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EU Regional Innovation Survey Factor NI rank within UK (out of 12)

Population with tertiary education 11

R&D expenditure in the public sector 7 R&D expenditure in the private sector 8

SMEs innovating in-house 12

Innovative SMEs collaborating with others 9

EPO patent applications 11

SMEs introducing product/ process innovation 11 SMEs introducing marketing/organisational innovations 11 Employment in knowledge intensive activities 12 Sales of new to market & new to firm innovations 11

Source: EU Regional Innovation Survey

This innovation survey, albeit for the whole economy, demonstrates an R&D&I malaise that impacts on Northern Ireland economic performance. Driving forward from this point will require a phenomenal improvement, particularly as none of the other regions are standing still on R&D&I. In the context of life and health sciences, the following sections provide a snapshot of current capacity within the sector and examine the extent to which Northern Ireland LHS businesses demonstrate innovation.

2.2 NORTHERN IRELAND LIFE & HEALTH CAPABILITY

The 2008 MATRIX Northern Ireland Technology Capability Study judged the life sciences sector as ‘impressive and significant; however, this remains fragmented between academic research, public sector research and private company research.’ Across academia, the public sector and private sector, Northern Ireland was judged as follows:

• Private sector: ‘The private aspect of the sector remains dominated by three leading companies - Almac, Norbrook and Randox, who have little interaction with the rest of the sector in Northern Ireland. Their success is based on their own capability to supply their markets quickly and efficiently. Within the private sector, there are clear capabilities in medical devices and diagnostics, pharmaceuticals, medical disposals, biotechnology and clinical trials.’

• Academia: ‘The academic part of life sciences in Northern Ireland is filled with significant capability, albeit sometimes small in scale. The research in the sector tends to be fundamental in nature and this drives limited exploitation opportunities. This implies that any meaningful commercial research is exported outside of Northern Ireland to leading companies in the UK or Europe and the USA.’

• Public sector: ‘The public sector capability is driven by the work of the DHSSPS. This unit benefits from having a dual remit of health and social care and therefore has a R&D directorate which promotes and supports R&D within the HPSS. This R&D tends to span both healthcare and community/social care. This does provide some additional

‘end-to-end’ capability. The R&D strategy is focussed on wellbeing and health but seems to be disconnected from the other companies in the sector in Northern Ireland’

2.2.1 PRIVATE SECTOR

The life & health sciences sector in Northern Ireland can best be described as niche and increasingly vibrant. Accounting for around 7,500 jobs and approximately £800m in sales, the sector is dominated by three large companies (Almac, Norbrook and Randox) and a further 130 companies or so across several sub-groups. This section of the report profiles the innovation capacity of Northern Ireland’s life and health sciences companies.

Global context

Latest estimates of the global life science sector place annual turnover at over US$1.1 trillion with a (CAGR) of 6.7%. The pharmaceuticals market accounts for 72% of total life science revenues.

Pharmaceutical sub-sector

The global pharmaceutical market was estimated to be worth around US$792b in 2011. There is an emerging trend among the large pharmaceuticals to move towards more collaborative, lower cost approaches to the development of new drugs as their patents on key products expire. Drugs worth US$132bn lost their patents between 2009 and 2013. This shift in the type of products coming out of pharmaceutical research labs provides excellent opportunities for smaller pharmaceutical firms to aid in the R&D of a new series of targeted drugs.

The generic drugs market is expected to see a 10% CAGR between 2013-2015.

There is also a growing trend of pharmaceutical and

biotechnology businesses converging, with a focus on higher margin biopharmaceuticals to treat diseases.

Medical biotechnology

The global medical biotechnology market accounted for 19% of the total pharmaceutical market in 2011 US$142b with a CAGR of 11%. The industry comprises over 10,500 firms and employs around 525,000 people worldwide. The sector is being driven by, among others, the emergence of stem cell technology and regenerative medicine. The field of medical biotechnology is still very much in its infancy but it is attracting a lot of attention and investment due to its potential application across a wide range of diseases and ailments.

Medical technology

The global medical technology market had an estimated value of US$325b in 2011 and a CAGR of 7% between 2005-2011. In 2011 the top five medical technology segments by global sales were in vitro diagnostics, cardiology, diagnostic imaging, orthopaedics and ophthalmics. In vitro diagnostics are expected to remain the largest sub-sector until at least 2018, although CAGR for the sector is expected to fall to 4.4% over the same period.

Industrial biotechnology

The industrial biotechnology market has an estimated global market size of between US$50-60b and this is forecast to increase to US$300b by 2030, with the biofuels and chemical markets most likely to fuel this growth. At present, less than 12% of chemicals used in consumer products are made through industrial biotechnology processes. Biodiesel production increased 400% between 2005 and 2010 and the demand is expected to reach 65 million barrels by 2020.

In 2014, the Patient Protection and Affordable Care Act (PPACA), commonly called the Affordable Care Act (ACA) or “Obamacare”, came into effect. It provides an extension of health insurance to more than 30m uninsured US citizens and will undoubtedly provide a boost to the life sciences sector worldwide. However, in a global context, the focus of life science attention is quickly shifting towards large emerging markets. The increasingly ageing and affluent populations of countries like the BRICS nations (Brazil, Russia, India, China, and South Africa) as well as the modernisation and Westernisation of their health sectors, is leading to huge increases in the healthcare expenditure in these economies.

This attention on the emerging economies is also resulting in increasing inward investment. China is becoming an attractive location for investment by life science firms due to its highly skilled yet low cost R&D environment and the increasingly stringent regulatory requirements in Europe and the USA.

United Kingdom context - overview

The UK life sciences sector employs 176,000 people in 4,980 companies with an estimated combined turnover of over

£50b. The pharmaceutical sector alone generates around

£30b per annum with 17 of the top 20 global pharmaceutical manufacturers having a presence in the country. The

medical technology industry is the largest employer in the UK life sciences sector, with 71,144 jobs, but its turnover is significantly smaller than the pharmaceutical figure at only around £16b per annum.

In December 2011, the Prime Minister launched the Strategy for UK Life Sciences. This strategy is built around three key pillars - building a UK ecosystem, attracting talent and overcoming barriers - and is committed to a broad range of initiatives and improvements including the Biomedical Catalyst Fund, formation of the Cell Therapy Catapult, improving NHS management of clinical trials and aligning financial, operational and performance incentives in the NHS.

In the academic year 2012/13, there were 436,257 students enrolled in university courses directly related to life sciences.

Key regions were London (72,314), the South East (59,687) and the North West (45,531).

Regional strengths

Surfacing the National Offer (SNO) is one of the resources used by the Investment Services Team (IST) in UK Trade &

Investment (UKTI) to support the identification and short-listing of UK locations for FDI projects. SNO identifies concentrations of local capability across sectors and sub-sectors throughout the UK.