Biotech Boom
With new technologies and government support, the number of biotech firms and new products on the continent is rising rapidly.
Tommy McCall
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E-mailBiotechnology companies stereotypically have hatched in sun-soaked California with researchers and scientists unlocking new treatments for obscure diseases. But the past decade’s advances in genetic knowledge have broadened biotechnology’s scope to include more widespread diseases and have expanded R&D to many corners of the world, particularly Europe, where governments are working to encourage growth in the health-care industry. Nine NYSE Euronext IPOs of Europe-based biotechnology companies have listed in the past three years, bringing the total number listed to more than 20. While firms such as Ablynx NV (ABLX), TiGenix NV (TIGN) and Galapagos NV (GLPG) in Belgium are addressing common ailments such as osteoporosis and joint damage, other firms, such as France’s Exonhit Therapeutics SA (ALEHT) and Belgium’s OncoMethylome Sciences SA (ONCOB), are developing genetic tools for detecting cancer early and personalizing treatments.
Still others, such as France’s Vivalis (VLS), have developed stem-cell solutions for manufacturing vaccines and antibodies, while firms such as the Netherlands’ Pharming Group NV (PHARM) are working to address genetic disorders and diseases associated with aging. The largest independent vaccine company, with a market cap of $1.54 billion (€1.05 billion) as of Sept. 24, is Netherlands-based Crucell NV (CRXL).
The number of biotech products from European firms has risen rapidly in just the past few years. According to a 2009 report from Ernst & Young, in 2006 about 400 biotech drugs from EU companies in the pipeline had made it to Phase II clinical trials. (Typically, Phase I trials are used to judge a drug’s safety using a small group of patients; in Phase II, drugs are assessed for their efficacy, especially compared with existing treatments.) By 2008 the number had jumped 50 percent, to about 600 products.
Venture funding and investment also followed the industry across borders. Despite the global economic crisis, in 2008 $1.4 billion went to biotech venture funding in Europe. “In general, biotech funding in the U.S. has always been better,” confirms Onno van de Stolpe, CEO of Galapagos. “EU investors are a bit more risk-averse and look at revenue/earnings potential rather than future potential value.” This attitude has helped keep European companies focused on results. Revenues of public European biotech firms in 2008 were up 17 percent from a year earlier, while R&D costs increased by only 3 percent. By comparison, U.S. biotech revenues were up only 8.4 percent for the same period.
“Any company based on robust science that invests in its science in order to keep its leadership and competitive advantage will generate innovative products and sustainable growth and attract funds and strategic partners, whether the companies are in the U.S. or in Europe,” asserts André Choulika, founder and CEO of French biotech firm Cellectis SA (ALCLS).
For a chart with more information about the 20 companies that comprise
Next Biotech, Read more
To help investors better track the industry, last year NYSE Euronext launched Next Biotech, the first Eurozone biotech index. Composed solely of biotech companies listed on NYSE Euronext’s European markets, the index boasts 20 components with a combined market cap of more than $4.8 billion (€3.3 billion). From Sept. 10, 2008 to Sept. 10, 2009, the index has gained 27.1 percent, compared with losses in the S&P 500 (down 15.3 percent) and the S&P Europe 350 (down 9.5 percent) in the same time period.
Scientific Advances
The industry’s rapid European expansion is largely due to the promise of biotechnology in medicine. Biotechnology offers the possibility of understanding how our genetic makeup affects and interacts with diseases, explains Choulika. By gaining knowledge of those DNA traits related to ailments, researchers can develop gene-based treatments that have the potential to directly address medical conditions, rather than simply alleviate the symptoms of those diseases. With biotechnology, for example, it is now possible to develop genetic tools to regenerate damaged cells and tissue, an approach that is already proving to be an effective way to treat heart disease and some forms of cancer, he adds. In the future, says Choulika, “a disease will not be seen as symptoms to be healed but as a DNA-based malfunctioning that can be fixed with less fatality.”United Government Support
To bolster biotechnology, the EU has played an increasing role in developing a consistent set of rules, regulations and incentives among member nations. Last year the EU Commission invested $118 million in biotech research. But perhaps more important was the passage of three proposals that make up the so-called pharmaceutical package in December 2008. The long-awaited rules provide a uniform framework for regulating new drugs, in the hope of easing the expense to companies that have had to deal with multiple regulations and approval processes in different countries.
The issue of multiple patent filings and approvals across the European continent is also improving, say biotech firms. “The positive is that more and more countries are getting involved with the Patent Cooperation Treaty,” says Choulika. Simplifying European patent legislation has helped, but the industry still faces patent problems because of the complexity of some novel therapies, which require tremendous biotechnology knowledge on the part of patent examiners. Expanding that knowledge base should help in the future, as should avoiding the tendency to overregulate, say biotech firms.
“Europe, particularly France, has a world-leading position in orphan diseases,” adds Choulika, referring to uncommon diseases that require specialized medicine. This is partly attributed to the so-called orphan regulation passed by the EU in 1999 and 2000. The legislation adopted international criteria for orphan designation and provided incentives, such as 10-year market exclusivity and a streamlined approval process, to encourage the development of drugs aimed at smaller markets. According to EuropaBio, the European Association for Bioindustries created in 1996 to provide a voice for the biotech industry, the EU regulation has spurred innovation. By 2005 it had covered more than 450 applications for orphan designation, of which 22 were later approved for market.
European biotech chief executives say they are encouraged by government efforts, both the EU’s and individual countries’, to support their industry. “There has certainly been more support for R&D from the French government,” says Philippe Archinard, CEO of France’s Transgene SA (TNG), pointing to its research tax credit program, which refunds up to 50 percent of every euro spent on research and development. For Transgene that amounted to €6 million ($8.8 million) in 2008, “certainly an incentive to grow our business.”
