Yogan Patel, Partner at MHA, a UK member of Baker Tilly International, draws on an international network to provide insights into how the UK start-up landscape is changing.
MHA
Yogan Patel, Partner at MHA
The NHS is a global brand in healthcare. It is synonymous with high standards, best-in class training, innovation and much more. This has helped position the UK as a leader in medical technology and helped many of the companies supplying the NHS to internationalise at speed.
When international healthcare providers come across UK companies, they are attracted to those who supply the NHS. They are perceived as trustworthy, high quality and value driven. This has led to many medical technology start-ups taking an NHS first approach to growth, that sees them establish a successful track record in the UK before leveraging their NHS case studies to venture into international markets.
However, this NHS-first strategy has been changing over the last decade. Although still an effective approach, it is increasingly being seen as a slower route to growth.
MHA is part of the wider Baker Tilly International network, which gives us access to valuable market insights in 146 countries. We are increasingly working with UK start-ups who are either exploring, or planning to explore, internationalisation much earlier on in their corporate journey.
The reasons for this are complex, but there are several common threads that include a mix of push and pull factors. This trend hasn’t been confined to MedTech either; we have also witnessed similar trends with gene therapies and rare disease therapeutics.
One of the main drivers of this trend is the recent increased availability of international funding sources for UK start-ups. The value of estimated inward life sciences foreign direct investment (FDI) was 1.9 billion GBP in 2021, coming behind only the USA in terms of value; this is a significant uptick from 574 million GBP in 2019.
By their very nature, start-ups are dynamic and agile.
A significant proportion of this funding came from overseas investors, especially from the US and Asia, who are attracted to the UK’s strong reputation for research and innovation. This means startups are being exposed to international stakeholders earlier on in their journey, which can be extremely positive as securing international funding can open up new networks and partnerships and attract investors with market expertise.
Another driver is the growing demand for solutions to health challenges that are truly global in nature. Medical devices focused on addressing ageing populations and chronic diseases are especially popular, and regulatory pathways to accelerated access are being simplified to help get solutions to market. The FDA has taken a pragmatic approach to regulation as it seeks to outmanoeuvre the MHRA, which combined with the more commercial outlook of many US providers, is making the US an increasingly attractive market for early-stage companies.
Another important factor is that many start-ups feel it takes too long to break into the NHS. Investor pressures, and the realities of cash fl ow management, mean many MedTech companies are having to generate revenue more quickly. This is forcing them to make tougher commercial decisions and be more realistic about how quickly opportunities may crystalise.
The adoption of new technologies varies across the UK too, as many ‘Test Bed’ sites and ‘Innovation Hubs’ are accessed at a local level – complicating market access. Health clustering is strong in regions like Cambridge, Leeds and London but in other areas of the country it can make accessing the NHS harder.
There is no doubt pursuing internationalisation has its challenges. Companies must navigate complex regulatory frameworks, protect intellectual property, manage cultural barriers and understand complex financial and accounting rules.
Start-ups are now taking a personalised approach to growth and going where the opportunities for them to make the biggest difference exist.
As a result of these challenges, early-stage companies are having to transition from being research-led to a becoming more commercially focused earlier on. As my US-based colleague Mario Prohasky pointed out recently, this requires a clear strategic vision on how to achieve operational scale while staying true to the fundamental focus on breakthrough science.
But many start-ups are simply adapting to the challenges in front of them and finding solutions by building a team with the experience, expertise, knowledge and capabilities to help them exploit new opportunities. Where this isn’t possible, they are adopting a strategic approach and seeking expert advice from industry associations and professional services firms.
By their very nature, startups are dynamic and agile. They are living out this ethos by adapting to the changing circumstances around them and seeking to get innovation into the market as quickly as possible. Traditionally, the mantra was to grow gradually in your own market before considering exporting - but that approach is dying out. Startups are now taking a personalised approach to growth and going where the opportunities for them to make the biggest difference exist. All the better for patients.
Yogan Patel
Patel attending a session at the Baker Tilly conference in Auckland, NZ.
