With Brexit, U.K. May Be ‘Third Global Cluster' in Life Sciences

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By John T. Aquino

June 24 — The U.K.'s vote to leave the European Union could lead the country to become a “third global cluster” for life sciences, U.K. life sciences attorneys and organizations said.

Fifty-two percent of voters cast “leave” ballots and 48 percent voted to remain in the EU. Some life sciences stakeholders had warned that a “leave” vote would irretrievably change the industry's landscape (10 LSLR 13, 6/24/16).

Some U.K. attorneys predicted that a vote in favor of Brexit would shake up the regulatory approval process and force the London-based European Medicines Agency (EMA), the EU equivalent to the Food and Drug Administration, to move from the U.K. A U.K. exit from the EU also conceivably could scuttle the planned Unitary Patent System and other efforts for global harmonization of the life sciences, they said.

“The vote is very significant because it will change 43 years of legislative and cultural history,” Graham Defries of Dechert LLP, London, told Bloomberg BNA in a phone interview. “And yet I am sure that a lot of the predictions of what will happen in anticipation of the vote will turn out to have been exaggerated. There are clearly complex issues we have to navigate through, but I am positive that self-interest will come to the fore and right the ship.”

The immediate reaction of those contacted by Bloomberg BNA was acceptance of the vote while looking beyond it. “The result is a genuine surprise, and honestly not one I wanted,” Tom Leonard of the law firm Kilburn & Strode told Bloomberg BNA in an e-mail. “However, the UK has been through challenging times before, and I am confident that in the face of this result, we can not only prevail, but thrive.”

Making U.K. ‘Third Global Cluster.'

A GlaxoSmithKline spokeswoman told Bloomberg BNA in an e-mail, “Although the EU Referendum result creates uncertainty and, potentially, complexity for us in the future, we do not currently anticipate a material adverse impact on the business, [the GSK] Group’s results or [its] financial position. We will continue to operate as usual and will engage in the process ahead.”

Calling the U.K.'s life sciences sector “resilient,” Steve Bates, chief executive officer of the U.K.'s BioIndustry Association, said, “The BIA remains committed to making the U.K. the third global cluster for life sciences [with the U.S. and Europe], and we will work closely with government and relevant agencies to see how this ambition can be delivered in the new political context we now find ourselves in as a country.”

Bates said the fundamentals of U.K. bioscience remain strong. “In terms of potential new therapies in the pipeline, the UK is by far the strongest in Europe,” he said.

He did note, however, several key issues that are now in flux, including the regulation of medicine, access to the European market and life sciences talent, intellectual property and the precise nature of the future relationship of the U.K. with Europe.

“This will require detailed and dispassionate thinking,” he said, and the life sciences sector working with the government and its key agencies.

EMA Leaving London: Impact?

Dechert's Defries downplayed the negative impact of the EMA moving out of London.

“From a jobs perspective, I think there a few hundred people working at the EMA, and there'll be a transition time for them as well. But the EMA is a relatively new construct. It's been fulfilling an important function. But there's no reason why its responsibilities can't revert to a national organization like [the U.K.'s] MHRA [Medicines and Healthcare Products Regulatory Agency],” he said.

Defries noted that the vast majority of drugs in Europe aren't approved by a centralized authority. “The EU will have to recognize that the idea that drugs approved in the UK will somehow be overlooked by the EU is unsustainable.”

He said that the situation for U.K. companies seeking regulatory approval will be no different for the U.K. than it is for countries such as Switzerland that aren't members of the EU.

Funding Remains Concern

Defries acknowledged that a reduction in funding from the EU as a result of Brexit is a concern and that there will be uncertainty for a period of time. From 2007 to 2013, the U.K. contributed an estimated $7.4 billion to EU research and development, according to the U.K. Office of National Statistics. During that time, it received $12 billion in direct EU funding for research, development and innovation, according to a Royal Society report.

The European Association for the Study of the Liver (EASL) said in a statement that there is uncertainty, but that EASL “understands that for the next two years the UK will continue to be able to take part in Horizon 2020 and other EU-funded projects as a full member and that non-UK EU nationals will continue to be able to live and work in the UK.”

Neil Woodford, fund manager for U.K.-based Woodford Investment Management, wrote in his blog that the U.K. economy won't be severely affected by Brexit in the long term.

“That is not to say there won’t be challenges in the near term,” Woodford said. “There will. We now face a period of uncertainty as the exact terms of Britain’s exit from Europe are negotiated. Financial markets loathe uncertainty as amply demonstrated by this morning’s reaction across all asset classes.”

The stock prices of London-based biopharmas GSK and AstraZeneca dropped immediately after the Brexit vote.

Patents: Business as Usual

The Chartered Institute of Patent Attorneys President Tony Rollins called for calm, noting in an e-mail to Bloomberg BNA that it will be patent business as usual for at least two years.

“The UK will not immediately cease to be a member of the EU,” he said. “The terms of the UK’s exit will need to be negotiated. For now, UK patent attorneys and registered trade mark attorneys will still be able to perform the same work they do now, and UK and overseas IP [intellectual property] owners will not lose any IP rights or any access to EU IP registration systems.”

A spokesman for the London-based law firm of Marks and Clerk e-mailed Bloomberg BNA that, while it will be unclear in the short term how the U.K.'s relationship with the EU will change, there is no immediate change in intellectual property law. It is likely to be months if not years before the position changes substantively, he said.

U.K. Patents and Brexit

• U.K. will stay in the European Patent Organization.

• European patents will continue to cover the U.K.

• Future of Unitary Patent System and Unified Patent Court in question.

The U.K.'s relationship to the EU has no effect at all on its membership in the European Patent Organization, and European patents will continue to cover the U.K., he said. The vote to leave the EU also will have no effect on any national patents or applications or on international patent applications known as PCT [Patent Cooperation Treaty] applications. Enforcement will continue to be available in the UK Courts as presently.”

Unitary Patent System Question

According to Marks and Clerk, one matter of concern is the Unitary Patent System and Unified Patent Court. “Its future must now be uncertain, and it seems clear that the UK will now not be a part of that project—should it proceed at all,” the e-mail said.

An agreement to establish the UPS and UPC in the EU has been in development. To take effect, it was to have been ratified by 13 countries, including the “big three” of France, the U.K. and Germany. Nine countries have ratified, including France, and an EU official in February predicted the system could be established by March 2017 (10 LSLR 05, 3/4/16).

“The future of the UPS and UPC is an interesting question,” Dechert's Defries told Bloomberg BNA. “It had some ways to go before it was adopted. Next year at best. It would be more convenient to have a uniform system across countries. But there are transitions and negotiations to be made. There is no way that the EU will allow drugs manufactured by UK companies not to be sold throughout Europe or that it will allow its patents to not be recognized. The UK will not become an unimportant patent hub overnight,” Defries said.

Trademarks: Don't Panic

One negative impact of Brexit is that in the future, EU trademark and community design registrations won't apply to the U.K.

But Kate O’Rourke, president of the Institute of Trade Mark Attorneys (ITMA), said in an e-mail to Bloomberg BNA that “we will encourage trade mark and registered design owners not to panic. [Existing marks and designs] remain valid in the UK.”

ITMA will advocate for a simple and cost-effective transition of all EU-based trademark and design rights to U.K.-based protection, she said.

“We will also be calling on the UK Government to ensure that UK practitioners remain entitled to represent clients before the European Union Intellectual Property Office,” O'Rourke said.

To contact the reporter on this story: John T. Aquino in Washington at jaquino@bna.com

To contact the editor responsible for this story: Randy Kubetin at rkubetin@bna.com

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