BioWorld International Correspondent
COLOGNE, Germany - More than 1,400 delegates from across the continent gathered here last week at BIO-Europe 2004 for one-on-one meetings amid signs of a stable, but challenging economic environment for the sector.
Julia Schueler, of Ernst & Young AG's office in Mannheim, Germany, presented a snapshot of European biotech in 2004. On the positive side of the balance sheet, the initial public offering market reopened, bringing six new listings that raised about €300 million. Venture investments might reach the 2003 level of nearly €900 million.
Compared with the U.S., however, Europe is losing ground rather than gaining. Revenue in Europe will be hard pressed to reach the level of 2003, while growth in the U.S. was stronger. The net loss for European companies fell, but not as strongly as their American counterparts.
Participants in the conference drew contrasts between the macro-situation and their personal needs. While the overall European outlook gave grounds for only cautious optimism, prospects at the firm level often were more optimistic.
For example, Franz-Josef Schaefer, of the Stadtsparkasse Koeln, a public-private bank based in Cologne, highlighted the city's improving position within German biotechnology.
"The University of Cologne is the country's largest, and the home institution of the inventor of the [gene] knockout mouse," he said. More than 50 biotech companies have been founded in the area, and it has strong links to traditional large pharmaceutical companies such as Bayer, Schaefer added.
Andre Lochner, director of business development for Atugen AG, of Berlin, told BioWorld International that the company was exceeding its goals and looking forward to positive events in the coming year. He acknowledged that the outlook for the sector as a whole was challenging, but was confident about his company's direction and prospects for additional revenue and partnerships.
In a keynote presentation, Jim Mullen, CEO of Biogen Idec Inc., compared the state of the industry in the United States and Europe. He reminded the audience that Biogen Idec's roots are in Europe, as it originally was incorporated in Geneva. The story of its move (to Cambridge, Mass.), he said, is "familiar to anyone who has tried to raise money in Europe."
Asked whether he expected more companies to follow a similar path, Mullen said it was likely. However, he said there is no question that it is easier to grow a business wherever you first start.
"But," he added, "every successful European company will have to have a significant U.S. presence."
European capital markets continue to be more shallow than American markets. Venture investment is lower and the European market is still fragmented into national markets, both of which present significant challenges.
John Hodgson, of Critical I, a consultant firm based in Oxford, UK, cited three investment gaps that hindered development in the European biotechnology sector. First, European investors tend to fund early stage companies particularly poorly, compared with their U.S. counterparts. Second, they fail to support later-stage companies. Third, they provide much less support to each company that they do invest in. Hodgson suggested that eliminating those gaps would require about an additional €2.7 billion in annual investment.
"The investment pool would simply need to be bigger," Hodgson told BioWorld International. He said that many European investors are funding U.S. companies. If European companies could find ways to win back the investment that is flowing to America, that could close part of the gap.
Addressing a specifically German context, Norbert Walter-Borjans, a high-ranking civil servant in the state government of North-Rhine Westphalia, cited the collapse of the Neuer Markt as a reason many investors shied away from the sector. Losses of more than 90 percent after the market's precipitous drop in 2000 made new investments difficult to justify. Public confidence, he said, has been hurt and will take time to rebuild.
However, the German market is the destination of the largest amount of venture investment in Europe, with about €200 million committed so far this year. The UK is second with about €180 million. France and Switzerland rank third and fourth, respectively.
In a sign of increasing market maturity, the amount of intra-European biotechnology alliances has increased in 2004. Last year, according to figures from Ernst and Young, Europe-U.S. alliances were about as numerous as intra-European alliances. In the first nine months of this year, deals within Europe have made up 53 percent of the total, while Europe-U.S. deals have accounted for only 39 percent.
Finally, Wills Hugh-Wilson, of the EBE trade association, sees signs of a better regulatory environment on the way at the European Agency for the Evaluation of Medicinal Products.
"They are working on improving the approval process in ways that will particularly help biotech companies," she said. Changes include possible reductions in the fees the agency charges and increased transparency throughout the approval process.
"It will be less of a black box that you send your dossier to," she said.