Image 1 - Front coverToday we published a new report in partnership with Evaluate and the London Stock Exchange, Money, momentum and maturity: UK biotech financing and deals in 2015/16. In the post below, BIA CEO, Steve Bates takes a look at the key statistics and what they mean for the sector.

The biotech sector has enjoyed a remarkable surge over the past couple of years, evident across the globe. The latest data, compiled by the BIA in partnership with Evaluate and the London Stock Exchange, indicates continued momentum for the UK industry in 2015.

Whilst IPO activity may have cooled off, last year saw an unprecedented rise in follow-on funds raised on the London Stock Exchange. This was particularly evident on AIM, with almost four times the amount raised than the previous year, accounting for over 60% of the total amount raised by biotech companies on the LSE (versus 23% in 2014).

Image 4 - LSE money

Another stand out story for 2015 was the level of VC activity in the sector, with £489m raised in the UK – that’s up a staggering £166m from 2014 – helped by Immunocore’s record-breaking £205m round. The UK continues to extend its lead in Europe, accounting for over a third of total European VC funding.

A marked trend is towards larger financing rounds of fewer but perhaps better positioned businesses, as investors move away from the historical ‘drip-feed’ approach. This will enable quality UK management teams to focus on delivering value with an increased level of maturity. Although the UK and Europe as a whole still lag behind the US and its leading clusters, these are all promising trends as we look to develop the UK as the third global biotech cluster, building on its established lead in Europe.

UK VC activity with count

There are also some advantageous differentiations developing in the UK versus the US. Firstly, London has established itself as a hub for IP commercialisation businesses in recent years, providing the longer-term patient investment and support required by companies to succeed. Secondly, we’re starting to see the nascent crowdfunding sector have an increasing impact on biotech here in the UK, ahead of the US, with AIM-listed Scancell the first company to apply crowdfunding to the public markets. This is a trend to keep a closer eye on in 2016.

At the time of writing we await the result of the EU Referendum in the UK. With other global political events in play for 2016 – such as the US Presidential election – the crystal ball remains foggier than usual in terms of predicting the macro-economic and political environment, both at a national and international level, which undoubtedly has a significant impact on sector financing. That said, the first half of 2016 has seen private fundraising continuing to grab headlines, with the UK’s MISSION Therapeutics recording a £60m Series C in February led by Imperial Innovations and Woodford Patient Capital Trust. The IPO window also remains ajar even in these chillier months with Shield Therapeutics, and most recently Mereo BioPharma, successfully listing on AIM.

However what is clear is that despite signs of continued momentum and maturity in the funding of the sector, from the data for 2015 and our experience so far in 2016, there is no room for complacency. For example, the lack of reported seed capital for UK companies in 2015 raises a potential red flag and underlines the importance of effective support for early-stage companies through fit for purpose innovation policy from the government.

Image 8 - Pipeline

Given the strong R&D pipeline coming through the UK and the impressive rate of regulatory approvals, the sector is in good shape and there is great potential to build on. Ensuring that early-stage companies have access to kick-start innovation funding, such as that offered through the Biomedical Catalyst, is essential to take start-ups to a stage from where they can effectively leverage private capital.

A shared focus from government, industry and investors on how we can sustain start-up momentum, alongside scaling-up UK life science companies into the cohort of mid-tier companies the country needs to feature as a top three global cluster, is what is required in 2016 to build on current momentum – whatever the rest of the year holds.

Download the report here.