PARIS - A commission set up by the government to look into ways of improving France's performance in the industrial application and commercial exploitation of scientific and technological research has recommended establishment of a public fund to provide seed money for biotechnology startups.

Biotechnology is one of two sectors, along with information technology, considered to have great potential that is not being exploited fully.

The commission recommended that the biotech seed fund be endowed with FFr100 million to FFr150 million, of which FFr50 million would be provided by the state deposit agency, Caisse des Dépôts et Consignations (CDC).

CDC plays a key role in channeling public funds into industry and already has an active venture capital subsidiary, CDC Innovation. The fund would be managed primarily by financiers, but public research establishments also would be involved in evaluating the projects to be backed. The 260-page government report points out that France devotes more of its resources to publicly funded research and development than any other country, spending FFr80 billion a year, and that it is well-placed in terms of fundamental research.

But it is not as aggressive in the area of applied research, as attested by the fact that while the number of scientific publications produced by French research establishments has risen by 16 percent over the past 12 years (from 4.3 percent to 5.1 percent of the world total), France's share of European patents fell by 17 percent (from 8.5 percent to 7 percent) between 1987 and 1996.

This phenomenon is attributed in large part to the great divide between public research and the market economy, which impedes the transfer of technology from one to the other.

The report thus makes a number of recommendations for facilitating and encouraging public sector researchers to move into private industry and for encouraging the creation of innovative enterprises.

Asked for his comments on the report, Pascal Brandys, president of the French biotechnology industry association France Biotech, agreed with the general drift of its recommendations, but said it was too prudent in the all-important area of the tax treatment of business.

Brandys, chairman, president and CEO of Paris-based Genset SA, said he would have liked the commission to propose changes in the system of R&D tax credits, allowing them to be refunded after one year instead of three, and in stock options, on which recipients are currently taxed.

As regards the seed fund, Brandys said FFr150 million could make a significant contribution if well managed, but stressed it is important for the fund to be administered by people with experience in industry, not solely by government officials.

As for the performance and role of public research, Brandys suggested public sector establishments be independently audited to evaluate their contribution to the general economy, rather than be judged solely on the basis of their output of scientific publications. That would mean assessing them on a technology transfer basis, in terms of both the licenses they granted for the exploitation of their discoveries and their contribution to the creation of research-based enterprises. *