Drug industry output - a measure of the volume of physical production not company revenues – increased 1% in 2015 according to analysis by group EEF and Oxford Economics. This is in marked contrast with the wider manufacturing sector that saw output fall 0.1%.
The reason for pharma’s resilience is that economic factors that have hurt other UK manufacturing industries since 2008 are outweighed by drug producers’ need to develop new products said EEF chief economist, Lee Hopley.
“The performance of the pharmaceutical sector post crisis differed from other industries as it was less impacted by UK economics” she told us.
“Instead, drug industry dynamics were driven by the patent cliff which prompted companies to invest in R&D and to make acquisitions to refill pipelines.”
At first glance the comments about R&D investment do not fit with recent cutbacks made by a number of big pharma firms.
However, such cutbacks have fuelled the growth of start-up pharma companies. R&D efforts by such start-ups have caught the eye of larger firms whose need to find new products combined with their manufacturing capacity have driven the increase in output according to Hopley.
“It is a legacy of the pharmaceutical industries investment in R&D, which has resulted in the formation of many start-up companies. Many of these smaller firms have been acquired by larger pharmaceutical companies with manufacturing operations in the UK which has increased the sector’s output.”
Growth in 2016
This upbeat take on UK pharma coincides with the publication of less positive data from the UK Office for National Statistics which show that drug industry manufacturing output was 4.9% lower in November than in October.
However, month-to-month variations are not uncommon. Pharma output in October was 2.5% higher than in September for example.
And, for Hopley, the factors that helped pharma to buck the wider trend of manufacturing output decline in 2015 will still hold true this year.
“Looking to 2016 the drivers of growth in the UK will be a continuation of the positive trends in 2015” she said, adding that “companies capitalising on past investments in facilities and R&D, solid domestic demand from the healthcare sector and also the pharmaceutical sector’s success in export markets."