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Aside from Covid-19, what lies ahead for British pharma firms?

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aside from covid 19 what lies ahead for british pharma firms

This pandemic has been much worse for the elderly, who have borne the overwhelming brunt of the deaths. 

But one sector that leans heavily on pensioner pounds is doing noticeably well this year – pharmaceuticals, and it not just because of Covid.

Share prices of many British pharmaceutical firms have grown strongly despite a stock market-wide March dip as worldwide worries over the economy were superseded by public health threats.

Since 1 January , the share price of the country’s largest pharma business AstraZeneca have risen 14 per cent in value, while Vectura’s have jumped by around double that amount, and FTSE 100 firm Hikma has climbed by a third.

AstraZeneca and GlaxoSmithKline are both working to manufacture vaccines to treat Covid-19

AstraZeneca and GlaxoSmithKline are both working to manufacture vaccines to treat Covid-19

GlaxoSmithKline (GSK) has been an outlier among British pharma firms with a 14 per cent decline in its share price since 1 January, although this is still some way above its March low.

Amidst smaller firms, some have had an even better run in 2020. Both London-listed Amryt Pharma and Guildford-based Ergomed have seen shares rise 74 per cent.

Each of them invests copiously in orphan drugs research, which is becoming a highly lucrative market. 

An orphan drug is defined as one intended for the treatment, prevention or diagnosis of a rare disease or condition.

According to one 2016 analysis of 86 publicly-listed pharmaceutical companies by two academics from Liverpool and Bangor universities, orphan drug producers had a 9.6 per cent greater return on investment than non-orphan drug makers.

Ergomed executive chairman: 'Our PrimeVigilance services have been essential in recent times, partly due to an increase in adverse event reporting as a result of the pandemic'

Ergomed executive chairman: ‘Our PrimeVigilance services have been essential in recent times, partly due to an increase in adverse event reporting as a result of the pandemic’

Amryt’s chief executive and founder Joe Wiley says his business’s acquisition of two marketed rare disease products – Lojuxta and Myalept – last year ‘transformed our company overnight.’

‘We quickly integrated these products into our existing business, and since the start of the year we have been consistently growing revenues quarter-on-quarter, and we moved into EBITDA profitability ahead of schedule and the market’s expectations.’

He also believes Amryt has ‘broken the mould’ of tradition biotech firms by gaining strong revenues and profits, a sentiment shared by Ergomed’s boss Dr Miroslav Reljanović, whose firm reported a 15 per cent rise in first-half revenues back in July.

Both companies state that Covid-19 has given them a further boost. Wiley says his company moved quickly to a work-from-home model and had a robust supply chain and inventory when the pandemic hit.

For Dr Reljanovic, it is the ‘essential’ nature of Ergomed’s research and drug safety services that has made it a crucial business during this unusual time.

‘We act as an essential services provider to larger pharmaceutical firms, as evidenced by our ability to orchestrate complex clinical trials (e.g. for Covid-19 patients) with a rapid turnaround time.

‘Our PrimeVigilance services have been essential in recent times, partly due to an increase in adverse event reporting as a result of the pandemic, and partly through the establishment of safety services to support Covid-related clinical trials.’

Another company, 4D Pharma, is running a trial giving an oral drug to hospitalised coronavirus patients, although whether this has boosted its share price is disputable.

Ergomed's executive chairman t is the 'essential' nature of Ergomed's research and drug safety services that has made it a crucial business during this unusual time

Ergomed’s executive chairman t is the ‘essential’ nature of Ergomed’s research and drug safety services that has made it a crucial business during this unusual time

AstraZeneca’s much more eminent Covid vaccine trial on the other hand, has given its share price an enormous (metaphorical) shot in the arm.

Even the announcement of a pause on clinical trials last week did little to scare investors. The FTSE 100 firm’s share price been on a long ascent in the last decade, thanks in large part to better success rates in getting new medicines to market.

By contrast, GSK had been tarnished with bribery scandals and flat turnover. Even if the company manufactures Covid treatments, it expects to not profit off them. AstraZeneca has also declared it will supply any potential Covid vaccine at no profit.

