A significant proportion of life-sciences firms in Ireland are involved in high-value research and development (R&D) activities. Their efforts are supported by the R&D Tax Credit regime, which offers companies a tax credit worth 30 per cent of qualifying expenditure on R&D. It was hoped that this would be increased in Budget 2025, but no change was made.
How important are R&D and its tax credit for the Republic? What would be the impacts of losing them?
The State has become a significant hub for R&D in various areas including life sciences, technology, and food and agriculture, says Ian Collins, partner and head of innovation incentives at EY Ireland.
“In life sciences, Ireland continues to attract major global pharmaceutical, biotechnology and medical-device companies, with significant growth in areas including advanced therapeutics, such as mRNA, cell and gene technologies, vascular/neuromodulation, orthopaedic, diagnostics, drug delivery /combination devices, and healthcare services/technology.”
Ireland cannot compete as a low-cost manufacturing economy, but we have the potential to rise in the ranks to be at the forefront of life sciences innovation thanks to our well-established ecosystem that has a culture of collaboration with world-class talent and leadership, says Austin Sammon, managing partner of Galway office and board member of Forvis Mazars Life Science/Pharma.
“The Irish MedTech Association has noted that a subsidiary which combines manufacturing with R&D is better positioned to contribute to a differentiation strategy, and thus strengthen its strategic position with headquarters,” says Sammon.
“It is important to stress that all strategies and actions should always be for the overall benefit of the company, and the ability to collaborate and innovate across global R&D locations within a company is critical to successful innovation.”
Investment in R&D is seen as a plausible solution to the innovation, competitiveness and sustainability of the firm, and medtech firms in Ireland have recognised this potential, with around 48 per cent of companies surveyed having initiated R&D since the 2000s, Sammon says.
“The survey also showed that the great majority of Irish companies/subsidiaries who took the survey have increased their R&D activity in the last number of years and expect future R&D growth as well,” he adds.
The R&D Tax Credit regime is crucial as it provides significant incentives for companies to invest in research and development, says Collins: “It has been a key factor in attracting multinational companies to establish, maintain and continue to invest in their R&D operations in Ireland.
“The regime currently supports over 1,600 companies conducting R&D and the recent increase in cash benefit from 25 per cent to 30 per cent for qualifying expenditure will continue to provide a significant incentive for companies and others to invest in Ireland.”
Competition is a risk that has been noted and all stakeholders are working hard locally to minimise this, says Sammon.
“In particular, the US and China have made strides in medtech innovation in the past number of years,” he explains. “The EU has historically been a location of choice for the launch of new medical technologies and Ireland has benefited from this with investments. However, a lack of predictability relating to EU Regulations under MDR, coupled with an increasingly favourable regulatory environment in other markets, such as the US under the FDA, means that the EU is no longer seen as the most attractive location to develop and launch new medical technologies, with almost 50 per cent of EU companies deprioritising the EU market.”
This issue risks being further compounded by investors choosing not to invest in early-stage companies with plans to launch new products in the EU given the lack of business predictability, thereby limiting people’s access to transformative technologies.
Competition for R&D investment – whether in life sciences or any other sector – is becoming ever more intense, says Enda Kelly, EY Ireland R&D and innovation incentives partner. “The competition is coming from a variety of countries, both within the EU and outside, that are continuously enhancing their R&D incentives and infrastructure.
“To match this, Ireland needs to further strengthen its R&D tax credit regime and grant support. Additionally, public investment in infrastructure will create an enabling environment, lowering business costs and increasing competitiveness.”
Areas such as water, energy and transportation are key, and it has been positive to see significant investment in these areas over recent years; however, this momentum needs to be maintained.
The future of R&D in Ireland has huge potential growth in both the “R” and “D” elements, says Sammon. “The ecosystem of talent with deep sectoral expertise makes it ‘sticky’. The growth of ‘indigenous’ start-ups who are becoming international players is fantastic.
“With ageing populations and chronic diseases prevalent, companies who are developing technologies in diabetes, cardiovascular disease and obesity are important. In addition, the topic of prevention is better than cure, which means that ‘diagnostic’ technologies will also be hugely important to our health and healthcare systems.”
R&D investment is becoming increasingly mobile and therefore Ireland must continue to review and refine our offering, says Kelly.
“Many jurisdictions are introducing and improving their incentive landscape to attract large investments in capital and high-value projects, and we need to ensure we continue to do the same,” he adds.
