BioWorld International Correspondent

BRUSSELS, Belgium - The European biotechnology industry is claiming victory in its efforts to win tax breaks for start-ups, after the European Union announced rule changes on Nov. 22 to allow new aids for innovative companies.

The EU said that beginning Jan. 1, innovative start-ups can receive public funding and tax incentives without falling foul of stringent European limits on state subsidies.

"Our industry welcomes the new state aid rules, which will hopefully contribute to create a more attractive environment for research intensive enterprizes in Europe," said Philippe Archinard, CEO of French biotech firm Transgene, and chairman of the emerging enterprise council at EuropaBio - the EU association for bioindustries.

The new state rules, backed by new guidance on tax incentives, are designed to stimulate research in Europe. They will permit governments of EU member states to provide public funding through fiscal and other financial incentives to young innovative biotechnology companies. Extra incentives will be allowed for companies less than 6 years old and those spending 15 percent or more of their revenues on R&D.

EuropaBio said the new rules recognize its longstanding campaign to win official European authorization for young innovative companies to be eligible for state aid. The target was adopted as a EuropaBio policy after France Biotech persuaded French legislators to introduce it in 2004. Earlier this year, Belgium also introduced similar incentive measures at the national level.

The biotech industry expects that the measures will encourage more private and institutional investors to invest in biotech companies in Europe, where "there are some 2,000 small and medium-sized biotechnology companies, which are struggling to raise money from private and institutional investors" to fuel research and development, said EuropaBio.

The European Commissioner responsible for competition, Neelie Kroes, said the new framework should make it easier for member states to use state aid to boost private sector innovation. The rules are a recognition that markets on their own might sometimes fail to ensure optimum levels of research and development investment, and that complementary state aid can provide an invaluable catalyst.

"It is now up to member states to take full advantage of this opportunity," Kroes said.

Simultaneously, the European commissioner responsible for taxation, L szl Kov cs, said the tax guidance clarifies what is permitted under EU rules and "encourages member states to improve the use and coordination of tax incentives on specific R&D issues."

When EuropaBio leaders met European Commission President José Manuel Barroso just days before the announcement, they stressed that young companies are motors of innovation in the new economy that the EU is committed to building.

"Young companies need predictability, robustness of the decision-making process and policy coherence," he was told by EuropaBio. The industry delegation also underlined to Barroso the need for a predictable robust product approval system and for equitable access for patients to highly innovative products and therapies in all member states.

EU Will Not Appeal WTO GMO Verdict

The European Union has decided not to appeal against a World Trade Organization condemnation of European obstacles to international trade in biotechnology products. EU official Peter Power confirmed Nov. 21 - the last day for lodging an appeal - that the EU would let the verdict stand unchallenged.

The WTO ruled Sept. 29 that the EU's de facto ban on authorization of new GMOs broke trade rules by causing "undue delays" with no scientific or regulatory justification. The four-year moratorium, which ended in 2003, arose from many EU member states - Austria, France, Germany, Greece, Italy and Luxembourg - exercising their veto on new GM product launches. The case was brought to the WTO by the U.S., Brazil and Canada, after they found their exports to the EU prevented from entering the market, even though the products were duly authorized.

The EU dismissed the ruling as of purely historic interest, since GM products are now, said its spokesman, routinely being authorized in Europe.

Environmentalist activists condemned the EU decision. To accept the WTO ruling is to set a dangerous precedent for future environmental disputes, said Adrian Bebb of Friends of the Earth Europe. "It seems that the EU is happy for the WTO to trample over environmental laws, and to expose the public and the environment to business interests," he said. He alleged the WTO verdict ignores international agreements to protect the environment, including the United Nations' Biosafety Protocol, which allows nations to use a precautionary approach, giving them the right to ban GM products if there are concerns about their impacts on health and the environment.

Ambassador Peter Allgeier, U.S. trade representative to the WTO in Geneva, said Nov. 21 that although the EU has approved a handful of biotech applications following the initiation of the dispute in 2003, it has yet to lift the moratorium in its entirety. "Some biotech product applications have been pending for 10 years or more, and applications for many commercially important products continue to face unjustified, politically motivated delays," he said.

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