Cambridge helped the UK retain top spot in Europe for equity financings in 2023 despite a challenging macro-economic backdrop, with a number of VC funds in the city earning plaudits in the latest report from the BioIndustry Association.

The BIA report also lauds deals involving such Cambridge stars as AstraZeneca and Bicycle Therapeutics in a round-up that also highlights how far internationally the UK and Europe lag the US for VC funding.

The BIA reports that VC investment in biotechnology experienced a dip in deal-making across the globe: The UK received 8 per cent of all venture capital investment in the global biotech industry. European countries collectively accounted for 19 per cent while the US led with 70 per cent and Asia constituted 10 per cent.

UK biotechs secured £1.8 billion in equity financings in 2023, down only nine per cent from 2022 despite depressed markets worldwide. Of this figure, £1.25bn was raised in VC – just a 6 per cent fall year-on-year, against a backdrop of 43 per cent reduction for all UK VC investment.

The UK retains top spot in Europe, receiving 41 per cent of total VC invested into biotechs across the region.

The BIA says that the UK leads Europe with the highest number of companies conducting clinical trials, and major licensing and M & A deals demonstrate the ongoing quality and attractiveness of UK science.

Companies on the public markets struggled from low investor appetite for the second year in a row as UK biotechs saw a follow-on fundraising decrease of 16 per cent, with only £551 million raised. There were also no new public launches.

UK biotech VC funding experienced a slow start to the year, with only £491 million raised in the first half of 2023, marking one of the lowest figures on record. However, the sector swiftly rebounded, achieving a record £486m in Q3 alone, the highest since 2021.

The largest venture deal of the year was secured by Cambridge-based Apollo Therapeutics in a Series C round of venture financing that concluded in December.

Seed deals made up 41 per cent of the total raised in venture investments. The mean seed deal size rose to £6.7m from £4.3m the previous year, reaching a record mean deal size in BIA records.

UK biotechs also attracted considerable international investment this year as foreign investor participation was at 40 per cent across all venture deals.

Cambridge funds Meltwind Advisory and o2h Ventures along with Sofinnova Partners were the most active investors in UK biotechs by the number of deals they participated in. Cambridge Innovation Capital was also prominent. CIC also figured among the top VC investors by deal series with o2h Ventures, Martlet Capital and Meltwind prominent for seed deals.

The BIA reports that over the past five years, foreign investor participation in UK biotech deals has steadily increased, reaching 40 per cent of the total. North America consistently holds the highest position among foreign investors.

Studding the UK performance into a global perspective, the BIA report finds that worldwide VC financing activity totalled £16.6bn – a 23 per cent fall compared to 2022.

In terms of public markets, the absence of IPOs in 2023 marks the worst year on record due to the global loss of investor appetite driven by macro-economic factors including interest rates and the wars in Ukraine and Gaza.

Follow-on financing provided a prime example: Subdued activity in the first half of the year contributed to this decline, making it the worst period on record.

Although the public market revived in the second half, it was insufficient to lift the total for the year, which still dipped below the average value. Bicycle Therapeutics, the Cambridge headquartered company quoted on NASDAQ in the US emerged as the top performer in follow-on offerings among UK companies, raising £178.6m.

Kevin Lee, Bicycle’s CEO said: “While 2023 was a tough year for biotech from a financial and fundraising perspective, we at Bicycle Therapeutics were fortunate to raise $230m in an oversubscribed follow-on financing to fund our pivotal study for our lead therapy in advanced bladder cancer and bring in over $90m through partnerships with Bayer and Novartis.”

Cambridge was also on the map with Sherlock Biosciences’ strategic acquisition of Sense Biodetection’s Veros. The BIA says that this will allow Sherlock to leverage its CRISPR and AI expertise to create a new generation of highly accurate, user-friendly diagnostic tools for diverse diseases.

Among the most notable licensing agreements was Quell Therapeutics’ collaboration with AstraZeneca – a landmark agreement valued at over £1.6 billion, according to the BIA. This partnership leverages Quell’s expertise in engineered T-regulatory cell therapies to tackle unmet needs in autoimmune diseases like Type 1 diabetes and inflammatory bowel disease.

Another highlight was Bicycle Therapeutics’ collaborations with Novartis and Bayer, each worth £1.4bn. Both deals capitalise on Bicycle’s innovative bicyclic peptide technology to unlock new breakthroughs for targeted radiopharmaceutical cancer treatments, the BIA reports. Cambridge duo Astex Pharmaceuticals and F-star Therapeutics also receive special mentions here.