British biotechs raised £182 million ($240 million) in venture funding during the first quarter of 2019. The figure is up 35% from this time last year, showing VCs are continuing to invest in U.K. biotechs despite political uncertainty.
In its latest biotech financing update, trade group BIA presented data showing Medicixi’s £36 million commitment to Sosei Heptares’ spinouts Inexia and Orexia led the way as the U.K. made a fairly fast start to 2019. That resulted in biotechs raising £182 million across December, January and February, significantly more than they managed over the same period of the previous year.
The funding came from a broader pool of biotechs, too. Last year, Orchard Therapeutics’ £85 million series B round accounted for close to two-thirds of all the VC funds raised in the first quarter. This year, most of the £182 million was split between seven rounds of £10 million to £36 million.
While the figures compare favorably to the preceding year, there are reasons to doubt whether 2019 will outperform 2018 overall. VC funding accelerated quickly in the second and third quarters of last year as Orchard and Freeline therapeutics raised £200 million between them. To improve on the £1.1 billion raised last year, the U.K. will need other biotechs to pull in similarly significant rounds.
The presence of British biotechs at the leading edge of hot fields such as gene therapy means there is scope for triple-figure rounds later in the year, but there remain concerns that over the longer term Brexit will make the U.K. a less attractive location for research and investment. Government officials have sought to head off some of these threats but have failed to quell concerns.
In some cases, the industry thinks the government’s mitigation measures may cause problems. Lord Warner, an advocate for biotech in the House of Lords, highlighted this risk in a recent debate, claiming government proposals “create a great deal of additional red tape and running costs [that] ... have already taken funding and resources away from research and development.”
The first quarter shows such concerns have yet to translate into a dip in VC funding and may never do so. The need to avoid Brexit-related headwinds are illustrated by other aspects of the BIA report.
In 2015, BIA outlined a 10-year strategy to turn the U.K. into a biotech hub to rival Massachusetts and the San Francisco Bay Area. The strategy identified financing as the area in which the U.K. lagged far behind. Four years later, that is still the case.
While the U.K. raises sizable sums by European standards, it is yet to get close to the hubs across the Atlantic. In the first quarter of 2019, biotechs in the Bay Area raised £1.5 billion, eight times as much as their peers in the U.K. and almost twice as much as all of Europe. Biotechs in Massachusetts raised more than all of Europe, too.
The ongoing gap between the regions is partly the product of a boom in funding across the Atlantic, which means the U.K. is far behind despite hitting its goal of £1 billion in annual venture financing. The IPO gap is bigger still. In the first quarter of 2019, no British biotech went public. The same thing happened in the first quarter of last year. When biotechs do go public, they largely choose Nasdaq over London.