If the two firms were cities, AstraZeneca would be London, hogging most of the money and glory, while GSK would be Birmingham or Manchester – still prominent and world-famous, but dwarfed by their much bigger, richer and older sister.

AstraZeneca has declared it will supply any potential Covid vaccine at no profit

AstraZeneca has declared it will supply any potential Covid vaccine at no profit

So, what about the rest of the British pharma sector? According to consulting firm GlobalData’s Pharma Intelligence Center Drugs Database, there are 235 known private independent pipeline-only Bio/Pharma companies headquartered in Britain.

Peter Shapiro, the senior director of Drugs and Business Fundamentals at GlobalData, says: ‘It is hard to generalise about these smaller Pharma companies as they are quite diverse, spanning every major molecule type and therapeutic area.’

GSK and AstraZeneca though ‘both have blockbuster drugs and diversified, innovative therapeutic pipelines. Their pipelines include Covid-19 vaccines or collaborations, and they have made significant investments in advanced therapy medicinal products, especially in the growing field of Immuno-Oncology (IO).’

But whatever the size of each pharma business, one long-term trend should give the wider industry a considerable boost in confidence – the world is getting older.

GSK's share price has been hurt in the last decade as bribery scandals and flat turnover beset the Brentford-based company

GSK’s share price has been hurt in the last decade as bribery scandals and flat turnover beset the Brentford-based company

This year 2020 is the first time in human history that the number of over-65s outnumbers those under five. The Office for National Statistics projects that one in four Britons in 2050 will be 65 or older.

China and India, the world’s two largest countries by population, have seen women’s fertility rates plummet as they have grown richer, while the Asian tiger economies have already had below-replacement birth rates for decades.

As journalist Camilla Cavendish writes in her book Extra Time: 10 Lessons for an Ageing World: ‘The twenty-first century will be defined by people living longer, in societies which are growing older much faster than we have fully realised.’

Health spending is also disproportionately concentrated on the elderly. The Institute for Fiscal Studies (IFS) estimates that 65-year olds cost the NHS two and a half times more than a 30-year old, but 85-year olds cost five times as much.

The year 2020 will be the first time in human history that the number of over-65s outnumbers those under five. About one in four Britons in 2050 will be 65 or older as well

The year 2020 will be the first time in human history that the number of over-65s outnumbers those under five. About one in four Britons in 2050 will be 65 or older as well

And just to throw in an extra secret sauce, the world is getting fatter, putting people at greater risk of diabetes, heart disease, depression, and other medical problems.

Put it all together, and pharmaceutical firms are set for a golden century. Surely nothing could throw a spanner in the works? Well, the industry has one major worry on its immediate horizon – the threat of a hard Brexit.

A parliamentary report on the sector published two years ago warned that ‘any small gains [from Brexit] would be hugely outweighed by additional costs or the loss of access to existing successful markets.’

It added that the ‘potential for new, untapped markets simply does not exist in an already global sector in which the UK is highly engaged.’

The report called on the UK to have a close relationship with the EU, with medicines able to travel across borders with as little hassle as possible, something that could be severely affected if the two parties end up trading on WTO terms.

A parliamentary report on the pharma industry said 'any small gains [from Brexit] would be hugely outweighed by additional costs or the loss of access to existing successful markets'

A parliamentary report on the pharma industry said ‘any small gains [from Brexit] would be hugely outweighed by additional costs or the loss of access to existing successful markets’

CMC Market analyst David Madden believes such a scenario will hurt pharma stocks across the board, though he thinks GSK and AstraZeneca may not be as badly impacted.

He says because their overseas earning are proportionally higher, a fall in the pound’s value will not hurt them as much and that ‘big pharma players like GSK are more likely to produce a Covid-19 vaccine so that will be on traders’ minds too.’

GlobalData’s Peter Shapiro says the major pharma firms have also been extensively preparing for a hard Brexit. However, the potential regulatory dealignment between Britain and the European Medicines Agency (EMA) remains a significant worry in the industry.  

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Trainline boss Clare Gilmartin to step down for family reasons

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trainline boss clare gilmartin to step down for family reasons

Shares in the rail ticket firm Trainline dived today after the company revealed its CEO Clare Gilmartin will leave her post in February next year to spend more time with her family.

