Following on from signs of recovery in the final quarter of last year, biotech funding is being driven by a rebound in venture capital investment.

Backing up indications of renewed momentum and increased investor confidence seen in the BioIndustry Association’s (BIA) report at the end of last year, the UK biotech sector continued to show signs of recovery in the first quarter of this year, driven by a rebound in venture capital investment and a broader distribution of funding across companies and stages.

Total equity financing reached £552 million between January and March, up from £466 million in the fourth quarter of last year, marking a stronger start to the year for the UK’s biotech sector. Venture capital was the primary driver, rising 17% quarter‑on‑quarter to £516 million from £442 million, signalling growing investor confidence following a prolonged period of caution.

“It comes as great relief to see those green shoots that started showing end of 2025 grow into a more sustained and healthier shift in market dynamics in the first quarter of 2026,” said BIA’s managing director Jane Wall.

“While headline figures often fluctuate based on the presence of a few megadeals, the underlying story of Q1 is one of accelerating momentum and a broader distribution of capital across the UK’s innovative ecosystem,” she added.

Broad spread of investment

While headline totals remain below the £924 million recorded in the first quarter of last year, those figures were skewed by a small number of mega‑rounds. In contrast, the first quarter of this year was characterised by a broader spread of investment, with capital deployed across more companies and stages.

Deal activity increased significantly to 25 VC transactions, up 67% year‑on‑year, pointing to a healthier, more active funding environment even as average deal sizes remained more moderate. Moreover, the UK secured 57% of all European biotech venture capital this quarter – an indicator of the ongoing strength of the UK market.

The data highlights a shift away from reliance on a handful of outlier financings and towards a more balanced funding landscape. Later‑stage rounds continued to attract the largest share of capital, while early‑stage activity strengthened in volume terms, reinforcing the depth of the UK’s innovation pipeline.

This recovery has yet to reach public markets. Follow‑on financings increased slightly to £36 million, up from £24 million in the final quarter of last year, and there were no UK biotech IPOs in the first three months of the year, extending a period of inactivity that has persisted since 2022. This underscores the ongoing challenges facing listed biotech companies and the continued importance of private capital and alternative routes to liquidity.

Despite these headwinds, M&A activity was a standout feature of the quarter. High‑profile acquisitions, including Centessa Pharmaceuticals’ £4.6 billion purchase by Eli Lilly and Amgen’s acquisition of Dark Blue Therapeutics for £626 million, reinforce UK-originated assets as must-haves for international pipelines. Even while the public market window remains narrow, the strategic value of UK companies is being validated at the highest levels.