Investors remain bullish on UK biotech despite market downturn
Last week, the BIA and Clarivate launched the Q2 financing report for the UK biotech sector, which showed positive growth on all fronts. In this blog, Gwen Nguyen, BIA's Data Analyst, breaks down the facts of the report.
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 Clarivate and the BioIndustry Association (BIA). Despite the prevailing market downturn, the UK biotech sector has secured a total of £382 million in venture and public financing, a notable increase from the previous quarter's £295 million. This growth was largely driven by venture capital investment, with investors favouring early-stage companies.
Amidst the challenging global macro-economic headwinds, subdued public markets, and political uncertainties that have impacted investor confidence, the sector continues to experience a robust flow of deals, totalling £338 million across 26 deals, with an average deal size of £13 million. There was a healthy spread of investment between early and late-stage companies, with most of the investment focusing on early-stage opportunities. Seed investment has notably rebounded after a sluggish start.
On the IPO front, activity has remained stagnant in the UK and Europe for the past year, with no new market launches. Follow-on financing also faced challenges, raising only £44 million this quarter, but showing signs of improvement compared to the previous quarter’s £37 million. The figures could improve as there is typically an upward trend toward the second half of the year.
Despite the challenges, the UK continues to maintain its position as the European leader in all financing fronts, including venture and public financing. The steady and continued growth of capital flow is a testament to the UK's renowned research base and strong industry, reinforcing its position as a prime destination for investment.
This quarter the life sciences ecosystem has seen several initiatives aimed at incentivising business creation and supporting entrepreneurs. Higher R&D tax relief and increased grants for researchers and institutions are expected to boost innovation. The UK Research and Innovation (UKRI) funding of £250 million presents new opportunities for engineering biology, AI and quantum technologies, expanding these emerging markets. The additional £50 million of government support for early career researchers funded medical research charities is also welcome as it supports the growth of the scientific workforce.
The acquisition of SVB UK by HSBC, is a significant success that will provide robust support to the life sciences industry, ensuring enhanced access for biopharmaceutical startups to international markets and global networks of investors. Additionally, the Mansion house reforms are anticipated to have a profound impact on industry growth in the coming year, unlocking pension fund assets and increasing access to capital, thereby stimulating the flow of deals and funding opportunities in the life sciences and biotech sector.
Steve Bates OBE, CEO of BIA, said, " Steve Bates OBE, CEO of BIA, expressed, "Our sector demonstrated stability and resilience amid challenging times, with the continuous flow of deals in venture capital. Our continued European leadership and the positive impact of policy initiatives provide a solid foundation for growth and innovation in the coming year. The BIA remains dedicated to advocating for the life sciences sector and driving progress through our policy efforts."
"The recent $400 million biotech fund raised by Medicxi is a clear indication that despite the market downturn, investors remain optimistic about the UK biotech sector. We are pleased to see the return of investor appetite in our high-quality science and innovative ecosystem. It reassures us that the UK biotech industry will continue to attract capital in the coming years.”
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