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Is the lack of finance necessarily spelling doom for the European biotech industry?
As someone who spends a lot of time meeting with biotech SMEs and spin out companies, I have detected a definite sense of gloom recently. It seems that investor money has been hard to come by and spinning out a company is becoming more hazardous.
There is no doubt that the European biopharmaceutical industry is facing a challenging time. Biotech success by its definition is something that depends on small company innovation, so there needs to be a healthy financial environment for biotech SMEs to thrive. However, 2005 saw several recent IPO attempts in the UK fail to get away. As a result, it seems from anecdotal evidence at least, that in the last 6 months private investment in biotech start-ups has never been harder to obtain. If early stage investors can't see a path to realize their investment, they won't put up the money in the first place. Increasingly, European companies wishing to develop innovation into a product are turning to public financing of one sort or another. In this area hot topics such as biodefence and an influenza pandemic have helped to keep public money flowing into biotech.
If European biotech remains undervalued, we are in danger of losing our best scientists, companies and technologies elsewhere. The US isn't the only threat. Europe faces tough competition from Asia and other developing economies. Companies with highly skilled manufacturing workforces in countries such as Singapore, Taiwan and South Korea have intelligently developed and well-financed plans to build biotech economies as they face up to the threat of losing other high-technology manufacturing to China. India now has WHO- and FDA-accredited manufacturing facilities, and is making good progress to comply with Trade Related Aspects of Intellectual Property Rights (TRIPS) — meaning much more Western science can find a secure development home there.
Well, no, we shouldn't just pack up and move to the US. It isn't an entirely bleak picture and there are plenty of reasons to believe that the European biotech industry can move forwards with optimism. The shake out in recent years means that the industry as a whole is leaner and fitter. There is still fantastic science underway and a host of committed entrepreneurs wishing to develop commercial products. Society will always want new and better medicines, and in terms of population, it shouldn't be forgotten that Europe is potentially a larger market for healthcare than the US. Large pharma companies on both sides of the Atlantic still have a huge appetite for licensing new compounds and technologies from European biotechs.
While the promise of new technologies can create excitement and froth, ultimately the European industry badly needs biotech successes that bring new, blockbuster biotech drugs on the market. Investors want to see that in a high risk game, there is at least the chance of a big reward. In the past, too much investor money has been wasted on underachieving technologies and, in particular, companies with weak management. This is a real problem that must be overcome — only a handful of European companies have genuine experience in successfully bringing new products onto the market, and the expertise gained as a result. Proven management is hard to find.
A positive sign is the recent acquisitions of major US biotech companies by European pharma. For example, the acquisition of Chiron by Novartis, Transkaryotic Therapies by Shire and Corixa by GSK. The flow of know-how and technology is not all one way!
In addition, expertise needs to be made available to smaller companies and again, there are encouraging signs that this is being recognized with a number of European national initiatives to develop expertise. For example, bioProcess UK plans to develop tomorrow's bioprocess leaders through mentoring and training programmes; the UK National Biomanufacturing Centre seeks to provide development expertise; and The Netherlands, France, Germany and Sweden all have projects underway to increase access to expertise for biotech companies.
Europe undoubtedly has the science and we certainly have the entrepreneurs. If we can continue to improve the integration of regulatory and financial frameworks, we will also have the environment to nurture healthcare innovation. When we can demonstrate we can consistently put all this together to create market value, the investment euros will come flooding back to drive further growth.
Derek Ellison is business development director at Eden Biodesign, UK.
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