Big Pharma Tweaks Real Estate Strategy As $200B Patent Cliff Approaches

When an industry is facing the sudden loss of $200B of revenue in almost one fell swoop, it shakes up the way things are done.

That’s true right now of large pharmaceutical companies and their real estate as the industry faces the expiration of 190 patents before the end of the decade.

“There’s an enormous patent cliff approaching the pharmaceutical market,” GSK Senior Director and Global Real Estate Lead Josh Palmer told the audience of more than 200 at Bisnow’s Beyond Biotech: UK Life Sciences Forecast event.

Patents on drugs that currently generate $200B in annual revenue will expire by 2030, according to data from Evaluate. 

“That affects pharmaceutical companies in different ways, and many, including ourselves, are looking for the next products,” Palmer added. “That drives a need for [research and development] to not only be efficient, but to find solutions.”

Companies like GSK have two options when it comes to replacing that revenue: Buy a late-stage company or drug that is close to becoming revenue-producing or develop new drugs themselves. And when its comes to the latter, real estate can have a positive impact on innovation — if it’s done well.

With that in mind, GSK is partnering with developer Reef and investor UBS Asset Management to build a 1.4M SF, £900M life sciences campus on a 33-acre site alongside its existing R&D facility in Stevenage, 33 miles to the north of London. 

The 15-building campus will be set around a central green with an interconnecting network of paths and open spaces. The buildings for the new campus will comprise a variety of different uses, including R&D labs and offices, Good Manufacturing Practices facilities and flexible lab buildings as well as training, innovation and collaboration spaces. 

The site will also include restaurants, cafes and leisure facilities.

The aim is to create an ecosystem of academics, companies and investors, which GSK will contribute to and benefit from. 

“We have sat historically behind a big fence with one or two partners and a good catalyst,” Palmer said, referring to the Stevenage Bioscience Catalyst.

“But the idea behind partnering with Reef was that they would come in with all of their industry expertise and bring forward a state-of-the art life science campus that would benefit GSK through that collaboration, through the ecosystem, through the proximity to late-stage, early-stage, fully-formed pharma businesses that may well be rivals, but equally, are united in a passion to develop science going forward.”

Overlaying those amenities is an engagement programme that, for example, allows GSK’s chief scientific officer to speak to users of the campus and facilitates equipment exchanges between companies, lowering costs and waste. 

GSK also opens smaller offices in cities or clusters where it might want to access a specific knowledge marketplace. In one case, it opened a small office in King’s Cross, London, to access the “Knowledge Quarter” cluster in the area. That office is specifically focused on life sciences technology. 

When it comes to working with real estate companies, Palmer said GSK was looking for specialisation and scale, adding the ability to tap into a network of different sites across a country or region is useful for companies. 

Palmer warned landlords to look for a partnership rather than just focusing on the financials.

“What is always clear is that there are landlords, who for any negotiation, it's a purely an adversarial, financially-driven discussion,” he said. 

“Finance does drive value and is an important factor. But I think the true way that we can move forward, and the most successful relationships we've had with landlords, have been where a partnership approach has been possible, and where I think there's potential additional value.”