or biotech to blossom in any European region, several key parameters must exist locally and simultaneously:
And some might add: a sunny environment with good international schools for kids of management and biotech-savvy large pharmaceutical companies. I will focus on academic research and financial support of startups. The most important factor in biotech cluster success is academic research. Although some companies, like the French firm Carmat, an EADS spinoff which is developing the most advanced totally artificial heart, come out of corporations, they benefit from academic backing. Carmat would not exist without the academic support of Paris VI University.
Some other successful biotech companies, like Actelion of Switzerland, were also corporate spinoffs. However, most innovative biotechnology results from convergent, breakthrough academic discoveries that evolve from basic science. Novel science, resulting in broad patent applications can lead to strong licensing out to start-up companies that attract seed financing from experienced venture capitalists.
Let's remember that anti-cytokine monoclonal antibodies, a huge biotechnology success to treat chronic inflammatory diseases (anti-TNF) and cancer (anti-VEGF), came from the separate discovery of hybridomas and separately from the discovery of cytokines.
Consequently, government policies are critical to academic research and resulting biotechnology. Although Germany has strong life sciences academic research and connections to industry with Fraunhofer, its limitations in venture capital, stock market and entrepreneurial spirit have limited its biotechnology potential.
The U.K. has for many years strongly supported life sciences research with a competitive funding policy that successfully promotes excellent research. The MRC [Medical Research Council] and the Wellcome Trust Foundation are effective vectors of academic research. Four universities — Oxford, Cambridge, Imperial College of London and the University College of London — rank among the world's best universities in life sciences, directly competing with U.S. universities. The new initiative from Prime Minister David Cameron to allocate Â£200M (US$300 million) for the development of a series of technology innovation centers is interesting. But one could wonder if the thematic focus might not slow down true — i.e. unexpected — innovation as compared to an increase of the MRC grant funding budget.
Belgium has had clear success with its universities, especially Louvain. France has declined in life sciences research for 30 years despite prestigious institutes like Pasteur Institute or INSERM, but archaic management and funding systems have impaired productivity and competitiveness, and no French university ranks in the world's top 10. The French government has launched an unprecedented reform of universities which should result in better ranking in the years to come. Universities are becoming more autonomous, and the creation of the Agence Nationale de la Recherche (ANR) is a major move.
Following the example of foreign grant agencies (NIH, MRC, Wellcome Trust), ANR provides funding to laboratories based on grant applications, peer review and a competitive process. That changed the sleepy attitude of many scientists in France. Instead of getting a low, but secured, annual budget independent of scientific productivity, they now have the opportunity of a greater, but unsecured, budget relying more on scientific excellence and productivity.
However, ANR remains a secondary funding source for French academic research, and its independence and budget still need improvements. A very large new funding source — le "grand emprunt," a €35-billion (US$46-billion) French state funding — will fuel many universities and laboratories. However, one could hope for a greater international peer review process and transparency to maximize its effectiveness. Still, the pan-European "nationalistic" approach to academic research marks the limitations of our European model.
Europe competes with the U.S. and now China in life sciences, not internally. To further increase European academic rank in the world and emergence of the best clusters, funding should not be distributed on a national basis, but on a European basis (if avoiding unnecessary bureaucracy and rules). FP7 (a European Commission program) and the European Research Council (ERC) are excellent initiatives. ERC ensures pan-European, peer-review competition of academic research.
However, the ERC budget in life sciences, dedicated to academic research, is only about €400 million (US$527 million), compared to the $30 billion NIH budget. Alas, it is unlikely governments will accept such funding increase of the ERC, implying a decrease of their direct national funding. The ERC serves also as a very good index of national and regional academic excellence: An interesting 2009 surprise was that France ranked first, Germany second and the U.K. third for selected ERC life science grant applications. Because of a small sample of funded grants, it will be important to see 2010 results to see if this is a lasting European trend. Also, a success rate of 7 percent can only be discouraging for submissions. A more standard 15 percent success rate would provide a better balance, implying of course a sharp increase in budget.
Government support of startups and an adequate financing environment are essential. France has made an effort in recent years to offset the high cost (as compared to the U.K., Germany and California) of employment, with the status of the Young Innovative Enterprise (JEI), which I had proposed to former President Chirac in 2002. This status cancels for startups all social costs for eight years on researchers' salaries, decreasing the overall cost of employment by 25 percent.
Unfortunately, the 2011 finance bill dramatically affects this successful incentive scheme. The 30-percent research tax credit is another strong French incentive, unfortunately favoring broadly large rather than small companies, at a high cost for taxpayers and for a questionable impact on value creation.
OSEO is a French grant agency targeting small companies, and is effective in selecting the best R&D projects, funding up to 50 percent of the project cost. Seven Truffle Capital companies were funded by OSEO in the past two years. No other European country benefits from such a strong combination (JEI- research tax credit-OSEO), which explains why venture capital and IPOs have continued to support French biotech companies in recent years.
Venture capital and the stock market are essential to biotech companies' growth and success. Unfortunately, the financial crisis and regulations of prudential ratios for banks and insurance companies decrease the appetite of investors for private equity. The strong tax incentives in the U.K. and France continue to make venture funds reasonably well funded, while German venture capital has sharply declined. The stock market for biotechnology follows the trends of the general market. But good companies can make it even in a difficult environment. Three Truffle Capital biotech companies — Neovacs, Deinove and Carmat — became public on the Alternext stock market this year and two are preparing for a 2011 IPO.
Overall, only lasting efforts can propel any region or country to the top of the biotechnology sector. Given the needed combination of successful academic research and proper state and private financial environment, the U.K. and France are probably in the best position to host the most successful clusters, followed by Switzerland, which has a strong academic, pharmaceutical and financial environment. However the healthier German economy should translate into a strong comeback.
Let's hope we move into a truly European policy era, which will support and promote the bests in Europe, wherever they are. Otherwise, others — such as Brazil, which has the will, the cash and the sun — could surprise everyone.