Will Brexit spring a leak in AstraZeneca’s talent pool?

As drug pricing policies dominate pharmaceutical headlines, the threat of economic nationalism looms even larger over AstraZeneca’s R&D pipeline.

What would be more detrimental to the bottom line of a global drug company, trade limitations that restrict product distribution or constrictions in the scientific talent pipeline resulting from isolationist policies? Among other things, it depends on the time horizon in question.

Management at UK-based AstraZeneca appears most concerned with the immediate implications of a hard Brexit on the ability to distribute pharmaceuticals across the globe. In fact, the company’s most recent annual report mentions the importance of current trade agreements, which enabled AstraZeneca to earn 42% of 2016 revenue from countries in continental Europe [1]. The report goes on to acknowledge the uncertainty surrounding Brexit and the potential drag on market share, sales, and profitability that could result from barriers to free trade.

However, I believe that AstraZeneca has more to lose over the long-term from the isolationist movement than just trade partners. A recent report from Strategy& argues that companies that are highly dependent on R&D for long-term success are especially susceptible to the negative effects of economic nationalism [2]. AstraZeneca certainly belongs in this discussion as it is expected to spend more than 25% of 2017 revenues on R&D, more than any other company surveyed in Strategy&’s report.

But how exactly could R&D be impacted at AstraZeneca? First, the European Union has provided financial support for research, development and innovation through a number of programs with total aid estimated at €120 billion [3]. This funding is certainly at risk as Brexit continues to take shape. More importantly, immigration policies in the UK and the US are likely to play a major role in the ability of AstraZeneca to attract and retain scientific talent, the lifeblood of drug pipelines.

Restrictive immigration and visa policies will limit intellectual capital produced through academia and through AstraZeneca’s commercial labs, both of which would be detrimental to the company’s long-term prospects. The work of university postgraduate students and researchers has become critical to the drug R&D process. Four years ago, AstraZeneca announced plans to build new R&D facilities at the center of “bioscience hotspots” in the US, UK, and Sweden which facilitate information sharing and collaboration between corporations and universities [4]. Says CEO Pascal Soriot, “The strategic centres will also allow us to tap into important bioscience hotspots providing more of our people with easy access to leading-edge academic and industry networks, scientific talent and valuable partnering opportunities [4].”

Although the “hotspots” are concentrated in Europe and the US, the pool of scientific talent draws from every corner of the globe. In the UK alone, more than 13,000 scientists and engineers came from outside the European Union [5]. If nationalist policies restrict the supply of talent into the UK and/or the US, the cost of talent acquisition and retention will rise. In addition, the talent pool at AstraZeneca would become more homogenous, limiting the benefits that come from a diverse R&D workforce.

To mitigate these risks, management at AstraZeneca should join forces with other R&D-focused, UK-based organizations to lobby the government against labor-focused economic nationalistic policies. By explicitly presenting the array of organizational costs that will accumulate across the economy, they can illustrate the impact on GDP, tax revenues, and ultimately societal welfare. Efforts to this end are already bearing fruit as the US and UK governments have come to an agreement on relaxing travel restrictions on scientists post Brexit [6].

To the extent that isolationist policies inhibit employment of foreign nationals or business travel is severely limited, AstraZeneca should consider establishing subsidiaries or separate legal entities in progressive countries. By “offshoring” R&D centers in hospitable jurisdictions, AstraZeneca can minimize the risk of disrupting the R&D pipeline. This strategy would certainly increase costs and hamper communication across borders. The company budgeted about $500 million to build its new research and development facility in Cambridge, UK in 2013 [4]. I presume that new facilities built outside of Europe or the US would be similarly expensive. In terms of communication challenges, the dependence of commercial drug research on wet lab facilities makes physical colocation of scientists at the research center important. However, given technological advances, I wonder if physical presence of R&D scientists at the lab is imperative?

Among the many questions to be answered, I’m most curious to about the role that technology might be able to play in the drug R&D process. Is something like “virtual R&D” in the pharmaceutical industry possible?

(730 words)


1 AstraZeneca, 2016 Annual Report, p. 153, https://www.astrazeneca.com/investor-relations/annual-reports.html, accessed November 2017.
2 Strategy&, “The 2017 Global Innovation 1000 Study,” https://www.strategyand.pwc.com/innovation1000#VisualTabs1, accessed November 2017.
3 The Royal Society, “UK research and the European Union. The role of the EU in funding UK research,” https://royalsociety.org/~/media/policy/projects/eu-uk-funding/uk-membership-of-eu.pdf, accessed November 2017.
4 AstraZeneca, “AstraZeneca to establish strategic R&D centres to enhance innovation and pipeline productivity,” https://www.astrazeneca.com/media-centre/press-releases/2013/astrazeneca-research-development-centres-innovation-pipeline-18032013.html#, accessed November 2017.
5 Martin Turner, “Immigration: Keeping the UK at the heart of global science and engineering.” January 2016. A report by the Campaign for Science and Engineering. January 2016. Accessed November 2017.
6 Pallab Ghosh, “UK strikes research deal with US in run-up to Brexit.” BBC News, 20 September 2017, http://www.bbc.com/news/science-environment-41340971, Accessed November 2017.


