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UK BIOTECH BOOM: 65% growth in UK biotechnology research and development companies since 2016 as sector attracts record investment

UK BIOTECH BOOM: 65% growth in UK biotechnology research and development companies since 2016 as sector attracts record investment

  • Biotech business population has flourished in the past three years as annual investment reached £2.2bn in 2018
  • Three new companies incorporated every working day during the first two months of 2019
  • 40% increase in the number of public listed companies (PLCs) with biotechnological research and development (R&D) as a registered activity since Q1 2016
  • London, Cambridge and Oxford cement position as ‘Golden Triangle’ of biotech, accounting for over a third (34%) of registered UK biotechnology firms, up from 27% in just over three years

The number of active UK biotechnology businesses in the field of research and experimental development has soared by 65% in just over three years as the sector attracts record levels of funding, according to new analysis by investment manager Downing LLP.

Analysis of official data from the Companies House register indicates that 3,456 active companies are currently involved in biotechnology research and development (R&D) activities. This represents a 65% increase from Q1 2016, when 2,095 active companies were classed as engaging in biotech R&D.

Downing’s analysis suggests almost two fifths (44%) of active biotechnology businesses have been incorporated in the three years since January 2016. This includes 127 in the first two months of 2019: equivalent to three every working day during January and February.

Industry spurred on by record investment

The findings follow record investment in the UK biotech sector during 2018, with figures from the UK BioIndustry Association (BIA) and Informa Pharma Intelligence revealing the sector raised an unprecedented £2.2bn from investors in 2018: up 85% from 2017. Venture capital has contributed 51% of UK biotech funding from 2016-2018, increasing by 63% from £681m in 2016 to £1.1bn in 2018.

While investment to date has largely come from institutional venture and private equity funds, innovative providers are beginning to create products designed for a retail audience. The Downing FOUR VCT Healthcare Share Class, for example, offers investors exposure to the specialist healthcare and biotech sectors – including drug discovery, medical devices, diagnostics technologies and e-health technology - while providing access to venture capital trust (VCT) tax reliefs1.

While private limited companies make up the majority of active businesses in the sector – 96% in Q1 2019, up from 95% in Q1 2016 – Downing’s analysis also shows the number of public limited companies (PLCs) has increased by 40% from 30 to 42 as biotech firms experience continued growth and success. The BIA figures indicate that IPOs contributed 15% of funds raised by UK biotech companies from 2016-2017, increasing to 20% in 2018.

‘Golden Triangle’ grows in strength

Downing’s research highlights that London, Oxford and Cambridge have strengthened their position as the UK’s ‘Golden Triangle’ of biotech in just over three years, now accounting for over a third (34%) of UK biotech companies. This compares to 27% at the start of 2016.

Leading this trio, London has reinforced its status as the home of UK biotechnology and now plays host to nearly one in four (24%) registered businesses, compared to fewer than one in five (18%) in Q1 2016. The number of biotech R&D businesses based in the capital has increased by 120% over the last three years.

Cambridge ranks second with 7.5% of biotech businesses located here in Q1 2019, followed by Oxford with 2.3% – surpassing Manchester and Nottingham since Q1 2016 to place third in the regional rankings. Oxford’s biotech business population has increased by 95% in just over three years.

Outside of the Golden Triangle, Nottingham and Manchester continue to make up the top five UK locations for biotech R&D activities, each accounting for 2% of active businesses in Q1 2019.

Comparing business population growth since January 2016, within the top ten UK locations for biotech R&D, Nottingham (71%) and Bristol (83%) have both outperformed the industry trend (65%) as the sector has rapidly expanded through new investment and innovation.

Table 1: Top ten UK locations for active biotechnology R&D businesses, Q1 2019

Table for Downing release

1The Downing FOUR Healthcare Share Class focuses on development and expansion funding for innovative healthcare and biomedical businesses occupying the intersection between healthcare and technology. Target sectors include drug discovery, medical devices, diagnostic technologies and e-health technology, identifying opportunities that can deliver a significant return within a five-year VCT investing cycle.

Existing investments in the portfolio include Destiny Pharma, an innovative biotech company developing treatments for antibiotic-resistant bacteria; Arecor, a leading developer of biopharmaceuticals in the field of diabetes care; and Open Bionics, producer of the world’s first medically approved 3D printed bionic arm.


Will Brooks, Investment Director, Downing said, “Britain’s biotech sector is going through unprecedented growth, with substantial investment supporting a myriad of start-ups tackling some of the world’s most pressing healthcare challenges. For investors, the sector presents the dual benefits of attractive potential returns alongside achieving a social purpose.”

Jeremy Curnock Cook, Managing Director, BioScience Managers said, “Healthcare investing is all about timing – using deep expertise to identify promising companies that can deliver within the desired investment window.

“While some industries are voicing concerns about the post-Brexit outlook, we’re excited by the opportunity for the UK to become a truly international hub for the healthcare sector with an attractive funding environment for companies from all over the world.”
 

Issued for and on behalf of Downing by Instinctif Partners.
For more information please contact: Downing@instinctif.com


Research methodology

Findings are based on the analysis of active companies registered at Companies House on 1 January 2016 and 1 March 2019 with ‘research and experimental development in biotechnology’ listed as a business activity.

VCT tax treatment

VCTs offer investors access to income tax relief at 30% when shares are held for at least five years, tax free dividends over the course of the investment, and capital gains tax exemption on any gains arising on the disposal of the shares.

Please note that this is a very brief summary of the current UK tax reliefs on VCTs. Tax reliefs are subject to the companies maintaining their qualifying status and vary according to personal circumstances and may change.

About Downing LLP

Downing LLP is an FCA authorised and regulated investment manager with over 30 years of experience and has raised funds from 35,000 investors. It currently has over £1 billion funds under management. The healthcare activities of the Downing venture funds are led by Will Brooks, investment director, who has over 30 years’ experience in healthcare and biotechnology with over 18 years’ experience in venture capital across Europe and the US.

About BioScience Managers

BioScience Managers is an international healthcare investment firm that finances and enables innovative science and technology with the potential to transform healthcare. Investments are made in both private and public companies, where its vision and strategic support enables it to deliver impressive investment returns. BioScience Managers operates from offices in Australia and the UK and from bases that span three regions - Europe, North America and the Asia Pacific, from where it sources investment opportunities. It is part of the PhillipCapital Group, which has more than US $28 billion under management and whose network of offices in 16 countries around the world provides access to valuable local knowledge and business contacts.

Current funds include:

  • Asia Pacific Healthcare Fund II
  • BioScience Managers Ventures I
  • BioScience Managers Translation Fund I

Find out more online at biosciencemanagers.com.

Important notice

This article is for information purposes, should not be regarded as investment or taxation advice and no reliance should be placed upon it. Any personal opinions expressed are subject to change and should not be interpreted as investment advice or a recommendation.

Capital at risk. Share prices, their values and income can go down as well as up and Investors may get back less than their original investment. Qualifying investments are long term in nature and are in smaller businesses which have higher risk profiles than larger ‘blue chip’ companies. Tax reliefs depend on the companies invested in maintaining their qualifying status and vary according to the individual's circumstances and may change in the future. Downing LLP is authorised and regulated by the Financial Conduct Authority (Firm Reference Number 545025). Registered in England No. OC341575. Registered Office: St Magnus House, 3 Lower Thames Street, London EC3R 6HD.

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