U.K. biotech investment got off to a “slow start” this year, with the amount raised in the first quarter dropping 39%, according to the latest report from an industry body.
For anyone eager to spot green shoots of recovery, the report from the U.K. BioIndustry Association and insights company Clarivate doesn’t make for easy reading. Only 295 million pounds sterling ($367 million) were raised by innovative life sciences and biotech companies in the three months ending on Feb. 28, compared with 485 million pounds ($604 million) for the same period of 2022, the report said.
Of the quarter’s figures, only 37 million pounds ($46 million) was raised by public companies, with the remaining 258 million pounds ($321 million) sourced from venture capital across 20 deals. No U.K.-based biotech companies launched an IPO during the three-month period, the report’s authors noted.
For context, that VC money was only slightly over half the amount raised in the year-ago period and well below the 336 million pounds ($418 million) for the same period of 2021. However, it still overshot the 124 million pounds ($154 million) and 182 million pounds ($228 million) raised in the first quarters of 2020 and 2019, respectively.
“With valuations down, private biotechs are being forced to work harder for their capital and investors continue to support their existing portfolio rather than invest in earlier-stage companies,” the report’s authors said.
Respiratory tract infection-focused Pulmocide led the charge, raising 42.9 million pounds ($52 million) in a series C extension round to prepare for the potential commercialization of its invasive pulmonary aspergillosis therapy opelconazole. It was followed by Grey Wolf Therapeutics, which brought in 39.5 million pounds ($49 million) in an oversubscribed series B round in January.
Looking ahead, the picture doesn’t look much brighter. “With only 16% of the 2022 total raised by the end of February 2023, the sector is facing another year of low investor confidence as macro-economic factors continue to weigh heavily on global markets,” the authors wrote.
If there’s any consolation, it’s that the U.K. wasn’t alone in the lackluster start to the year. Europe saw its first-quarter total drop from 1.4 billion pounds ($1.7 billion) in 2022 to just 624 million pounds ($777 million) his year, of which the U.K. remained the largest contributor. The U.S. also saw a noticeable dip of 42%, while Asia saw “less steep declines” with China in particular bringing in 81% of its first quarter 2023 figures, according to the report’s data.
The tough VC climate in the U.K. is bad news for observers who had been pinning their hopes on private investors saving a biotech sector that had seen an IPO drought in the second half of last year. Looking for reasons for optimism in a previous report in January, the BIA and Clarivate pointed to a number of new VC funds created that have the mandate to invest in U.K. biotech. It means there is a potential 3.7 billion pounds ($4.6 billion) up for grabs if the sector can tempt investors, the authors said at the time.