Why the U.S. remains the preferred listing choice for European biotechs (even in the current market)

Earlier this year, the UK Government published its Science and Technology Framework to support the life sciences sector. A trailed promise was to reform UK listing rules to make the UK a more attractive destination. As it happened, the Government was not able to finalise proposals at the date of publication, instead looking to revisit the issue in the Autumn Statement.

In the meantime, the U.S. continues to be the premier destination for life sciences companies seeking access to the public capital markets. For European life science companies, a U.S. listing offers access to larger pools of capital and better liquidity than are otherwise available on European exchanges.

While the U.S. has had certain advantages such as the size and coherency of its public markets (compared to Europe) and a number of significant tech and high-growth success stories to create confidence, that does not explain all of America’s relative dominance. Compared to their peers in other English-speaking countries (such as U.S., Canada or Australia), British pension funds have not invested in high growth companies nearly as much. This was another area of focus in the UK Government’s reforms. 

Another advantage for the U.S. markets is a well-developed ecosystem that has developed around the life sciences and healthcare sector. U.S. markets are enhanced by the presence of many specialist investment funds and sophisticated buy-side research and engagement, resulting in a deeper focus and understanding of the relevant science.

All is not lost for the UK and EU. As seen in the recent turbulence, there are some in Europe who view U.S. markets as more prone to significant swings. In addition, the UK has significant strengths in terms of tax incentives and government support for early stage companies, meaning that many may choose to remain in the UK if the promised reforms do materialise. One advantage of Brexit may be for the UK to compete on (de-regulation) with the EU.