IMPORTANT LEGAL NOTICE - The information on this site is subject to adisclaimerand acopyright notice
 
Contact   |   Search on EUROPA  
European Research News Centre - Homepage
Graphic
Weekly Headlines RTD info magazine Diary Press releases Contacts
Graphic
image European Research News Centre > Pure Science > Investors in the long term
image image
image image image Date published: 07/11/02
  image Investors in the long term
RTD info 35
image  
   
  Research is expensive. A young biotechnology company has to raise new capital at each stage of its development. The growth of venture capital in Europe and the development of new stock markets have facilitated access to this vital ingredient.
   
     
   

When studying the feasibility of a project to create a biotech company, private investment and national subsidies are usually enough. But for the actual start-up, recourse to venture capital funds is needed. These specialised financial structures invest simultaneously in a number of high-tech companies, counting on the profits made by the fortunate few to offset the losses incurred by those who fail.

Europe's helping hand

For many years a lack of venture capital was a brake on the development of advanced technologies in Europe, especially in the life sciences. This was in marked contrast to the United States where this specialisation made its appearance back in the late 1970s. To correct the deficiency, the Commission turned to the European Investment Bank (EIB), which launched the i2i initiative, making a billion euro available to venture capital operations over the following 12 months, mainly in new information technologies and biotechs. The EIB also operates through the European Investment Fund (EIF) in which it has a 60% stake (30% being held by the Commission and 10% by major financial institutions). The EIF helps high-tech companies to start up by financing business incubators, and it is biotechnology which, in practice, benefits most from this mechanism. Most recently, the EIF has invested €20 million in Heidelberg Innovation in Germany, €29 million in MVM International Life Science (a subsidiary of the British Medical Research Council) and a further €10.5 million in Nordic Biotech K/S which incubates start-ups in the Scandinavian Medicon Valley.

The end result is that European biotechnology companies are now able to count to a growing extent on experienced venture capital funds with available capital. Consequently, viable projects which fail to get off the ground are consequently becoming increasingly rare. In fact, venture capitalists who, two or three years ago, preferred to invest in new information and communication technologies are now turning their attention to life science companies which they see as having better long-term prospects. At a time of stock market unrest, the latest figures cited in the Ernst & Young report confirm this. Whereas venture capital investments in the high technologies fell by 31% between 2001 and 2002 – the bursting of the Internet bubble decimated the ICTs – investments in biotechnology companies fell by just 16% compared with 2000, a year which had broken all records. The only cause for concern was the low investment in biotech projects for agriculture. Venture capitalists fear the consequences of the public debate on GMOs and are reluctant to invest in agri-biotechs in Europe at a time when the sector is booming in the new emerging economies.

From venture to development capital

Nevertheless, raising the necessary venture capital is just one step in the long process which leads to the marketing of a biotechnological product. Clinical trials and securing authorisation require a fresh capital injection. This is what is known as development capital, and is usually provided by financial markets specialising in high technologies. There are two ways for a company to be launched on the stock market in Europe: through one of the five new markets (London, Frankfurt, Milan, Amsterdam, Paris), or directly at European level through the Nasdaq-Europe. 'These new financial markets have created a very beneficial new dynamic, but they remain too fragmented,' is the view of Philippe de Taxis du Poêt of the Research Directorate-General. Hence the idea of further integrating them through the Financial Service Action Plan. The FSAP is a set of 40 measures adopted at the Stockholm Summit in March 2001 and due to enter into force by 2005. The successful transition to the euro has made this integration even more desirable.

Dossier - boutons de navigation ... précédent suivant...
imageTop of the page

To find out more:

European Investment Bank
European Investment Fund

Equipment at the Computer Cell Culture Centre in Seneffe (Belgium), which specialises in cell culture for the production of vaccines and other therapeutic proteins.

Equipment at the Computer Cell Culture Centre in Seneffe (Belgium), which specialises in cell culture for the production of vaccines and other therapeutic proteins.

 


European Research News Centre - Homepage
Graphic
Weekly Headlines RTD info magazine Diary Press releases Contacts
Graphic