BioWorld International Correspondent

VIENNA, Austria - An investor, a business leader and an academic leader closed the Cordia-EuropaBio Convention here Thursday with a lengthy "to-do" list for the European biotechnology community.

While agreeing that European companies and researchers were getting better at looking beyond national boundaries, they said that too often their colleagues on the continent did not necessarily think about being in a global industry.

"To succeed," said Spiro Rombotis, CEO of Cyclacel Ltd. in Dundee, UK, "you must build a business from day one that is globally competitive."

Rombotis gave a convenient definition of a company that had succeeded in the biotechnology business: a market capitalization of about $1 billion. To reach that level, the company would have a price-to-earnings ratio of about 20, have free cash flow of about $50 million and generate about $150 million to $200 million in annual revenue from sales or royalties. Anything less, he said, likely would mean an eventual destiny as a target of acquisition, most likely for less than a company's desired value.

One significant barrier to success is presently at the gateway to public markets. Rombotis said that the rule of thumb for 25 years in the biotechnology industry had been that to reach profitability, a company needed to develop three to 10 molecules, spending roughly $500 million over 10 years. That money would come from a variety of sources - 60 percent from the pharmaceutical industry, 30 percent from public markets and 10 percent from venture investors. "The change today is investors' loss of confidence in this model," Rombotis said.

The lessons he drew for the industry were clear. "We need drugs, lots of drugs, because we must allow for attrition," he said. Furthermore, European companies could not rely on homegrown investors to fund their growth. Addressing a global market globally, he argued, was the only way a company that happened to be based in Europe could succeed.

Joseph Penning, director of the Institute of Molecular Biology in Vienna, agreed, adding that Europe can succeed only as a single entity. "We need one market, one patent office, one stock exchange," he said.

Those single institutions should also come without extra bureaucracy. He singled out provisions in the European Union's sixth research framework program for criticism. "Scientific validation counts for only 15 percent of the funding criteria," he said. Other factors included how a research program was good for Europe or good for the framework, he said. He argued that the other criteria had little relevance for success. "Good science is good science," Penning said.

On the other hand, the sector's relative youth opened opportunities. "In Europe, we can really create institutions," Penning said. He aims for his institute to eventually host 800 to 1,000 researchers, and he said that the associated Ph.D. programs already were drawing applicants from the United States, Canada and Australia.

Jean-Bernard Schmidt, chairman of the European Venture Capital Association, joined the calls for global competitiveness and faster change. "We are 25 years behind in terms of tax and regulation," he said.

Although 2003 was likely to end as a better year than 2002 for venture capital as a whole, it would probably be another down year for biotechnology, he said.

"Consolidation has to continue," Schmidt said. "We have too many companies that are competing for financing."

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