Woodford Funds Scandal Hurting Funding For UK Biotech Stars

Woodford Funds Scandal Hurting Funding For UK Biotech Stars

British biotechnology start-ups have been among the most successful in the world in recent years, in large part due to successfully attracting international investment capital to fuel their R&D and commercial growth. However, there are fears investment in the UK’s biotech sector may have peaked in 2018 after financing slumped over 2019. British biotech start-ups raised just £1.3 billion last year. That represented a fall of over 40% from the £2.2 billion of investment capital brought in over 2018.

The drop-off in investor interest in the sector, or at least their willingness to put hard cash on the line, is being attributed to the blows to sentiment resulting from the U.S.-China trade war and the Woodford funds scandal. The UK biotech sector investment data was this week published in a report put together by the Bioindustry Association.

The report tracked three areas of financing – venture capital, IPOs and follow-on financing. All three saw 2019 declines. The value of venture capital invested in biotech start-ups slumped to £679 million from £1.1 billion, IPOs brought in just £64 million, compared to £432 million and the previous year, and follow-up capital injections totalled £596 million. In 2018 follow-up investments added up to £658 million.

However, while total investment figures in UK-based biotechnology start-ups fell, there were still success stories. The biggest round of 2019 was raised by cancer immunotherapies company Achilles Therapeutics. The start-up ran a Series B financing round for £100 million, led by a £35.1 million commitment from London-listed Syncona Capital. Syncona, which is backed by the Wellcome Trust, the research charity that is one of the UK’s biggest investors in biotech, also put up £48 million of Gyroscope Therapeutics’ £50.4 million Series B investment round. Gyroscope is a retinal gene therapy specialist.

On the impact of the forced closure of the Woodford Equity Income fund, which had been a high-profile investor in the UK’s biotechnology sector, but encountered liquidity problems when investors lost patience, the Bioindustry Association’s chief executive Steve Bates commented that it has created a “difficult environment” for the sector last year. Polar Capital partner Dan Manony agreed that the fund’s suspension and subsequent closure had hit sentiment. He added that the struggles of biotech companies on the London Stock Exchange was largely down to Brexit uncertainty hitting investor appetite for smaller companies, especially in risky spaces such as biotech. As such, many new IPOs involving British biotech start-ups are relocating to the USA:

“For most UK-based biotech companies, the path to Nasdaq [the American technology-focused stock market] has become a well- trodden route to IPO and probably the best access to the capital required to scale up”.

Only two British biotechs went public last year, including Bicycle Therapeutics, which raised £47 million through a May IPO and Nasdaq listing.

One positive the report did highlight was that the UK’s biotech financing space is more diverse than it was five years ago, when it was largely reliant on a handful of larger investors, including Neil Woodford. The 2019 investment total in the sector was still, despite the significant drop from 2018’s level, still the third best year since the Bioindustry Association began to track data.

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