European biotech long way from US in investors' mojo, study finds

Image courtesy Europabio

EuropaBio (European Association for Bioindustries) said in a study published on 30th May that the European and the US biotechnology industries both had around 2000 companies in 2004 (Europe: 2163, US: 1991)

But here the similarities end: the US sector employs almost twice as many people, spends around three times as much on research and development, has twice the number of employees involved in research and development, raises over twice as much venture capital, and has access to 10 times as much debt finance.

As a result it earns twice as much in revenues.

“Europe seems to be a little unsure of its ambition on biotech,” said John Hodgson, Partner at Critical I - a specialist biotechnology consultancy – who authored the study, at a press briefing. “Venture capital is a luxury. Less than 10 per cent of European companies win venture funds each year. But it is an indispensable luxury. Only properly capitalised companies can hope to compete globally in knowledge-intensive industries like biotechnology.”

He pointed out that Europe, (which established 119 new biotechnology firms in 2004, compared to 78 in the US), has been a fertile breeding ground for start-ups. There is a good deal of European national government enthusiasm for biotechnology, apparent in a myriad of technology transfer initiatives, seed funding schemes, and taxation schemes encouraging bioscience and other high-technology research and development.

However, as is evident from the US example global investors are only interested in more developed companies.

Hodgson said Europe is good at providing primary funding for start-ups but has failed to follow through with the promotion of a secondary funding market, leaving many new companies stranded.

“Europe is extraordinarily entrepreneurial, creating over 100 new small vibrant companies each year. These companies must keep being vibrant, but they must stop being small,” said Johan Vanhemelrijck, Secretary General of EuropaBio said. “More than anything, Europe must ensure that its biotechnology firms grow.”

Dr Hans Kast, Chairman of EuropaBio, and President and CEO of BASF Plant Science suggested providing financial and tax incentives to investors and venture capitalists through schemes such as the Young Innovative Company (YIC) concept, which was introduced in France in 2004.

“Making this the norm across all Member States would give a significant boost to attracting more investors to our sector and help to close the yawning competitiveness gap.”

The study identified 2,163 European companies whose primary commercial activity was in biotechnology.

EuropaBio has 70 direct members operating worldwide and 24 national biotechnology associations representing some 1500 small and medium sized enterprises involved in research and development, testing, manufacturing and distribution of biotechnology products.