The UK has a world leading life sciences sector which is underpinned by an array of second-to-none research, world leading universities and a nurturing environment for funding and growing start-ups.
Yet, although the UK is evidently committed to biotech companies in the early stages of their life cycle – as has been shown in a report by the UK BioIndustry Association (BIA Report) – it has historically not been as successful as many would like in developing late-stage biotech companies. It is well-understood that the US equity markets are the destination of choice for biotech companies seeking to raise significant finance in order to grow and scale quickly. This was exemplified a few years ago when UK biotech companies were rushing to raise money on Nasdaq’s booming biotech market (whether by direct listing or by way of a reverse (“fallen angel”) merger) and take advantage of the wealth of eager and suitable investors. For example, in 2015, Adaptimmune Therapeutics and Summit Therapeutics listed on Nasdaq and raised approximately $230m between them.
Moreover, Nasdaq offers UK biotech companies not only the opportunity to raise finance on an IPO, but the opportunity to return to the market for follow-on investment – for example, GW Pharmaceuticals has returned to Nasdaq four times and raised over £400m in follow-on funding since it listed on Nasdaq in 2013.
Despite the lure of the US, the LSE’s junior market – AIM – has demonstrated in recent years that it can be an important platform for initial and follow-on financing. According to the BIA Report, six UK biotech companies raised a combined £99m by listing on AIM in 2016 and raised £862m in further issues, which, as the report states, is evidence of the UK market endeavouring to close the gap on Boston and San Francisco’s pre-eminence.
So far, however, 2017 has been a quiet year for the LSE which reflects the (almost cyclical) cooling of the global biotech market more generally: when Destiny Pharma listed on AIM in September 2017 raising £15m it became only the second life sciences company to list on the LSE this year. Investor confidence in the UK has undoubtedly been hampered further by uncertainty created by geo-political instability and Brexit. It therefore seems that, despite the UK capital markets showing promising signs, the trend of UK biotech companies looking to the US in pursuit of major financings will continue for the time being at least.
Bristows is currently advising NuCana, an Edinburgh-based company, on the UK aspects of its listing on Nasdaq through which it plans to raise $115m in order to fund late-phase trials of enhanced chemotherapies for resistant tumour.