Biotechnology, study: European biotech – innovative but strapped for cash

Europe is an explosive incubator of new biotechnological ideas, but growth is hampered by a severe lack of venture capita, an industry study comparing the biotechnology sector on both sides of the Atlantic has found.

The report, produced on behalf of EuropaBio, the European Association for Bioindustries, compared the performance of 18 European countries with the United States. It found that, at the end of 2004, there were more than 2 100 biotech companies in Europe, but less than 2 000 in the United States. The number of new companies formed in Europe were nearly a 120 compared with less than 80 in the USA. However, in all other measures the transatlantic gap stretched the other way.
This suggests that Europe is good at lighting the initial spark but less good at keeping the flame going. “Europe is extraordinarily entrepreneurial, creating over 100 new small vibrant companies each year,” observed Johan Vanhemelrijck, the secretary-general of EuropaBio. “These companies must keep being vibrant, but they must stop being small.
” European biotech firms spend €7.6 billion on R&D, while their US counterparts sink a massive €21 billion, and the gap in revenue is similarly large, with US firms generating €41.5 billion, as opposed to €21.5 billion in Europe.
One of the main problems is what EuropaBio calls “chronic underfunding”. “Europe’s biotechnology project is in danger of foundering from the relative dearth of that most vital of fuels for innovation: money,” the association warned in a statement.

Venturing across the biotech frontier
The main difficulty European biotech companies face is in raising capital of any sort, and in particular risk-taking venture capital. Also in 2004, American firms attracted €2.5 billion from venture capitalists, while European companies drew only €1.1 billion.
“Venture capital is a luxury… But it is an indispensable luxury [for biotech firms],” said John Hodgson of Critical I, the consultancy which conducted the study.
According to industry insiders, Europe will attract the necessary venture capital only by creating an environment conducive to such high-risk investment. “Identifying the problem is the first step to a solution. [The] second step is providing significant financial and tax incentives to investors and venture capitalists to invest in biotechnology,” suggested Hans Kast, the CEO of BASF Plant Science. He pointed to France’s Young Innovative Company initiative, which was launched in 2004, as an example of the way forward.
Hodgson believes that there is a stark choice facing European biotech: “Europe can be a breeding ground for European companies, or it can be a greenhouse for high-technology firms that are acquired by better-funded US firms.”
This is the second such study released by EuropaBio. Last year’s report came to similar, if less urgent, conclusions.

Source: EU and external sources
More Information:
EuropaBio’s comparative study [ - 2.99Mb]