The biotech venture financing gap between Europe and the US is growing, with Europe on average receiving five times less per quarter compared to its US counterpart since 2017, says GlobalData. According to the leading data and analytics company, biotechs headquartered in Europe had $56 billion less venturing financing for innovator drugs than the US from 2017 to 2022 (through May 27).

Sharon Cartic, MSc, Associate Director of Business Fundamentals at GlobalData, comments: “Biotechs went public with inflated stocks in 2021, however, 2022 entered a bear market with biotech indices falling and biotech stocks taking a nosedive. Therefore, investors are taking a more selective approach to investments, which could see the gap between Europe and the US expand further.”

The cumulative venture financing raised by European headquartered biotechs for innovative drugs from 2017 to 2022 reached a total of $16 billion compared to the US, which raised $72 billion over the same period. The current bear market continues to impact small- and mid- cap biotechs with stocks plummeting and an additional volatility in public markets being added due to geopolitical tensions from the Ukraine crisis.

European investors are known to be more conservative in investing smaller rounds and in non-revenue-generating companies compared to their US counterparts.

Cartic continues: “This has led to many European biotechs selecting the US-based Nasdaq or New York Stock Exchange (NYSE) to list their companies. For instance, UK-based biotechs, Exscientia and Centessa, both went public in 2021, listing on the US Nasdaq stock exchange. Initial public offerings (IPOs) are significantly larger than on European stock exchanges, allowing for more funding for growth.”

Exscientia raised $225 million and $40 million for the use of artificial intelligence to design patient-based drugs, while Centessa raised $250 million to advance its portfolio of highly validated programs. US biotech EQRx raised significantly larger funding of $500 million and went public in December 2021 with their portfolio of late-stage oncology assets. US-based Neumora Therapeutics also raised $500 million with Phase II and Phase I drugs in neuroscience.

Cartic concludes: “The fall in biotech indices, such as the US-based Nasdaq Biotechnology Index (NBI) and Europe’s Euronext Next Biotech index (BIOTK), in addition to low biotech valuations following the COVID-19 pandemic means US companies looking to buy may see European biotech start-ups as rich pickings. This could result in Europe’s biotech sector losing out to the US unless Europe looks to improving venture financing investments of biotechs, particularly those with late-stage assets, to enhance their chances of generating revenue once they’re listed on the stock markets.”