They fell 11.7 per cent to 294.2p as it was announced her replacement would be the group’s current chief operating officer Jody Ford.

Gilmartin took charge of Trainline in 2014 and helped oversee a period of rapid expansion for the company until this year when the coronavirus and the UK government’s advice to Britons to avoid public transport caused rail travel to slump.

Gilmartin scooped a massive £50million windfall last year when Trainline floated on the LSE

Gilmartin scooped a massive £50million windfall last year when Trainline floated on the LSE

Gilmartin scooped a massive £50million windfall last year when Trainline floated on the LSE

Its success has been partly predicated on higher purchases of tickets on mobile phones, but also because it offers a one-stop-shop to buy tickets on a fragmented UK rail network that contains multiple rail operators.

This growth enabled the Dublin-born boss to scoop a massive £50million windfall last year when her company floated on the London Stock Exchange, thereby becoming one of the country’s wealthiest female executives in the process.

Gilmartin will stay on as a ‘senior advisor’ at the business, but she declared that ‘the time has come for me to spend more time with my family.’

‘I am immensely proud of our progress over the last several years – including driving the advancement of digital ticketing and the customer shift online, our international expansion and our track record for meeting and exceeding expectations.’

Her successor only joined Trainline in September but has extensive experience in leadership positions. Mr Ford’s prior role was as CEO of Photobox Group, the parent company of greeting cards business Moonpig.

Like Ms Gilmartin, the University of Exeter graduate also worked for eBay, where he was its vice president of global growth. Before that, he was a consultant at McKinsey and PricewaterhouseCoopers.

Both Clare Gilmartin and her successor Jody Ford have worked in senior roles at eBay

Both Clare Gilmartin and her successor Jody Ford have worked in senior roles at eBay

Both Clare Gilmartin and her successor Jody Ford have worked in senior roles at eBay

Ford said he joined Trainline because ‘it is a tech innovator with huge growth potential’ encourages ‘greener travel choices’.

‘I am very much looking forward to bringing my digital experience to bear as CEO and continuing Trainline’s focus on working with the rail and coach industry to make travel as easy and friction-free as possible for millions of customers in Europe and beyond.’

The firm disclosed last month that it had processed over two million UK-based refund requests in the first quarter of the fiscal year due to the pandemic and had seen business sales drop to just 1 per cent of their equivalent level in the prior year.

International and UK consumer revenues were better, but at £79million, they were still only 9 per cent of what they took home in the first three months of the 2020 financial year. 

Office of Rail and Road figures showed only 35 million journeys were made on the rail network between April and June, its lowest amount since the mid-nineteenth century. Passenger numbers are now running at about a third of their usual size.

Senior company executives including Gilmartin took pay cuts in response to the tumble in rail passenger numbers. Nonetheless, she earned another £3million after selling 800,000 company shares in late August.

Figures from the Office of Rail and Road showed only 35 million journeys were made on the rail network between April and June, its lowest amount since the mid-nineteenth century

Figures from the Office of Rail and Road showed only 35 million journeys were made on the rail network between April and June, its lowest amount since the mid-nineteenth century

Figures from the Office of Rail and Road showed only 35 million journeys were made on the rail network between April and June, its lowest amount since the mid-nineteenth century 

Trainline has received further public attention during the pandemic for charging and holding onto large commission fees for tickets booked through its website.

This has happened while rail companies are required to hand over any money they have generated to the government under the terms of a rescue package it received from them earlier this year.

The move effectively renationalised the railways and ended the franchise model that had arisen after privatisation in 1994.

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‘Zero emission mandate’ could force makers to sell more electric cars

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zero emission mandate could force makers to sell more electric cars

Manufacturers could be forced to sell a rising share of electric cars each year to speed-up the shift to zero-emission vehicles, according to reports.

The Times said ministers are considering a California-style ‘zero emission vehicle mandate’, which would be similar to the one introduced in the US state in the 1990s and demand a minimum volume of plug-in cars are sold by brands.

MPs believe the mandate would be the most effective way of shifting the UK’s car make-up to electric vehicles, to bridge the proposed ban on sale of petrol, diesel and hybrid cars in 2035.

