EU biotech companies lagging behind the US, warns report

May 17, 2004

Brussels, 14 May 2004

A recently published report claims that the European biotechnology industry is in a vulnerable position compared to the US, and singles out the UK as a potential market leader.

The Ernst & Young 11th annual European Biotech 'Refocus' report reveals that in 2003, total European revenue from the sector fell for the first time. It appears the turnover in the sector slid 12 per cent from the previous year to 11.3 billion euro, dropping still further behind the dominant US industry. The report also highlights a 17 per cent drop in research and development (R&D) spending and a five per cent reduction in staff.

Bruce Gellatly, life science partner with Ernst & Young explained that 'on the whole, the European industry has not enjoyed the buoyancy seen in the US. It has been forced to respond to challenging funding conditions and lack of investor confidence by cutting costs, curtailing programmes and adjusting business models.'

This report follows a recent warning by the Economist Intelligence Unit that the EU's largest economies will continue to lag behind the US for the rest of the decade because of their slow adoption of information and communications technology.

On a positive note, however, the UK has been identified as the dominant player in the European biotech industry, with 43 per cent of total market capitalisation, worth 9.4 billion euro, and 37 per cent of revenue, worth 2.9 billion euro. Furthermore, almost half of publicly-listed companies in the biotech sector are located in the UK.

Dr John Dodd, director of the Sittingbourne Research Centre (SRC), explained that the UK has managed to achieve global status thanks to its excellent science research centre infrastructure, both at university level, and increasingly on the commercial side as well.

William Powlett-Smith, head of Ernst & Young's UK Health Sciences Group, also emphasised the academic side, congratulating universities for leaving some of the intellectual property rights with the scientists. Mr Powlett-Smith explained that the UK has been the most successful European country in fostering the environmental spirit. 'From 1979, finance was available on a selective basis. The environment was right, we modernised our economy a lot earlier than the rest of Europe, plus we have a vibrant venture capital market and a world class stock market.'

British biotech companies have also benefited from the support of public, semi-public and commercial bodies. This meant that by the end of 2003, of the top ten bioscience companies in Europe, six were British.

However, Mr Powlett-Smith warned that competition is increasing. 'The European country with the most growth in spin-outs is Switzerland,' he said.

Mr Powlett-Smith called for the EU as a whole to take action as it was failing to capitalise on world-class research, leaving companies vulnerable to takeover by larger US rivals.

'There is no doubt that Europe has plenty of examples of world-beating science, which is reflected in the product pipeline, but scientific advances are not enough. Companies, investors and governments must take bold steps to ensure that they realise all the benefits of knowledge and hard work. We desperately need a more entrepreneurial environment to support the science,' said Mr Powlett-Smith.

'The paramount lesson of biotech is that it's global,' he added. 'To succeed, you have to have a global view and look for partners outside the immediate area. The importance of the single market is a key lesson; we don't have one in Europe, but the US does.'

Mr Gellatly agreed, stating 'the big question is whether the biotech industry in Europe is robust enough to be sustainable and ultimately profitable.'

For more information on the report, please visit: ernational/Biotechnology_Reports_2004

CORDIS RTD-NEWS / © European Communities

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