Pharma’s UK dissatisfaction mounts as Merck & Co axes $1.3bn expansion

Merck & Co has walked away from its plans to invest $1.32 billion in a combined life sciences laboratory and office facility in London that were just two years from coming to fruition.

Explaining its decision, the US pharma company, known as MSD in Europe, voiced its frustration with the level of government support for the life science sector and the UK’s “undervaluation of innovative medicines”.

The firm isn’t the only major pharma player to have concerns about the UK, with Lilly and AstraZeneca also pausing major projects last week amid an ongoing row over how the NHS pays for medicines.

For its part, Merck will abandon its London Discovery Research Centre and UK Headquarters in the Knowledge Quarter district around King’s Cross, despite the project being two years into construction and due to be ready by 2027.

Although the company’s decision came less than two months after it signalled $3 billion worth of cuts – and the loss of 6,000 jobs – would need to be made by 2027, the scale of its disinvestment in the UK shocked commentators.

Professor Dame Ijeoma Uchegbu, Chair in Pharmaceutical Nanoscience at the UCL School of Pharmacy, said: “This is a huge blow for the sector. It is not just the science and innovation that will now happen in a different location outside of the UK and the loss of the associated science jobs; there will also be a negative impact on the science ecosystem as the collaborations between the Merck centre of excellence and scientists and technologists in the university/ healthcare sectors will be lost and innovation in these sectors thus hampered.”

Up and coming companies relying on upstream innovation from such a well-funded facility would also be harmed, she added.

Some 40 percent of the 25,000 square facility’s floor space was to have been occupied by laboratories, housing approximately 180 discovery scientists as part of a workforce of 800 that would have encompassed business development, regulatory affairs, clinical and business roles.

The company said in a statement that its decision “follows an evaluation of our company’s global discovery research capabilities as part of our multi-year optimisation”.

But added that it also “reflects the challenges of the UK not making meaningful progress towards addressing the lack of investment in the life science industry and the overall undervaluation of innovative medicines and vaccines by successive UK Governments”.

Merck will additionally move out of its laboratories in the London Bioscience Innovation Centre and the Francis Crick Institute by the end of this year, resulting in the loss of 126 jobs.

The company only moved into the new Skylab facility at the Francis Crick Institute in 2024, when it hoped to utilise the setting for chemistry, pharmacology and neuroscience research, as well as to start its first work on immunology research in the UK.

Merck’s decision comes after industry talks with the UK Government over the voluntary scheme for branded medicines pricing, access and growth (VPAG) collapsed in August.

The scheme controls the costs of branded medicines to the NHS through a clawback mechanism that sets a level of industry payments to the government and its latest version came into effect in 2023. The scheme’s payment percentage for 2025 had been expected to sit at 15.5 percent, but that jumped to 22.9 percent in the face of higher than expected sales of newer medicines, prompting acrimonious negotiations between the two sides.

The impact of Merck’s investment cut, and the role UK pricing policies may have had, were the subject of a debate in Parliament’s upper chamber the House of Lords the day after the news emerged.

Speaking there, Minister of State for Science, Research and Innovation Lord Vallance said: “[VPAG] ended up in an unexpected place. It was negotiated in good faith by the previous Government and the industry, and the result was not the one that anyone expected.

“We are negotiating to try to get that in the right place. We got very close to a deal. That is clearly now complicated by a number of factors, including the prospect of tariffs from the US.”

AstraZeneca and Lilly reassessing UK investments

Further pressure will have been added to those talks last week when, following Merck’s announcement, AstraZeneca pressed pause on a £200 million ($271 million) expansion of its Cambridge, UK research site that would have created 1,000 jobs.

The company had already abandoned its plans to build a £450 ($558) million vaccine manufacturing facility in Liverpool back in January, holding reductions in government support responsible for that decision.

Meanwhile, Lilly has similarly temporarily halted its £279 million ($365 million) project to build a Gateway Labs facility in London to support emerging biotech companies. The company has established five of the labs since 2019, with locations in South San Francisco, San Diego and Boston. Should the UK facility go ahead it would be Lilly’s second Gateway Lab outside the US, behind its China site in Beijing.

UK pharma competitiveness

Further adding to the sense of a perfect storm brewing for the UK government, Merck’s announcement was also followed by the release of a new report by UK pharma industry body the ABPI, which said a lack of competitiveness was holding the UK back in the race for R&D, clinical trial and direct investment.

The report, Creating the Conditions for Investment and Growth, said UK pharma R&D investment has faced a significant slowdown since 2020, when annual growth fell to 1.9 percent behind a global average of 6.6 percent. Meanwhile, the country attracted £795 million in direct foreign life sciences investment in 2023, down by 58 percent from £1,893 million in 2017, with the UK’s ranking among comparator countries falling from second to seventh during that period.

Richard Torbett, ABPI Chief Executive, said: “The UK has a world-class science base and the potential to lead globally in developing the next generation of medicines and vaccines. But without a more competitive environment for investment, we risk losing out to other countries making bold moves to attract internationally mobile investment.”