LYON, France – The European Union's (EU's) research funding programs will play an increasingly prominent role in European research in the coming years, but cash-strapped researchers will have an even tougher time than before in landing the precious funds they need to advance their work. Although the issue did not receive major billing during the Biovision meeting in Lyon last week, six years of unrelenting austerity budgets across Europe have taken their toll on national research programs, leaving many researchers more dependent on landing EU funding than ever.
Science is the only part of the EU's budget that is growing, Robert-Jan Smits, head of the European Commission's (EC's) Directorate General for Research & Innovation (DG Research), told the audience during an opening plenary session. The flagship Horizon 2020 program, which runs from 2014 to 2020, has a total budget of €80 billion, a significant increase on the €55 billion available under its predecessor, the 7th Framework Program, which ran from 2006 to 2013. It is being positioned as a key element in Europe's economic recovery. "There is a clear signal from Brussels – invest in innovation," Smits said.
The squeeze on science funding is evident in the massive response to the first call for proposals from the health directorate of the EC's Directorate General for Research & Innovation (DG Research). Speaking during a focus session on Innovative Immunotherapies, Ruxandra Draghia-Akli, the health directorate's director, revealed that her unit had received 1,700 proposals, whereas she would have expected about 1,000 based on previous experience. That means the success rate for proposals under that call will only be around 4 percent, whereas historically it would have been closer to 10 percent.
Draghia-Akli's unit will have a budget of €1.2 billion for this year and next. Small and medium-sized enterprises (SMEs) are eligible as usual to bid for funding, but for the first time, 5 percent of the total budget is being reserved for such firms, who can receive grants without having to join academic consortia. This is ideal for conducting phase II trials, for example, Draghia-Akli said.
The second iteration of the Innovative Medicines Initiative (IMI 2), which is also funded through Horizon 2020, has additional cash on offer for biomedical research. The scheme, which was finalized last month, is jointly funded by the EC and the European Federation of Pharmaceutical Industry Associations (EFPIA). It will have a budget of €3.3 billion, comprising half in public money and half in in-kind industry contributions. That's well up on the €2 billion the first run of the program received, although it is stretched over a slightly longer time frame, from 2014 to 2020, as opposed to 2008 to 2013.
Some €400 million of the total is earmarked for participation by companies outside the pharmaceutical industry, such as those involved in imaging technologies, medical devices or IT. That could lead to a change of emphasis in certain projects. "Some of them might be different – others might add a new dimension to a project led by an EFPIA company," IMI executive director Michael Goldman told BioWorld Today.
The European Institute of Innovation and Technology (EIT) is also, for the first time, about to fund life sciences research. The EU institute, which is located in Budapest, Hungary, was established in 2008 to kick start innovation across Europe by establishing thematic 'Knowledge Innovation Communities' (KICs), which link education and entrepreneurship with research and innovation.
Each KIC has an explicit governance structure, which could evolve toward a fully commercial entity. "It follows a business plan. It recruits a CEO. After seven years, they have to become sustainable," EIT chairman (and biotech entrepreneur) Alexander von Gabain told BioWorld Today. The model is distinct from the large academic research consortia that typically assemble to obtain funding under the EC's framework programs. "They are too loose. You don't have ownership," von Gabain said.
Each KIC brings together teams based in Europe's leading innovation hotspots. So far, the EIT has established KICs covering climate change mitigation and adaption, IT and sustainable energy. A KIC addressing 'innovation for healthy living and active aging' will be selected later this year – the call for proposals closes on Sept. 10 – and will receive up to €500 million over its lifetime.
"The decision will be made in December," von Gabain said. The winning bid will be selected on the basis of scientific excellence not geographic location.
Corporate R&D spending on life sciences dropped across Europe in 2013, according to Ernst & Young, which provided – appropriately for the gastronomic capital of France –an 'amuse-bouche' on its annual Beyond Borders report, ahead of its publication at the Biotechnology Industry Organization meeting in San Diego, later this month. Juerg Zuercher, of EY's Basel, Switzerland office, told delegates that European spending on R&D dropped 4 percent last year, versus 2012, whereas spending in the U.S. rose by 20 percent.
Although U.S. biotechnology firms now have better access to the capital markets than they've enjoyed in more than a decade, building value remains a difficult challenge.
"Value lies in the eye of the beholder," Zuercher said. Many firms are taking products into phase III, but a high failure rate is highly destructive. "We see that 40 percent of the value is destroyed in phase III," he said. Pricing pressures on those products that make it through compound the issue. "The biotechs are taking on more risk while capturing less in value," he said.
Total funding raised by European biotech firms in 2013 reached $5.8 billion, including $254 million in IPOs, $1.5 billion in follow-on funding, $2.5 billion in debt financing and $1.5 billion in VC funding. This represents Europe's best performance since 2007, when the industry raised $7.8 billion, but the sector has not yet returned to pre-crisis levels of performance. In contrast, U.S. firms raised some $25.5 billion, including $3.3 billion in IPOs, $7.5 billion in follow-on financing, $10.3 billion in debt and $4.4 billion in venture capital.
The meeting closed Friday.