The U.K. has been closing the gap on the leading life sciences sectors in Boston and the San Francisco Bay area, but uncertainty caused by Brexit could undermine those efforts, said the national industry body.
A report published today by the BioIndustry Association (BIA) said that the biggest threat to the sector is access to funding, which it says was "robust" in 2016 but may not be self-sustaining. That issue needs to be addressed if current momentum is maintained, said BIA CEO Steve Bates.
The U.K.'s strengthening position came despite "a challenging year of financial uncertainty with Brexit and the U.S. election leading to markets cooling across the globe in 2016," according to Bates, who says this means U.K. firms are "having to work harder than ever to secure the funding that they need."
Right now, the U.K. is ahead of other European countries such as Germany, France and Switzerland, which is reflected in the number of financing and partnering deals being made by British companies, which captured around a third of all the venture capital financing in Europe in 2016.
It also boasts the biggest pipeline in Europe, with more drugs in clinical trials or registration than any other country. Looking at the number of projects in development, the U.K. has 14 in phase 3—tied with France but with a strong earlier-stage pipeline—and ahead of Italy with 13 and Germany with nine.
That strength is paying off in fundraising terms. All told, U.K. companies raised £1.13 billion ($1.46 billion) last year, including £680 million in VC in 2016, putting the national sector behind the U.S. biotech clusters but ahead of San Diego and well ahead of all other European countries. However, the threat of losing investment from the European Investment Bank and its European Investment Fund as a result of Brexit "could undermine this strong position in the coming years," said the BIA.
IPOs last year were down at £105 million compared to a record £307 million in 2015, which is attributed to the general cooling around the world but also Brexit-related uncertainty, with questions raised about U.K. firms' access to talent as well as regulatory uncertainty as the U.K. leaves the European Medicines Agency framework.
Five out of seven IPOs for U.K. companies happened before the referendum on the U.K.'s membership of the EU in June, with just two—by Motif Bio and Oxford Biodynamics—occurring in the latter half of the year. The U.K. slipped behind Switzerland in IPO values.
On the plus side, the mix of deals also shows that the U.K. industry is maturing fast, with a lot more product partnerships being signed even as the proportion of earlier-stage, technology-based deals are decreasing.
"Companies are owning their technology for longer which means that they are able to scale up," said the report, which also said the industry is "knitting together" better with more deals being done between U.K. firms.
Interestingly, with Switzerland also doing well on raising VC cash in 2016, the BIA report says that after Brexit more than half of all European VC money will be going to non-EU member states. At the moment, the U.K. and Switzerland account for 55% of the total.
"There's no lack of ambition in our sector and we are ready to work with the government to address the funding challenges we have identified as holding us back," said Bates. "We need to achieve a sea change in the quantum of capital available to bioscience companies."