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America's Unquestioned Dominance Over Biotechnology

The inability of European biotech firms to raise money has some in "Old Europe" wishing for their own NASDAQ.

By Yves Mamou

April 22, 2005

Original Article (French)    

With 190 medicines and vaccines marketed throughout the world and more than 400 products in development in 2004, medicines with biological origins represent 8% to 10% of the turnover of the worldwide pharmaceutical industry (2003 figures), but 40% of the new molecules on the market.

Insulin, recombinant growth factors, monoclonal antibodies for the treatment of cancers, gene or cell therapy ... nearly 250 million patients all over the world already benefit from advances in biotechnological research, or "biotech." According to a study carried out in November 2004 by the consulting firm Arthur D. Little, on behalf of the professional union Leem (Les enterprises du medicament), the biopharmaceutical market should reach $100 billion in 2010 (80 billion euros) and represent 12% of the global turnover for the pharmaceutical industry

To all observers, it is clear that the United States holds the lion's share of this strategic market. A comparative study by EuropaBio, the European association of biotechnology firms, made public on Wednesday, April 13, at the BioVision tradeshow in Lyon, showed the head start the Americans have in this area. Using a unique, or even restrictive, definition of the reality of the term "biotech," incubators, consultants and certain medical material suppliers were excluded from the field.

It seems, first of all, that the delays in Europe are not the result of a lack of entrepreneurial spirit: in 2003, 1,975 biotechnology companies were counted in the European Union, versus 1,830 in the United States. These companies are mostly located in Great Britain (455) and Germany (525), but France (225), Sweden (108) and Switzerland (98) occupy significant positions.

FINANCIAL GAP

But the weaknesses start as soon as the issue of research and its funding come up.In 2003 and 2004, biotechnology received 15.7 billion euros and then 17 billion euros in investments. With the exception of the year 2000, when the financial markets, which were at the peak of the "bubble" for new technologies, invested 40 billion euros, companies in this sector have never attracted this much capital. How is this "manna" divided geographically?Very simply: the American companies have cornered 85% of the money invested." This gap, particularly apparent for companies more than 5 years old, is a major cause of preoccupation and a handicap for the competitiveness of European biotech companies," explained John Hodgson, director of the EuropaBio study.

Looking at listings on the stock exchange is enlightening.At the end of 2003, while the sector was finally getting over the damage inflicted by the crash in 2000, and when the European stock markets remained stubbornly closed to "biotechs," six American start-ups levied a global sum of $380 million on the NASDAQ. In Europe, only the British firm Sinclair Pharma surprised people by obtaining 12.6 million euros in 2003 in London.In 2004, attitudes having changed, 15 European companies were listed, levying 414 million euros.During the same time period, 32 American companies levied 1.27 billion euros.

EuropaBio confirms that these financial gaps do not seemed justified by any "particular advance in technological programs or clinical developments."

"On the other hand, the American companies grew faster and invested larger amounts in research and development," the study specifies.The investors present at the beginning of a start-up in the United States can be more generous with these companies that consume a lot of capital, because they are often sure that they will get their capital back in the middle term, thanks to NASDAQ, the stock market dedicated to technology companies." Not only does the NASDAQ provide cash to [biotech] companies that need it, but it also serves as a reassurance for early investors, who are worried about recovering all or part of their capital," the European study says.

This financial gap causes a string of inequalities between the two sides of the Atlantic. American biotechnology companies employ two times as many researchers (172,400) than the Europeans (94,200). The Europeans invest nearly three times less in research and development (6 billion euros) than their American rivals (16.4 billion euros in 2003), and that have a borrowing power four times higher (5.9 billion euros in 2003).

Unless it pools its forces, the European industry does not appear to be in a position to challenge the supremacy of its American counterpart.It is too divided. Great Britain, which holds first place in Europe in this "sector of the future," is equivalent to only 10% of American biotechnology, it doesn't communicate much with Germany, and it does so even less with France.

Markets, researchers and research projects remain cut off from one another.

Up to a point where, in France, for many creators of biotechnology companies, the future seems to hold a merger with an American company or a listing on the NASDAQ. A Europe of research and innovation remains to be built.


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