While the biotech investment scene in Europe has slowed somewhat following a COVID-19 funding boom in 2021, a new report from PitchBook suggests venture capital firms looking at opportunities across the pond could soon have more cash to spare.
PitchBook’s report—which focuses on valuations in Europe broadly and not just in the life sciences sphere—highlights three main “pillars” that the data outfit believes are dominating the VC landscape in Europe in 2024: rates, recovery and rationalization.
Trends in rates and recovery seem to be heading north, the report suggests, citing the European Central Bank and the Bank of England’s recent moves to cut rates at the beginning of the month.
With that in mind, the degree to which valuations have rationalized is “less clear,” according to PitchBook. The company specifically pointed to “lofty price tags” in areas such as artificial intelligence.
Taking a closer look at the numbers, median deal sizes “continued to tick higher across all stages” in the first half of the year, the report reads. AI especially is “buoying the dispersion in early and late stages,” though that does leave the question of how much other areas of the market are rebounding without the help of the “AI effect,” the report continued.
Meanwhile, the proportion of down rounds in Europe trended upward during the first six months of the year after showing signs of plateauing in 2023, which raises concern as to whether more down rounds could be on the table, according to Pitchbook.
On a regional level, the biggest proportion of European down rounds occurred in the U.K. (83.7%) followed by Nordic countries.
While the current financing environment in Europe is far from black and white, PitchBook did claim that a “recovery is taking place.” The company said it expects that recuperation to continue, too, given the potential for more rate cuts before the year is out.
While conditions may not seem ideal for up-and-coming companies seeking investments, a slate of European-focused VCs voiced optimism about the situation last fall.
Earlier in 2023, Netherlands and Germany-based Forbion had announced its biggest biopharma funds to date, raising 1.35 billion euros in April across two funds for earlier- and late-stage life sciences outfits. Elsewhere, Netherlands-headquartered BGV—focused on early-stage funding for European biopharmas—also raised its largest fund to date after it snared 140 million euros in July 2023.
“When the public markets and the macro environment are tougher, that is really when biotech venture capital-led innovation is most prolific,” Francesco De Rubertis, co-founder and partner at London investment firm Medicxi, told Fierce Biotech last October.