The UK’s biotech sector is in fine fettle, having raised a record amount of capital last year, but the Government should do more to support growth and investment to ensure Britain becomes a global hub for the life sciences industry, according to a report.
British biotechnology companies raised a record £489m in venture capital in 2015, up from £323m in 2014 and accounting for more than a third of the European total.
Meanwhile, the amount raised on the London Stock Exchange, through IPOs and other fundraisings, soared to just over £900m as the sector attracted fewer, but larger, rounds of investment, according to the findings from the BioIndustry Association (BIA), London Stock Exchange and Evaluate.
While IPO activity may have cooled off, there was a jump in the level of follow-on funds raised on the stock exchange. This was particularly true for Aim-listed companies, which raised nearly four times the amount generated in 2014.
Pipeline projects in development at UK biotechs far outstripped their European counterparts, too, and included the highest number of key phase three projects on the continent.
“I think here in the UK we have got the right elements to be a global R&D powerhouse,” said Steve Bates, chief executive of the BIA.
“We are the natural home for global companies that want to come to the EU. We have fantastic science. We have got a strong heritage in terms of a pool of talent. It is a combination of people, science and the business environment, supported by the Government and various R&D tax credits.
“Impressive levels of follow-on funding demonstrate that not only can companies raise money, they can continue to build momentum through accessing further funds as they grow.”
However, he added that there was more to do to ensure that Britain becomes a leader in the biotech industry and that there was “no room for complacency”, given the uncertain macroeconomic outlook, China’s economic slowdown and other disruptive events, such as the US presidential election and the possibility that Britain leaves the EU.
As a result, last year’s stellar performance is unlikely to be repeated this year, although Mr Bates said the funding outlook was still “promising”.
“It would be ridiculous not to acknowledge the uncertain global outlook, but there is money coming in,” he said.
Most pressing is the need for seed capital for early-stage companies. A dearth of funding at the fledgling stage of a biotech’s lifecycle is bad new for the industry and last year’s decline in seed capital to £29.4m has alarmed the BIA.
“The fact that there is less funding this year raises the red flag for us. We think it perhaps highlights the need for effective support for early stage companies from the Government,” said Mr Bates.
Existing policies, such as R&D tax credits, the Enterprise Investment Scheme, the Seed Enterprise Investment Scheme and Patent Box were effective ways to support the industry, but don’t go far enough, the report said.
It singled out entrepreneur’s relief as one area that “currently does not work for life sciences businesses” because repeated fundraisings mean that, in the vast majority of cases, the founders will never hold the 5pc share threshold required to be eligible for the relief.
“This results in a perverse incentive against scale and growth and creates a barrier for entrepreneurs,” the report pointed out.
Mr Bates said he was worried that the Biomedical catalyst scheme, in which the Government matches funding for very early stage companies, might come to an end. The funds for the scheme are distributed through Innovate UK, which itself is undergoing a budgetary review.
Since Biomedical launched in 2012 it has led to £100m of private funding, alongside Government grants. This, in turn, has generated a further £1bn in later fundraising rounds.
“It is a time-limited scheme and needs to be re-committed to,” Mr Bates said. “It has been a success and meant that early-stage companies, who would not have access to commercial funding, have been able to access funding.
“It is a vital seed corn that produces next year’s harvest and it is vital it is continued. We are pulling ahead in Europe and are the largest biotech cluster, after California and Boston. We have emerged from the EU pack and look ambitiously to becoming as big as our US peers.”
By Julia Bradshaw
Source: The Telegraph
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