U.K. biotech ends on a high note in 2025 despite plummeting investments, report reveals 

The healthcare funding landscape was not particularly kind to the U.K. in 2025. Following Merck pulling out of its $1 billion expansion plans in London, it was evident that life science investments in the region have been scarce in the past year. Yet the BIA 2025 report has found that despite it all, the biotech sector in the U.K. has shown resilience and investor appetite is poised to grow in 2026. 

2025 sees 13.2% drop in biotech investment in the UK but sector slated to grow in 2026

The report published by the BioIndustry Association (BIA) revealed that the U.K. ended last year with “clear signs of renewed momentum and increased investor confidence.” The country retained its position as Europe’s leading biotech market in 2025, accounting for around 30% of all European venture financing. Deals cost around £1.79 billion ($2.47 billion) across 58 deals last year, which was a 13.2% year‑on‑year drop in investment. 

This is a surprising outcome considering the past year was marked by a decline in investor interest in the sector. Major pharma players such as the American giant Merck backed out of a billion-dollar deal, slashing 125 jobs, amid volatile trade tariff policies at the time. Merck blamed its departure on Britain’s reluctance to invest in life sciences and the government’s lack of drug spending.   

On the same vein, French pharmaceutical Sanofi and Britain’s own AstraZeneca bailed on the region. Sanofi halted investments, claiming that the U.K. was an unfriendly place to conduct business and boost innovation. AstraZeneca, on the other hand, paused a £200 million ($271 million) project to expand its Cambridge research facility, having previously scrapped a £450 million ($620.41 million) vaccine plant project in Liverpool a year ago.  

Backing out of Britain, high clawback rates were partly to blame, according to experts, coupled with clinical trial bottlenecks and a highly uncertain funding environment. However, while it was speculated at the time that these big pharmas may have been plotting exit strategies, the BIA report tells a slightly different story. 

According to the report, the final quarter of 2025 saw an uptick in deals. With 22 deals recorded, it was the highest quarterly deal count of the year. Meanwhile, despite almost 47% of total capital raised in 2025 coming from two deals in the first quarter of last year, they were enough to buoy the sector.  

Did the Verdiva Bio and Isomorphic Labs financings save the year? 

These noteworthy investments were in two biotechs, namely, Verdiva Bio and Isomorphic Labs. Verdiva is a London-headquartered startup focused on developing treatments for metabolic diseases like obesity, a field that is rapidly growing and has witnessed buying sprees for GLP1 agonists Ozempic and Wegovy in recent times. The $410 million series A funding in Verdiva went towards advancing its GLP-1 agonist for obesity.  

As for Isomorphic Labs, it secured $600 million to develop its artificial intelligence (AI)-based drug design engine in March. This was likely part of a wider AI financing boom, even within the healthcare sector. AI startups now account for 60% of all digital health funding, according to a report by Qubit. Over the next four years, AI is thought to “empower” pharmaceuticals to tap into a lucrative market, worth around $868 billion, a report by Strategy& stated. It added that while 10% to 30% of healthcare systems have adopted AI at present, these figures are expected to rise to 30% to 45% by 2030. 

“The U.K. is increasingly seen by global pharmaceutical companies and specialist international investors as a place where world-class biology, rich human data and advanced AI can be integrated with scientific rigour and speed,” said Rosie Rodriguez, senior vice president (SVP) of Growth at London-based Relation Therapeutics. 

BIA 2025 report: new initiatives in motion  

Meanwhile, investor sentiment has slowly been building up over the past year in the U.K. And despite trade tariff unpredictability that plagued the industry globally last year, the U.K. came to an agreement with the U.S. in December. Granting a zero percent tariff on pharmaceuticals from the U.K. to the U.S. for at least three years, the UK-US Economic Prosperity Deal is expected to bolster biotech in the region. 

Moreover, the British government introduced the Life Sciences Sector Plan last year. This initiative is aimed at driving the uptake of the most appropriate medicines and medical technologies, remove bureaucratic delays to patient access, and straighten out the path to procuring medtech products.  

Another scheme that came into effect was the Mansion House reforms, designed to overhaul pension regulations and capital markets. By releasing billions of pounds from pension funds into promising British companies, the project is focused on boosting the U.K. economy and increasing the pension pot for workers, albeit elevating the risk to pension returns.  

James Costine, chief financial officer (CFO) and finance partner of SV Health Investors, said in the BIA release: “Whilst SV helps build robust investor syndicates for our companies, often involving international investors, we very much welcome the Mansion House Accord as a positive step in the right direction. Not only will it provide domestic scale-up capital for the most promising UK-based companies, it should also help boost returns for U.K. pensioners to be more in line with those seen in the U.S. and Canada.” 

The first evidence of the pension-backed scheme in the biotech sector was the $140 million investment in Cardiff University spin-out Draig Therapeutics, which is developing therapies for neuropsychiatric disorders, last year.  

UK biotech in 2026: BIA 2025 report shows strong overseas investor confidence

Domestic institutions in the U.K. could take advantage of these initiatives, as currently, 68% of investors in series A deals and 89% of investors in series B deals and upwards, are from outside the region, the BIA report noted. 

Besides, UK Advanced Therapy Medicinal Product (ATMP) clinical trials represent 57% of all European trials in 2025, according to Cell and Gene Therapy Catapult’s database. Out of 193 trials held last year, 56% were early-stage trials, and 80% were commercially sponsored, signaling that innovation is going strong. Most of these trials were targeted towards cancer indications, while inflammation-related studies were in the mix too.  

While the public market remained unwavering with zero U.K. biotechs going public the entire year – the third year in a row with no new listings – mergers and acquisitions (M&As) cued international investor confidence. And despite Merck’s London exit, its £7.5 billion ($10.34 billion) buyout of lung disease therapeutics company Verona Pharma as well as Sanofi’s of $1.15 billion acquisition of vaccine developer Vicebio are telling of overseas keenness to invest in research and development (R&D) in the U.K. 

Notwithstanding the 13.2% plummet in venture capital in 2025 compared to 2024, Jane Wall, managing director of the BIA, thinks that this figure “belies a sector that is increasingly focused on high conviction in U.K. science.” 

“Later-stage leads are still dominated by international capital, and the mandate for 2026 is clear: the U.K. Government must deliver to support a vital sector of the economy, and domestic investors must be encouraged to deploy here while we continue to welcome overseas capital,” said Wall. “This report is a testament to our sector’s resilience and a roadmap for the breakthrough decade ahead.”