European biotech financing nears record levels, but the gap with the US remains vast.

European Biotech Funding Nears Record, but Gap with US Remains Wide

Venture capital investment in European biotech startups is approaching an all-time high. According to PitchBook, as of the second quarter of 2025, the region has attracted approximately €800 million (about $912 million) in venture funding, exceeding three-quarters of the total for the full year 2024. At the current pace, the annual transaction value may surpass the record of €1.2 billion set in 2018.

However, beneath this positive momentum lies a structural concern: the gap between European biotech and the US is not narrowing, but instead continues to widen in key areas.

Divergence in Funding Scale and Deal Count

In terms of deal count, VC rounds in the European biotech sector are expected to see modest growth compared to last year, which stands out against the backdrop of sluggish financing in most industries. Yet the median deal size has fallen from its 2024 peak of €3.5 million, indicating that investment is tilting more toward early stages.

Large deals still exist. Swiss radiopharmaceutical startup Nuclidium led with a CHF 105 million (approximately $130 million) Series B round, followed by London-based RQ Bio, which develops therapies for immunodeficiency and influenza, with a $115 million Series A. These large transactions support the overall amount, but compared to the mega-rounds in the US, which often reach hundreds of millions of dollars, Europe still lacks super-sized capital events.

US AI-Driven Funding Boom Widens the Gap

US biotech startups have raised three times as much in total funding this year as their European counterparts. This disparity largely stems from the intense focus on artificial intelligence. For example, anti-aging company NewLimit completed a $435 million funding round last month, with valuations and amounts far exceeding similar European companies. The application of AI in drug discovery and biomarker identification is reshaping the global biotech investment landscape, and Europe clearly lags in capital allocation in this area.

PitchBook data shows that Europe's share of global biotech funding has rebounded to 20.5%, the highest level since 2018, but this is mainly due to Europe's own growth rather than an absolute increase in its global share. The US market still dominates, and its concentration is increasing.

Policy Response: The EU Biotech Act Timely Launched

Europe is clearly aware of this competitive disadvantage. At the end of 2024, the European Commission proposed the European Biotech Act, aiming to close the gap with the US and China through institutional design. The Act establishes a framework for identifying "strategic projects," which will benefit from accelerated licensing and priority financing. Its core goals are to shorten time-to-market, unify regulatory processes, and mobilize public and private capital.

The Act is a direct response to the fragmentation that has long plagued the European biotech industry. Under the current system, cross-border clinical trial approvals, intellectual property protection, and reimbursement access vary significantly across member states, increasing costs for companies and reducing global competitiveness.### The Two-Way Pressure on Capital and Talent

More concerning is the reverse flow of talent and capital. Earlier this year, the European Life Sciences Alliance (ELSC), composed of top European venture capital firms such as Denmark's Novo Holdings and France's Sofinnova Partners, jointly called for more public and private capital to be injected into the region. The ELSC noted that Europe's biotech industry supports 29 million jobs, yet struggles to retain and scale up its local startups. Reasons include fragmented capital markets, slow and inconsistent regulatory processes, and a declining number of specialized VC firms.

These structural deficiencies force many promising European biotech companies to relocate their headquarters or R&D centers to the United States, or even list directly on Nasdaq. Whether policy efforts at the EU level can reverse this trend remains uncertain.

Long-Term Challenges to Europe's Biotech Competitiveness

From a long-term perspective, catching up in Europe's biotech industry requires systemic change. First, capital market integration must be accelerated, particularly by building a deep regional venture capital and private equity ecosystem to support the full chain from seed rounds to later-stage growth. Second, regulatory coordination needs to expand from "accelerated approvals" to unified data standards, ethical reviews, and post-market surveillance. Third, Europe needs to cultivate more specialized biotech venture capital firms to offset the current contraction in the VC industry.

The EU is attempting to address some of these issues through instruments like the Biotechnology Act, but the effectiveness of these policies remains to be seen. Meanwhile, the United States has already formed a positive "financing-research-production" cycle in AI biotech capital investment and industrial translation. If Europe fails to fill its gaps in time, the gap may widen further.

However, European biotech also possesses unique strengths: deep basic research foundations, strong hospital and university systems, and rigorous yet reliable clinical trial standards. If these advantages can be translated into commercial momentum, Europe still has a chance to secure its place in the global biotech innovation landscape.