Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you understand how spread bets, CFDs, OTC options or any of our other products work and whether you can afford to take the high risk of losing your money.

69% of retail investor accounts lose money when spread betting and/or trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

  • News
  • biotechnology

Is Now a Good Time to Invest into UK Biotech?

The UK has a long history of training top scientists and driving medical breakthroughs, but the country is falling behind on biotech investment and clinical trials. A new support package from the government could give the industry a much-needed shot in the arm.

  • The UK biotech industry saw just four IPOs in 2022, raising $28m, versus 12 in the US, raising $1.25bn.
  • UK biotechs should be boosted by a £650m government support package designed to drive growth and innovation.
  • How to invest in biotech: The VanEck Biotech ETF is up 10% in the past year.

When it comes to biotechnology, the UK has long struggled to compete with the US. In 2021, the US had a staggering 58.8% share of the global market, according to data from Statista. China was second with 11.3%, but the UK was sixth with just 2.7%.

The global biotechnology industry saw 152 IPOs in 2021, which raised more than $25bn between them. However, this slumped to just 47 IPOs last year, which raised approximately $4bn, according to Reuters. There were only four deals made by the UK’s biotech industry last year — all in the first half — which raised £28m, data from Biotech Finance shows. This was down from £1.25bn raised by 12 deals in 2021.

Life sciences tools provider Aptamer Group [APTA.L] went public in December 2021, raising £10.8m, while clinical-stage cell therapy company TC BioPharm [TCBP] launched on the Nasdaq in February last year, raising £13m. ProBiotix Health [PBX.AQ], which is exploring the use of probiotics to address cardiovascular disease, launched on the Aquis Stock Exchange the following month and raised £2.5m.

The dearth of biotechnology IPOs in the UK extended into the first half of 2023, which saw no offerings whatsoever.

The UK’s Industry is Under Pressure

The UK biotechnology industry’s struggles are probably best illustrated by what’s going on at Aptamer. Despite interest in Aptamer’s technology, reaching and securing licensing agreements has taken longer than expected. As a result, the York-based firm announced in July that it will be cutting jobs, in an effort to reduce EBITDA and cash burn and break even within two years. It has to slash £2.9m from its £6.4m overheads, according to a regulatory filing.

Aptamer signed two contracts with an existing pharmaceutical partner last month, valued at £219,000. The group’s interim CEO Rob Quinn said in a statement that he hoped the deals can build “awareness and adoption of Optimer technology” and help the company to secure more licensing agreements in the future.

Meanwhile, biotech-focused venture capital firm Arix Bioscience [ARIX.L] has been pushed to consider winding down. “Volatile market conditions and depressed biotech valuations have resulted in fewer new investments this year with an increased focus on cash conservation,” noted the company in a regulatory release from July.

Arix has confidence in its ability to deliver "attractive" returns in the long term, but for now, all options are on the table, including the firm being wound down.

UK Government Unveils Funding to Drive Growth

Back on 25 May, the UK Life Sciences Council, a biannual meeting between ministers and leaders from the global life sciences industry, led by Chancellor of the Exchequer Jeremy Hunt, met to discuss biotechnology’s potential contribution to the future UK economy.

The meeting covered Lord James O’Shaughnessy’s independent review of clinical trials and Dame Angela McLean’s review of the life sciences regulatory system.

O’Shaughnessy pointed out in his review that the UK boasts world-class universities and research facilities, but despite “a magnificent track record” in therapeutic trials and developing Covid-19 vaccine candidates, the UK has been “falling behind in its commercial clinical trials activity”. The report called for clinical trials to be sped up and more funding allotted.

Hunt unveiled a support package at the meeting, dubbed ‘Life Sci for Growth’, which has pledged £650m to the UK’s industry. This includes £48m for scientific innovation to better prepare the country for future health emergencies, and £154m to increase the capacity of the UK’s geological data bank to aid future scientific discoveries.

Rejoining Horizon Europe is Another Shot in the Arm

The UK’s biotechs should be further boosted by the government’s decision to rejoin the EU Horizon Europe science programme, which should give UK biotechs the opportunity to lead global research to develop new cures.

“The UK’s participation in Horizon Europe unlocks access to the €95.5bn programme, giving a much-needed boost to UK innovators and adding further credibility to the government’s ambition for the UK to be a science and innovation superpower,” commented Dr Benjamin Reid, Programme Director for Innovation at the Confederation of British Industry.

UK Biotech IPO Activity is Being Held Back

While the government support should drive innovation and growth, London will need to capitalise on this opportunity to encourage more UK biotechs to choose the capital for a listing, rather than opt for the Nasdaq or the New York Stock Exchange, which are generally more liquid than the London Stock Exchange.

The UK Financial Conduct Authority proposed changes to listing rules to persuade more companies to list in London in May this year.

According to the Biotech Finance report, the UK made up more than one third of total venture capital raised by European companies, and more than half of deals on the continent. Nevertheless the average UK deal size at £12.4m was eclipsed by the European average of £18.9m, not to mention the US average of £49m.

How to Invest in Biotechnology

ETFs, or exchange-traded funds, offer an economical and diversified way to invest in a variety of stocks within a particular theme.

Funds in Focus: the VanEck Biotech ETF

Funds generally offer little to no exposure to UK biotechs, but here are three ETFs focused on the theme.

The Global X Genomics & Biotechnology ETF [GNOM] has allocated 81.7% of its portfolio to biotechnology and 10.4% to medical specialities. Major pharmaceuticals account for just 0.6% of the portfolio as of 31 August. The fund is down 20.3% in the past year and down 9.7% in the past six months.

The WisdomTree BioRevolution Fund [WDNA] has allocated 80.75% of its portfolio to the healthcare sector and 11.1% to materials. Consumer staples and energy have weightings of 4.3% and 3.8% respectively, as of 13 September. The fund is down 11.6% in the past year and down 4.7% in the past six months.

The VanEck Biotech ETF [BBH] is a pure-play on the healthcare sector. The fund is up 10.2% in the past year and up 2.3% in the past six months.

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

Continue reading for FREE

Latest articles