AstraZeneca’s falling out with Britain

IN A COUNTRY struggling to find reasons for cheer, British life sciences offer a ray of hope. The £108bn ($145bn) industry employs more than 300,000 people, many in high-value jobs, and Britain is a genuine global power. No wonder ministers like to boast about it. Sir Keir Starmer, the prime minister, has said it could be “the rocket fuel for our stagnant economy”.

That fuel tank could now be leaking. The launch of Labour’s Life Sciences Sector Plan on July 16th was peppered with optimistic references to this “world-leading” industry unlocking growth. But the last of its “six bold actions” conveyed a fear: the express goal to ensure life-science firms “stay in the UK”. This seemed aimed at AstraZeneca, Britain’s most valuable listed firm. The pharma giant’s increasingly fractured relationship with its home country lays bare Britain’s weaknesses and strengths as a home for life-science firms.

Sir Pascal Soriot, the firm’s outspoken CEO (a French-born Australian), has not been shy in voicing frustrations with Britain. He has reportedly held private discussions about changing its primary listing to New York, a move that could open doors to a larger, more diverse investor base (Sir Pascal declined to comment for this article). On July 29th, in a press call following the firm’s half-year earnings announcements, he called AstraZeneca a “very American company”. He said about Britain that the firm needed “to see that there is access and a reason to invest.”

This is partly a negotiating tactic to get a better deal from the British government, including on what the NHS pays for its drugs. But the risk of a departure is real. The announcement on July 21st that AstraZeneca would invest $50bn in America by 2030, no doubt in anticipation of tariffs imposed by Donald Trump, and Sir Pascal’s statement that this reflected a “belief in America’s innovation in biopharmaceuticals”, will add to British angst.

The company’s original decision to list in Britain in 1999, after a merger of Sweden’s Astra and Britain’s Zeneca Group, was largely an endorsement of its attractive climate for research and development (R&D). Sir Pascal, who took over in 2012, helped AstraZeneca turn a corner after years of stagnation, eschewing higher shareholder payouts (buy-backs ceased between 2013 and 2021) and channelling cash into scientific discovery instead.

When Pfizer, an American rival, made a takeover bid in 2014, ministers called for AstraZeneca’s protection on public-interest grounds. In 2020 the race for a covid-19 vaccine solidified its status as a national asset. Its life-saving jab, developed with Oxford University, became a symbol of British scientific prowess and turned AstraZeneca into a household name. Its share price has risen by nearly half since.

But its relationship with Britain has frayed. In 2021 Sir Pascal picked Ireland over England for a new £320m factory, later blaming Britain’s “discouraging” taxes. In November 2024 NICE, England’s drug-approval body, rejected the firm’s breast-cancer drug, Enhertu, over its high price, despite its availability in 25 other European countries, including Scotland. Months later AstraZeneca scrapped a £450m expansion of its vaccine plant in Liverpool after ministers threatened to slash subsidies from £90m to £40m on cost-effectiveness grounds, citing a reduction of AstraZeneca’s R&D promises. Sir Pascal rejected a final offer of £78m, calling the project “unviable” just hours after the chancellor, Rachel Reeves, had called the firm one of Britain’s “great companies”.

In part this is simply haggling. In negotiations over the Liverpool plant, the firm apparently raised several unrelated issues, including complaints about the NHS’s drug-pricing mechanism and NICE’s rejection of its breast-cancer drug. Clawback taxes are another gripe. Earlier this year the Association of the British Pharmaceutical Industry (ABPI), a trade body, complained to Wes Streeting, the health secretary, about having to pay back nearly a quarter of its members’ total sales—quadruple the average rate in France.

But the tensions also underscore some of Britain’s weaknesses when it comes to attracting and holding onto life-science companies. Its share of global pharmaceutical R&D is in decline. The number of phase III clinical trials (the stage closest to treatment) plunged by two-fifths between 2017 and 2021, making Britain drop from fourth to tenth in the world. It is starting to recover and now stands at eighth place, behind countries like Spain (third) and Italy (seventh). A survey by the ABPI found that in 2022 some 30% of its members deemed Britain among the top three countries for launching new medicines globally; this year only 13% did. Since 2010 Britain has fallen from the fifth-largest exporter of pharma products to ninth.

Yet the opportunity in Britain is still vast, at least in theory. Its strengths include world-class scientific talent and groundbreaking research. Britain’s academics account for more than a tenth of global citations in medical science, surpassed only by America and China. The potential for using the NHS’s vast patient database for research is unrivalled. Just this week Sir Pascal praised Britain’s “tremendous science” and “talented people”.

One way to boost Britain’s appeal to drugmakers would be to reform the much-loathed (by pharma) drug-approval process. To be deemed cost-effective, a drug must provide an additional quality-adjusted life year (QALY) for no more than £30,000, according to thresholds set by NICE. Yet the Treasury pegs the value of a QALY at £70,000, fuelling accusations that the regulator undervalues new drugs. Lifting regulatory barriers for clinical trials would also help, reckons Huseyin Naci of the London School of Economics. More investment would be better achieved through increasing public R&D and boosting public-private partnerships, he adds.

Meanwhile AstraZeneca is increasingly flirting with America, where it employs more people than anywhere else. The company believes this market will account for half of revenues by 2030 (up from 44% today). In addition to pledging big investments, it recently rejoined the Pharmaceutical Research and Manufacturers of America, the country’s biggest drug lobby.

America has long claimed that Europe is freeloading on stateside pharma spending. Mr Trump is putting pressure on drug companies to reduce prices in America. He is also pushing for higher prices across the Atlantic. The terms of America’s trade deal with Britain require it to “improve the overall environment for pharmaceutical companies operating in the United Kingdom” in exchange for preferential tariff rates.

Agreeing to higher prices for medicines or reducing rebates would put further strain on the NHS. The alternative is costly, too. The ABPI estimates that keeping the current rebate rates would result in £11bn of lost R&D by 2033. AstraZeneca has already made big commitments elsewhere: $1.5bn towards a cancer-drug factory in Singapore, $570m for 700 scientific jobs in Canada, $1.5bn for its R&D centre in Spain and $2.5bn towards a new one in Beijing—its second in China. It has earmarked only £200m for a conference facility in Cambridge. Winning back AstraZeneca will be neither simple nor cheap.■