Perspective, R&D, UK Biotech, Venture Capital

Brexit who? Record investment last year fuels big spike in registered UK biotech firms

LONDON — After Britain narrowly signed up to leave the European Union in June 2016, the prognosis for industry was projected to be grim. A new analysis suggests that UK biotech has escaped that noose — and indeed flourished — over the period that the divorce terms were meant to be formulated.

By analyzing data from the Companies House register — a place where information about firms registered in the UK is made publicly available by the government —  London-based investment manager Downing found that 3,456 active companies are currently involved in biotechnology R&D activities, a staggering 65% increase from 2,095 such firms in the first quarter of 2016.

Some 44% of active biotechnology businesses have been incorporated in the three years since January 2016 — including 127 in the first two months of 2019, or roughly three every working day in January and February, the analysis suggested.

The surge has been supported by record investment in UK biotech 2018 — a £2.2 billion injection, up  85% from 2017 (with venture capital contributing to more than half of UK biotech funding: from £681 million in 2016 to £1.1 billion in 2018), Downing said, citing UK BioIndustry Association and Informa Pharma Intelligence data.

Although private firms account for the bulk of UK biotech (96% as of Q1 2019), the number of publicly listed companies are also growing (from 30 in Q1 2016 to 42 in Q1 2019), Downing found.

“So not only are there a lot of new companies being established, the funding is growing across areas as well…from 2017, Series A, Series B and post Series B have all increased quite dramatically, especially at series B and a later stage, which is a sign that the healthcare, health technology and biotechnology market (in the UK) is actually maturing,” said Will Brooks, who directs the healthcare activities for Downing’s venture funds, in an interview with Endpoints News.

“The funding has doubled for Series A, more than doubled for Series B and post Series B…and people see that the maturity of the companies is changing — its no longer being led by a huge number of small companies struggling for capital. I think there seems to be more appetite for continual funding, and also various different exit routes, from M&A to the public market…I think that creates a confidence factor in the financial community.”

Brooks suggested genetics-focused firms, digital health companies and those involved in healthcare-related data mining for screening, drug development, and disease etiology are the ones garnering significant interest. Alongside, the larger pharmaceutical companies are now seeing more value in early stage technologies, which is triggering M&A, he said.

Genetics and big data-focused deals are all the rage across both sides of the Atlantic. Apart from the slate of recent deals betting on gene therapies, AstraZeneca has sharpened its focus on genomics by pouring its R&D resources into a new center in partnership with Cancer Research UK to develop personalized cancer drugs. Fellow British drugmaker GSK $GSK, has tied up with 23andMe to gain access to the latter’s database — to look for disease relevant genes. Regeneron $REGN has carved out its own genetics centre, Amgen $AMGN is delving deeper to identify and validate disease targets with its investment in Oxford Nanopore Technologies and acquisition of deCODE genetics, while Vertex $VRTX has partnered with UK-based Genomics plc on their platform for genetics and machine learning.

With a surge in biotech business and investment comes an uptick in hiring.

Demand for workers within the larger UK life sciences industry jumped by 11% last year, according to data compiled for the Association of Professional Staffing Companies (APSCo). Clinical vacancies rose the highest, with an increase of 37%, while demand for R&D personnel remained relatively flat at 4.6%. Overall, pharmaceutical firms continued to offer the lion’s share of work opportunities, although CRO job openings saw a steep spike of 25.6%.

Syneos Health is now the largest single recruiter for scientific roles in the UK, while IQVIA and GSK are also driving significant demand for talent, with vacancies at these firms increasing by 81% and 14% respectively, according to the analysis.

Ann Swain

“Despite uncertainty surrounding Brexit, the strength of the UK pharma sector has been thriving over the past year, with clinical vacancies showing extremely positive growth. Global testing volumes are rising due to an ageing population, surplus in management of diseases, and increased access to care. This reason, and the fact that the UK is home to three of the top five universities for pre-clinical, clinical and health sciences, explains why there is such a high demand for professionals in this sector,” APSCo chief Ann Swain said in a statement.

But a GlobalData survey published last November indicated dampening enthusiasm for the sector —  a mere 23% of healthcare professionals surveyed across the US, UK, and EU thought that the UK would be an attractive destination for healthcare companies to conduct research and manufacturing following Brexit.

“The Brexit effect has not really funneled through — in terms of funding — for companies on the pureplay financial level. Where it may have an impact is on the ability to access research funding and research grants through the European funding agencies — I think that will have a knock on effect in the future, but it’s not really significant just now,” said Brooks.

All things considered, the future for UK biotech looks bright — barring an unforeseen macro event, he added.

“For now there’s a degree of confidence in the sector, I think people are understanding it better. The biotech market has now been going for 25-30 years, and I think now you’re getting a maturity amongst the investors, that they understand what they’re actually doing. More flexible investment products are coming up as well, making it easier for companies to fund themselves. I think you’ll see an increase in actual funding round sizes and a continual stream of companies moving from seed capital to funding rounds.”

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Research Scientist - Immunology
Recursion Pharmaceuticals Salt Lake City, UT
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Atlas Venture Cambridge, MA

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