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Student comments on Will Brexit spring a leak in AstraZeneca’s talent pool?

  1. Thank you for your insightful analysis on the subject.

    That said, however, I must disagree with your main premise. Fortunately, even in a post-hard-Brexit world, the costs of importing talent from outside the UK is not actually all that high – indeed, it is a far less risky proposition than even here in the United States.

    In a worst-case scenario, importing talent from continental Europe post-Brexit would entail a similar process as that of talent from elsewhere in the world. That process, currently, costs organizations less than two thousand dollars (https://www.admin.ox.ac.uk/personnel/permits/tier2/overseas/costandpaymentofapplications/). To an organization like Astrazeneca, this, truly, is a drop in the bucket. As such, Brexit is unlikely to affect the hiring practices of AstraZeneca.

  2. Interesting perspective on the issue facing AZ. At least in the U.S., it seems as though the Trump Administration’s perspective has not been to increased the immigration restrictions for so-called “high-value” immigrants, but you never know when that policy may change. I don’t have enough experience with drug development to know if “virtual R&D” is, in fact, possible. However, I do know that despite the technological gains made in the last few years, nothing replaces being able to walk over to a colleague’s desk and quickly get an answer / discuss an issue. I wonder if the solution for AZ would simply be a single additional R&D office in a Eurozone country like Germany.

  3. I agree 100% on establishing Subsidiaries or other entities in more hospitable areas. I would argue that in the event of a hard Brexit, AstraZeneca (AZ) should go further and relocate it’s corporate headquarters to an EU member state. Though as a American I wish to argue for relocating to the US instead, the current trend of Nationalism and Isolationism is impacting us as well, for for this reason it may not be in AZ’s interest to do so. In terms of recruiting talent, relocating headquarters to the EU, even if only on paper, would help hedge against talent acquisition and retention challenges.

    Though it is unfortunate for the UK that AZ may be among many companies to make such a decision, perhaps this presents an opportunity for negotiation: AZ should collaborate with other large UK firms to lobby the government to vote against leaving the EU. This effort would be much less expensive and yield a much more desirable outcome if successful.

  4. You conclude with a great question – will there be a “virtual R&D” solution for pharmaceutical companies? There are already several startups that offer on-demand laboratory support. For example, Transcriptic (https://www.transcriptic.com/) bills itself as “outsourced research for the modern drug company” and enables companies to quickly perform biomarker / cell-based / biochemical assays remotely. Science Exchange also lets companies and researchers outsource research & development. Through these platforms, AstraZeneca may be able to reduce the need for researchers to co-locate. However, as there are security, quality and scale concerns, AstraZeneca should still pursue your other recommendations.

  5. Thank you for drawing attention to this issue, Brexit is certainty top of mind for most Brits!
    I would like to add that the UK government is very conscious of these concerns. In addition to reducing travel restrictions (aforementioned above), the Prime Minister has revealed further details about a 10-point plan to help boost British industry after the uncertainty of Brexit and the loss of EU funds, including investment in science, research and innovation. R&D in the UK will be one of the main beneficiaries of these steps, which include a total of £4.7 billion in additional funding and grants for companies and research organisations. AZ should actively seek such funding.

    With regards to virtual R&D, I certainly do not have any expertise in this area but it is sounds like an interesting concept. There is definately scope for virtual data rooms (VDR) to keep R&D secure, while allowing for sophisticated yet simple information sharing. Many of the tools that come built into a VDR are a natural translate into the application of virtual R&D.

  6. I’m curious what might happen if isolationism indeed does significantly hamper AZ’s internal R&D pipeline, forcing them to purchase R&D assets from the outside. This trend has been going on in the industry anyways for over a decade now – less in-house innovation and more M&A activity with early-stage startups. I wonder if Brexit will accelerate this trend in the UK?

  7. Great, but terrifying, essay. You bring up two implications of isolationism: trade limitations that restrict product distribution and constrictions in the scientific talent pipeline. I see a third implication, as it pertains to the global health: complete lack of global self-awareness. Historically, medicinal therapies come from all different corners and cultures of the world. Isolationism kills diversity of thought. By prioritizing the U.S. or the U.K. over all other countries, inherently we run the risk of not seeing the bigger picture. I am far less worried about trade restrictions and scientific talent than I am about group-think eradicating the need for international diversity.

  8. Very interesting analyses on the potential implications of Brexit on talent acquisition and R&D – both incredibly important areas for a pharmaceutical behemoth like AZ.

    My two cents on your analyses are that there may not be a very strong correlation between Brexit and the difficulty in getting top tier talent in general. I assume that the relaxed norms being applied to EU folks will no longer be available, however, it should still be reasonably low-cost to hire people. I do not expect that Brexit will have very stringent ramifications on work visas. However, I would definitely be curious to learn more about the same.

    Oliver raises a great point on whether isolationist moves mean more M&A activity triggered by “big pharma” outsourcing their innovation to start-ups. I believe that some important considerations in that analyses will be the cost of acquisitions, which typically tend to be quite high for innovative drugs compared to the cost of acquisition compared to the cost of moving R&D facilities to some other technologically advanced and “liberal” country in EU – perhaps Germany or even some emerging country in Asia / LatAm?

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