British biotech IPOs in 2022 dropped to their lowest levels in a decade, with the amount the sector raised also plummeting year over year. However, some hope may be on the horizon in the form of billions of pounds in fresh VC funds.
The U.K. was far from immune from the trends spurred by the global biotech bear market, according to a report by the U.K. BioIndustry Association (BIA) and insights company Clarivate. Low appetite from investors meant biotech IPOs only brought in a combined total of 28 million pounds sterling ($35 million), the lowest haul since 2012.
The four companies that did go public all made their move in the first half of the year. The only two to make it into double-digit millions of pounds were Scottish immunotherapy-focused TC Biopharm, which raised $13 million when it listed on the Nasdaq, and life sciences tools company Aptamer Group, which secured almost $11 million when it launched on London’s Alternative Investment Market.
The poor performance of IPOs meant they barely contributed to the greater fundraising haul in the U.K. With all public funding totaled, the biotech sector only brought in 1.8 billion pounds ($2.2 billion) in 2022, a huge drop on the 4.5 billion pounds ($5.6 billion) raised in 2021. However, Clarivate’s Mike Ward pointed out in the report that 2021 and the $2.8 billion brought in during 2020 were record-breaking exceptions.
“We expected a fall in investment following two bumper years, but it should still be considered a warning,” BIA CEO Steve Bates said in a statement. “What cannot be overstressed in this pivotal year is the central importance of R&D tax credits in leveraging the private investment that drives the U.K. life science ecosystem.”
A decision by the cash-strapped U.K. government to halve R&D tax relief for small and medium-sized businesses has left “the sword of Damocles hanging over the U.K.’s start-ups and scale-ups,” Bates added. “In a year when global markets are closed to biotech, it is vital that the U.K. does everything possible to attract investors and support its innovative companies.”
The sad state of affairs for the U.K. sector also produced some rich pickings for Big Pharma. The report cited Pfizer’s $525 million acquisition of respiratory syncytial virus-focused ReViral, Gilead’s $405 million takeover of autoimmune biotech MiroBio and AbbVie’s $225 million move on antibody-focused DJS Antibodies as proof that “acquisition of U.K. innovation by U.S. companies increased.”
If there were cause for optimism among the funding downturn, it’s that last year saw a number of new VC funds created that have a mandate to invest in U.K. biotech. It means there is a potential 3.7 billion pounds up for grabs if the sector can tempt investors, according to the report.
U.K. biotechs were not alone in seeing a slump in activity last year. PwC described 2022 as a “challenging year” year, with pharma and life sciences M&A collapsing by 41% year over year to $158.5 billion. Still, the firm expects M&A in 2023 to “more closely resemble prior years with a total deal value in the $225 billion to $275 billion range across all subsectors.”