Mandate for electric cars: The government is considering plans to force vehicle manufacturers to sell a rising share of plug-in models each year to speed-up the shift to zero-emission vehicles, according to reports

Mandate for electric cars: The government is considering plans to force vehicle manufacturers to sell a rising share of plug-in models each year to speed-up the shift to zero-emission vehicles, according to reports

Under the mandate, car makers would be required to sell an increasing volume of zero emission vehicles as a share of their overall sales.

If they fail to meet their EV target, they would be able to purchase credits from other manufacturers.

The government said it would consider a mandate in a response to a Committee on Climate Change report published in the summer.

It said it recognised a need to ‘go further than the existing regulatory regime to reduce CO2 emissions from road transport’, and that it was are looking into a mandate as part of the Transport Decarbonisation Plan. 

Already in the first nine months of 2020, demand for battery electric cars is at a record high.

Over 66,600 pure electric vehicles have been bought by the end of September – a year-on-year increase of 184 per cent increase, which has seen registrations almost double the full-year sales of pure EVs for the entirety of 2019 with three months to spare.

These electric-only cars now account for 5.4 per cent of all vehicle registrations in the UK, with that market share set to continue an increase as demand for diesel cars in particular shrinks and more people convert to zero-emission model while grants are available.

If a mandate was put in place it would allow the government to retract these subsidies and tax incentives that are currently exclusively available to buyers of electric cars, such as the £3,000 Plug-in Car Grant and VED road tax exemption. 

Sales of battery electric vehicles are booming at the moment, as motorists are taking advantage of incentives, such as the £3,000 Plug-in Car Grant, when purchasing EVs

Sales of battery electric vehicles are booming at the moment, as motorists are taking advantage of incentives, such as the £3,000 Plug-in Car Grant, when purchasing EVs 

And the Government has made no secret that it wants to phase out the availability of electric-car deals, which it outlined in its Road to Zero document in summer 2018.

It said: ‘As the market becomes better established and more competitive, the need for direct government financial support will decrease.

‘We therefore expect to deliver a managed exit from the grant in due course and to continue to support the uptake of ultra low emission vehicles through other measures.’

The Times reported that ministers also believe a mandate would help to attract electric car manufacturers to setup production lines in Britain to boost the economy. 

It comes as government is expected to announce plans to fast-track the deadline for the banned sale of petrol and diesel cars, which could be brought forward to as early as 2030.  

MPs last week urged the Prime Minister to accelerate the ban to a decade’s time in order to help the Government achieve its target of reaching net zero emissions by 2050.

The plans, which would dramatically accelerate the transition to zero-emission vehicles, are expected to be announced later this year alongside a series of new clean energy policies.

Downing Street had intended to unveil the blueprints in September, but the announcement will now be pushed back as ministers focus on soaring numbers of coronavirus cases, energy and transport insiders told the Guardian last month.

The ban, backed by the Committee on Climate Change, is likely to be set out by the Government in autumn alongside plans for Britain to become a carbon-neutral economy by the middle of the century.

Ministers are eager to pull the plug on grants, subsidies and incentives currently offered to owners of electric cars, stating that 'the need for direct government financial support will decrease'

Ministers are eager to pull the plug on grants, subsidies and incentives currently offered to owners of electric cars, stating that ‘the need for direct government financial support will decrease’

Greenpeace UK’s head of politics, Rebecca Newsom, gave her full support to a mandate. She said: ‘Moving the ban on petrol, diesel and hybrid cars and vans forward to 2030 is an absolute must if the government is to meet its legally binding climate commitments. Any later and it becomes almost impossible. 

‘But a ban alone won’t see this change take place without the policies that force it over the line. That’s why a zero emissions vehicle mandate for car manufacturers would be an incredibly smart move to bring new jobs to UK. 

In order to dangle the carrot for people buying a new car, the government must use the stick with manufacturers to ensure costs come down and sales go up.’

A new study by vehicle breakdown recovery provider Green Flag said the average UK driver now expects to purchase an electric car within the next four years. 

The poll of 1,500 drivers found that more than half (54 per cent) are today in favour of electric cars, with fuel savings and eco-friendliness the biggest perks, followed by lower servicing an maintenance costs and the convenience of being able to charge a vehicle at home.

