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With $700 million Q3 rise, U.K. biotech spearheads European recovery

The U.K.’s biotechnology landscape has witnessed an impressive surge in funding, clocking a robust £563 million ($700 million) in venture capital and public financings in the third quarter of 2023, according to Biotech Finance. This achievement marks a staggering 48% increase from the previous quarter and sets a formidable pace that is already on track to surpass the U.K.’s biotech financing numbers from last year.

Figures for 2022 show a total of £1,785 million ($2,220 million), while £1,240 million ($1,540 million) has already been raised in 2023. The last quarter marks the best results since the record-breaking year of 2021.

Steady growth amid global economic uncertainties

Despite the prevailing global economic challenges, the U.K.’s biotech sector has showcased unwavering growth, maintaining a consistent quarter-on-quarter upswing. Notably, public market launches remained challenging. However, biotech firms rallied with a remarkable comeback in follow-on fundraisings, amassing £315 million ($391.47 million) after a sluggish first half of the year.

Globally, the biotech sector has experienced a steady upsurge in capital, securing a total of £10.9 billion ($13.55 billion) worldwide in Q3 2023, according to Biotech Finance, marking a 24% increase since the year’s onset. While the U.S. maintains its position as the major funding hub, European and Asian countries have witnessed remarkable recoveries, doubling and rebounding strongly, respectively.

Insights into U.K. biotech ventures

Venture capital played a pivotal role in U.K. biotech financing, as U.K. biotechs raised £249 million ($309.45 million), though this marked a slight dip from the last quarter. Notably, early-stage companies garnered significant support, reflecting investor confidence in fostering growth, even though later-stage investments remained relatively subdued.

The landscape was punctuated by groundbreaking deals, notably Oxford University spin-out  Beacon Therapeutics securing £96.6 million ($120 million) in seed funding. This substantial increase in average deal sizes signifies a positive trend despite some fluctuations in deal counts.

Oxford’s Beacon Therapeutics was not the only one to raise significant funding: Tenpoint Therapeutics with £53.9 million ($70 million) and Crescendo Biologics with £24.9 million ($32 million) to mention only the most successful this quarter.

The U.K. rose to first place in the European venture capital biotech financing market with Germany and Switzerland just behind with £228 million ($283.35 million) and £70 million ($87 million) raised.

Internationally, the impact of the global economic downturn was felt during the past two years, reflected in a decline in venture capital fundraisings for biotechs across various regions during this period. However, this quarter marks a global recovery. Asian companies rebounded notably after a slump earlier this year, raising the bar to £735 million (£913 million), a 232% increase compared to last quarter.

Public market dynamics in retreat

European companies faced challenges in initial public offerings (IPOs), including U.K. biotechs, as no new market launches were recorded in the past year. Since 2021, the market for IPOs in the U.K. has been low. 2021 marked a £1,304 million ($1,621 million) record in IPOs, 2022 only recorded £29 million ($36 million), and none in 2023. The U.K. is not an isolated case since these numbers are consistent across Europe.

However, a notable recovery led by U.S. companies resulted in an important quarter-on-quarter increase in IPOs. The U.S. IPO market reached £436 million, remaining in first position overall.

IPOs represent a weak point in the European biotech industry, and it seems companies prefer to list in the U.S., where investors are more willing to take risks, hence the significant differences between the two markets.

Follow-on financings at the forefront of U.K.’s successful quarter

The U.K. biotech sector witnessed a surge in follow-on financing activities, marking a substantial rebound from the previous quarter. Bicycle Therapeutics’ £175 million ($200 million) fundraising contributed significantly, signaling renewed investor confidence, and a favorable outlook for the sector.

Other significant follow-on deals such as COMPASS Pathways raising £100 million ($125 million) have allowed the U.K. to place third in Europe in biotech follow-on financings with a total of £315 million ($391.47 million). The Netherlands marked an impressive quarter securing £839 million ($1.04 billion) in follow-on financings.

European biotechs quadrupled their fundraising efforts in follow-on public funding, significantly contributing to the upward trend in global public fundraisings. Europe places second in follow-on financing with £2.049 billion ($2.55 billion). The U.S. remains ahead with a substantial £4.2 billion ($5.2 billion) leading the industry.

As the U.K. biotech sector forges ahead, buoyed by groundbreaking innovations and strengthened investor support, the outlook remains optimistic. This quarter’s performance not only signifies a record-breaking period but also underscores the resilience and potential for continued growth in the U.K.’s biotechnology landscape.