UK biotech investment increases amidst progress in City of London to unlock new capital

The second quarter of 2023 has seen steady growth in financing activity for the UK’s life sciences sector, as revealed by new data released by the BioIndustry Association (BIA) and Clarivate. The positive news comes soon after industry figures welcomed recent announcements to unlock new sources of capital in the City of London.

Despite the prevailing global market downturn, UK-headquartered life science and biotech companies secured a total of £382 million in venture and public financing, up 29% from the previous quarter's £295 million. This growth was largely driven by venture capital investment.

Overview of Q2:

  • The sector continues to experience a robust flow of venture capital deals between March and the end of May: 26 totalling £338 million, with an average size of £13 million.
  • There was a healthy spread of investment between early and late-stage private companies, with seed investment notably rebounding after a sluggish start to the year.
  • On IPO, activity has remained stagnant across the globe, with no new market launches for UK or European companies.
  • UK companies raising follow-on financing also faced challenges, securing only £44 million this quarter, but showing signs of improvement compared to the previous quarter’s £37m.

Last month, the UK Chancellor and the Lord Mayor of London launched Mansion House Compact, which is an agreement by pension providers to allocate a minimum 5% to unlisted equities through defined contribution (DC) pension funds, and other sources of long-term savings, by 2030.

The steady and continued growth of capital flow against the difficult macroeconomic backdrop is testament to the UK's renowned research base and expert company management teams, reinforcing Britain’s position as a prime destination for life sciences investment.

Steve Bates OBE, CEO of BIA, said:

"Our sector is demonstrating resilience and growth amid challenging times. It is fantastic to see venture investors continue to back the UK’s life science companies and even raising new capital themselves, like London-based Medicxi’s $400 million fund, showing that there is more money to deploy in the years to come.

“The Chancellor’s and Lord Mayor’s leadership is unlocking further new sources of capital in the UK’s pensions industry and City of London, which will super-charge the growth of innovative UK businesses and deliver financial returns for savers and the economy. It shows that as Nasdaq sleeps, the City of London is waking up to life sciences.”

Mike Ward, Global Head of Life Sciences & Healthcare Thought Leadership, Clarivate, said:

“Globally biotech still remains an attractive sector for investment with the sums raised in the second quarter slightly above the first. At £3.9bn there was a 26% quarter-on-quarter increase in global VC investments driven mainly by 41% and 42% increases in fundraising among US and European biotechs respectively, although there was a dramatic drop in the amounts put to work by VCs in Asia Pacific biotechs. The market for initial public offerings remains lackluster across the globe, while the appetite for follow-on financing grew for US and Asia-Pacific biotechs, European biotechs struggled to take on additional finance.”

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