Mark Newberry, commercial director at Green Flag, said: ‘Our research has found that the main concern for drivers converting to electric is running out of charge mid-journey. Try to think back to the last time that you broke down because you ran out of petrol?

‘We want to reassure drivers that it only takes a few small adjustments to enjoy an electric vehicle – if you look after your car, prepare for your journey and drive carefully you should see minimal changes to your driving routines.’

SAVE MONEY ON MOTORING

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Men and younger workers more likely to shun pensions during pandemic

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men and younger workers more likely to shun pensions during pandemic

A quarter of savers have stopped or cut back on paying into their pensions during the Covid-19 crisis and more are considering doing so, new research reveals.

Men and younger workers are more likely to shun pension saving to make ends meet than women and older workers in response to the upheaval in jobs and personal finances caused by the pandemic, the study shows.

The findings from Hargreaves Lansdown echo a separate survey, which found many people are pausing or reducing contributions because they need money for essential spending, were made redundant or were furloughed. 

Covid-19 crisis: Men and young workers are more likely to shun pension saving to make ends meet

Covid-19 crisis: Men and young workers are more likely to shun pension saving to make ends meet

Some 14 per cent of people have cut their contributions, and 11 per cent have cut them entirely, while 8 per cent may do so in future, according to the latest survey of 2,000 adults in September.

The trend could cause serious damage to people’s retirement prospects as they wind up with smaller pots, but auto-enrolment comes with a failsafe.

(Source: Hargreaves Lansdown)

(Source: Hargreaves Lansdown)

Employers must re-enrol staff who leave once every three years, unless they choose to stay opted out.

But employers do this on their own schedule, usually on a rolling basis starting from when they first introduced auto enrolment, not timed on when a worker dropped out.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, says younger people may be quicker to stop contributions because their pension feels like a more distant consideration, so it is an easy cost to cut.

But she points out that the money you put in when you’re younger works the hardest for you – because compound growth boosts pots more over longer periods – so this will come at a higher cost than they expect. 

Coles adds that if you cut back or stopping paying into a pension the impact will also be magnified, because you lose pension tax relief from the government and free cash from your employer too.

Who pays what: Breakdown of minimum contributions under auto-enrolment 

How pension contributions stack up under auto-enrolment schemes (Source: The Pensions Advisory Service)

How pension contributions stack up under auto-enrolment schemes (Source: The Pensions Advisory Service)

But she acknowledges that if you are now on a lower income, have cut out luxuries and shopped around to minimise the cost of essentials and are still struggling, then you may need to pause pension contributions.

‘The good news is that the way that automatic enrolment works should stop temporary pauses in payments becoming enormous gaps,’ says Coles.

‘If you opt out of a workplace pension, you will automatically be put back in after three years, so even if you don’t get round to kick-starting payments yourself, you’re likely to accidentally do the right thing.’

Meanwhile, Coles says some people will have seen their pension funds drop in value due to big market falls early in the Covid-19 crisis, but some are well ahead of where they started the year, depending on where they are invested.

‘Most pensions aren’t just invested in equities either. Most will have a balance of different assets, so overall pension funds didn’t fall as far, and have recovered significantly,’ she says.

‘By the end of June, according to Moneyfacts, the average pension fund was only 4.4 per cent down from the start of the year.

‘It’s worth taking a look at where your pension is invested, and how it is performing, not just to see how it’s doing, but to be certain it reflects your aims and objectives.

‘If you have a workplace pension and you’re not sure how to do this, talk to your HR department, and ask them to send you details.’ 

Read our guide to checking if your work pension is up to scratch here. 

What should you do about your pension if you are strapped for cash?

Pension experts urge people to keep paying into pensions if they can afford it, to avoid harming their chances of a decent retirement.

Find out the three important rules to remember, and the options for what to do about different types of pension here. 

You can keep paying in to some types of pensions even if you have left your employer, and payments into pots based on 80% of salary are protected if you were furloughed. 

Read a 10-step guide to sorting out your pension here. We also have tips for people in their 20s wanting to get their pensions on track here, and help for older savers nearing retirement here. 

TOP SIPPS FOR DIY PENSION INVESTORS

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