by UK companies will be approved and regulated going forward, and the ability for the sector to continue to recruit and retain top talent from the EU.

Despite the current uncertainty, the UK remains a world-leader in the life sciences sector in part due to the strength of its academic and scientific institutions.  This is unlikely to change, and so Brown Rudnick’s Global Life Sciences Group expects to see the life sciences sector remain resilient during this period of economic and political uncertainty.

Some developments and issues we see emerging include:

US Dollar Denominated Fundraisings

We have seen growing interest in US Dollar denominated fundraisings from some UK companies. This is particularly the case for companies who already have a strong suite of US based investors, or where the companies are already operating in the US. US Dollar denominated fundraisings take advantage of a dollar that is about 10% stronger against the British Pound than it was immediately before the referendum result. In addition, some UK businesses are considering whether now is the time to set up a US subsidiary or flip their business into a US holding company structure.  This will be relevant to UK companies who want to commercialise their product into the US or with aspirations to list on Nasdaq.

Increased M&A Activity due to weaker British Pound?

There has been some speculation that a weaker British Pound may result in additional M&A activity.  Life sciences has generally been a sector where M&A activity has been driven by strategic product acquisitions and access to distribution networks, rather than opportunistic price driven acquisitions.  Where UK companies have been the target of M&A activity, often the rationale for the acquisition has been either the company’s underlying technology or that the company gives the acquirer access to a European distribution network through a UK base.  Consequently, pure price driven M&A as a result of a weaker British Pound seems unlikely. However, despite the Brexit vote the UK remains a strong base from which foreign companies can do business with Europe.  There is a well-funded and thriving scientific community, world-class academic and research facilities, and business-friendly tax structures including a corporate tax rate that is to drop to 17% by 2020, making the UK one of the most tax efficient jurisdictions in Europe to do business. In light of this, we think that foreign businesses will continue to look to the UK for potential acquisition opportunities, and that the devaluation of the British Pound may be a factor which accelerates some of this acquisition activity.

Regulatory Issues

The question of how products manufactured by UK companies will be regulated in a post-Brexit environment is crucial. To date, UK companies have had the benefit of a European-wide approvals process, whereby the European Medicines Agency has approved products for sale into all EU member states as well as the EEA countries. It is unclear at the moment whether going forward UK companies will need to comply with a new UK-only regulatory regime and whether this would have equivalency with EU regulations. In light of the fact that the EU represents access to 500 million potential healthcare consumers, compared to a domestic UK market of 60 million people, it will be critical for UK life sciences companies to ensure that they still have the ability to sell product into the EU without added complexity or cost.

IP Issues

The current European patent system is administrated under the European Patent Convention (EPC), a treaty which is independent from the EU and which offers applicants the opportunity to obtain a bundle of separate patents in different European territories, rather than a single European patent. Consequently, Brexit has not affected the ability for UK businesses to apply to the European Patent Office (EPO) for European patents applicable in the UK.

However, the future of the Unified Patent Court (UPC) and the UK's role in it, is less certain. The Unitary Patent was conceived to give applicants pan-European unitary protection, as opposed to the bundle of separate patents available through the EPC.  However, the draft agreement under which the UPC will be formed (UPC Agreement) must be approved by the UK in order for it to come into effect. The UPC Agreement contains provisions accepting the primacy of EU law and assigning a role to the Court of Justice of the European Union, and so it seems unlikely that the UK will ratify it in its current form.  Nevertheless, on 2 August 2016, the UK Intellectual Property Office released a statement entitled 'IP and BREXIT: The facts', in which it stated "The UK remains a Contracting Member State of the Unified Patent Court at present. We will continue to attend and participate in UPC meetings in that capacity. There will be no immediate changes."

Whilst the UK's willingness to remain engaged in the UPC remains positive, at least for now, the UPC's anticipated launch date of May 2017 seems highly unlikely given that this was contingent upon the UK approving the UPC Agreement by the end of 2016. At Brown Rudnick, our Intellectual Property Group is actively monitoring developments in this area and is ready to revise our clients’ IP strategies as appropriate, as the situation evolves.

Recruiting and Retaining Top Talent

As many of our clients continue to tell us, investors in the life sciences sector invest in good science, and Brexit has done nothing to change the fact that the UK remains a world leader with respect to its academic and scientific institutions.  A valid concern, however, is how the UK will ensure that academic institutions and life sciences companies are able to continue to recruit and retain top talent, some of which originates from outside of the UK.  About 10 per cent. of researchers in the UK are from EU countries, and approximately 43,000 staff in British universities are believed to be EU citizens.  We assume that the government is alive to this issue, and that it is working on a sensible solution to the immigration of skilled labour so as to ensure that businesses currently located in the UK are able to continue to recruit and retain the necessary talent for their organisations. 

Continuing Developments

Other issues that Brown Rudnick's Global Life Sciences Group are tracking include:

1) Changes to the profile of life sciences within government and the cabinet, including the fact that the position for Minister for Life Sciences has been axed following the referendum

2) Formation of an industry Brexit Steering Committee that is being co-chaired by representatives from GSK and Astra Zeneca

3) The introduction of potential tax incentives, including in respect of the corporation tax rate and R&D credits

4) Manufacturing issues affecting the industry

5) Renegotiation of trade agreements and international relations in the sector

6) Access to EU Funding programmes and other forms of non-dilutive financing

We will issue a further update in due course.

Why Brown Rudnick?

Brown Rudnick’s Global Life Sciences Group consists of a dedicated team of professionals focused on helping life sciences companies across the world. We also work closely with management teams, lenders, and investors active in the life sciences sector. Our clients span the life sciences spectrum, including pharmaceutical, medical device, diagnostic, biotechnology, biopharmaceutical, biomedical, and nutraceutical.

Our multi-disciplinary team includes lawyers who were former executives and in-house counsel in life sciences companies and have significant first-hand experience with the business and legal issues facing clients in this sector. Clients trust us to provide practical advice that is based on a deep foundation of experience and understanding of the life sciences sector and the challenges confronting companies at every stage of the business life cycle.

About Brown Rudnick

BROWN RUDNICK LLP, an international law firm with offices in the United States and Europe, represents clients from around the world in high-stakes litigation, international arbitration and complex business transactions. Clients include public and private corporations, multinational Fortune 100 businesses and start-up enterprises. The Firm also represents investors, as well as official and ad hoc creditors’ committees in today’s largest corporate restructurings, both domestically and abroad. Founded more than 60 years ago, Brown Rudnick has over 230 lawyers providing advice and services across key areas of the law. Beyond the United States, the Firm regularly serves clients in Europe, the Middle East, North Africa, the Caribbean and Latin America. With its Brown Rudnick Center for the Public Interest, the Firm has created an innovative model combining its pro bono, charitable giving and community volunteer efforts.

Contact Us

In the blur of mega firms, Brown Rudnick stands out as a “global boutique” and has in place a multi-disciplinary, international Brexit Team. We are monitoring and analysing the consequences and considerations for businesses and are ready to advise on the potential legal implications of Brexit.  If you have any questions please call your usual contact at Brown Rudnick or one of the following lawyers:


Mark Dorff

P: +44.20.7851.6005

F: +44.20.7851.6100

Sophie C. McGrath

P: +44.20.7851.6076

F: +44.20.7851.6100

Tim Matthews

P: +44.20.7851.6126

F: +44.20.7851.6100

Thomas C. Meyers

P: +1.617.856.8483

F: +1.617.289.0709

Robert C. Funsten

P: +1.949.440.0216

F: +1.949.486.3645

Catherine (Katy) Gardner

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F: +1.617.289.0691