UK Biotech Financing Sets New Records: Bubbly?VW Staff
LONDON, BOSTON, TOKYO (July 9, 2015) — According to a new report from life science market intelligence firm, Evaluate Ltd and the UK BioIndustry Association (BIA) , over the past 10 years, the UK’s biotech sector has outperformed other European countries, raising an impressive £923.7 million via IPOs and $2.4 billion in venture capital. The rise in optimism has been most evident in 2014 with the momentum continuing into 2015.
2014 was a big turning point for the UK biotech sector. In this year alone, on the public market, nine companies listed, raising a total of £408 million, almost half of the total IPO haul for the past decade.
UK venture capital financing also improved in 2014, jumping 71% from the previous year to $430m, with VC firms doing fewer, bigger rounds at an earlier stage. On the flip side, seed funding of early stage companies by venture capital has fallen dramatically and highlights the need for alternative funding and the return of specialist investors willing to take a more long-term view of the industry.
UK Biotech: A 10 Year Horizon highlights:
- Strong confidence in UK market is reflected in recent IPO activity reaching £408 million in 2014, with a further two IPOs in 2015
- Good stock market performance of new entrants, including 247% share gain by 4D Pharma since its IPO, helping to highlight the benefits of investing in the sector
- Increase in exits (via IPO and trade sales) have created a 10 year record in venture funding: investment in 2014 is up 71% to $430 million (2013: $251 million)
- Fewer larger financing deals took place in 2014, indicating a change in investment style
- Venture capital seed funding declined dramatically to 1 in 2014; although the $20 million raised equaled almost the total of the last four years combined
- UK is holding its own against the US and outperforming Europe in the past five years for venture funding
“The uplift of investment into the UK is fantastic news for the life sciences market, and 2014 in particularly, was an extraordinary year,” said Lisa Urquhart, report author and Editor of EP Vantage, the editorial arm of Evaluate. “However, these recent gains have been hard won. As we enter the second half of 2015, it will be interesting to see if any indicators of the future direction of the UK sector can be spotted. What is obvious, is that if we are to maintain this momentum, we need to see a big jump in seed funding – crucial to grow and retain UK innovation.”
Steve Bates, CEO of the BIA, said: “It is clear that the UK biotech funding ecosystem has learnt lessons from its history and is doing things differently this time around. We are seeing the development of different forms of investment for innovative UK companies. In contrast to the more generalist US investors, the UK’s specialist investors understand the need for patience, restocking funds while capital is plentiful, giving well-backed UK companies more financial runway to succeed.”
UK Biotech: A 10 Year Horizon
There is no disputing the huge wave of optimism sweeping the UK biotech sector. Evidence of this new confidence has been reflected in strong IPO activity, which resulted in the IPO haul reaching £408m in 2014. Equally encouraging is that the momentum has continued into 2015 with two floats so far and bankers reporting companies queuing up to list both here and abroad. A resurgence in venture funding, which made last year the best in a decade, has in turn been triggered by investors finding exits and companies finally returning value to shareholders.
While it might be an outlier, a look at 4D Pharma shows the kind of year-end share price gains usually found with biotech companies across the pond. All this is fuelling the hope that there is not only life in the sector, but that the arrival of bigger, well-funded companies, such as Circassia, could mean that this life is sustainable.
However, in this 10-year look at the industry it is clear that these recent gains have been hard won. There were long and dark times after the 2007 financial crisis when the IPO window remained firmly shut and VC funding all but dried up for anything other than the surest bet. Even before this point the sector had gained notoriety for producing cash-hungry, but success-light companies which rarely returned any value.
As we enter the second half of 2015 it will be interesting to see if any indicators of the future direction of the UK sector can be spied. The more bullish out there will almost certainly point to the current successes being enjoyed by companies, investors and shareholders alike. Bears with longer memories might, however, highlight that the fate of the sector is now dependent on a mere handful of companies, and there could be dire consequences if one of them were to fail.
However, it is clear that what will be needed to sustain the current rude health of the sector is the return of specialist investors willing to take a more long-term view of the industry. It will also help if there is a critical mass of good quality companies to share investor risk and for those companies already on the public markets to keep moving their products through the pipeline. Unless stated, the data are correct as of May 5, 2015.
UK Biotech: IPOs strengthening
Nobody close that window
Nothing has typified the resurrection of the UK biotech sector more than last year’s surge in flotations on the London Stock Exchange, which saw a staggering £408m raised, a figure that made up almost half of the total UK IPO haul of £923.7m since 2005. Four of the top 10 floats over the last 10 years all occurred in 2014. Only 2005, which included Hikma’s debut, has come close to the 2014 total. Nine companies listed in 2014, a stark contrast from the five in the previous three years, which raised a combined £127.1m. There was also the nadir of 2008-2010, when no companies were able to get out of the door amid the continued pain of the financial crisis.
See full PDF below.