Here's an article, from Science on the Biotech industry in Europe, which reveals a lot of what is right and wrong with business and the entrepreneurial spirit under in Europe:
The biotechnology industry first took root in the United States more than two decades ago. Since then, a combination of visionary life scientists, aggressive venture capitalists, and the determined support of state and local governments has created a series of world-class biotechnology clusters, among them, cities and states such as San Francisco, Boston, San Diego, Seattle, Maryland, and North Carolina.
Commercial biotechnology has taken longer to catch fire in Europe. Within recent years, however, several European governments have awakened to the potential benefits of a strong biotechnology sector. "Politically, Europe is becoming a more conducive environment for biotech businesses," states European Life Sciences 99, a report issued by consulting firm Ernst & Young. "Governments are looking for ways of establishing supportive infrastructure and changing tax regimes to encourage venture capital investment and entrepreneurial risk taking." Specific regions in Europe, often stimulated by national and local governments, have started their own aggressive efforts to create effective local bases for industrial biotechnology. To set up successful clusters, however, these regions need more than government support. Just as in the case of North America (see Science advertising supplement, May 7, 1999, page 989), significant factors include good relations with academic departments that specialize in the life sciences, the availability of educated venture capital, and the development of critical masses of companies involved in biotechnology and related activities.
Three other factors that have had relatively little impact in North America influence the growth of biotechnology in Europe. They are state organization of scientific activity, which in some countries controls what scientists can and cannot contribute to commercial enterprises; an attitude toward failure that is far more conservative than that in the New World; and public opinion, which is frequently against the growth of biotechnology.
Thus, the continent that created Dolly the sheep, the world's first cloned mammal, is now in the midst of a raging debate about the acceptability and labeling of genetically modified foods. "The public believes it has the right to have a say in the debate, not just as a consumer but also because it is subsidizing much of the scientific enterprise through research grants and tax breaks," states the Ernst & Young report. "The public is looking to the politicians to focus on the detail to ensure that it is not exposed to avoidable risk."
Attitudes toward risk also differentiate Europe from North America in terms of growth opportunities for the biotechnology industry. "The culture is still very negative towards people who have failed in business," says William Powlett Smith, who works in Ernst & Young's British branch. "It's very difficult to obtain backing once you've gone bust once."
Such attitudes do not have an entirely negative impact. Financial caution seems to act as a kind of Darwinian screen, one that acts very fast. "In comparison with typical U.S. companies, German biotechnology companies have to get their first revenues very quickly," says Ralf Kindervater, general manager of Biostart, a broker that helps biotechnology start-ups in Jena, Germany. "That means that the start-ups are rather healthy. They don't have to keep going from one financing round to the next."
"...the majority of economic development sections and the local authorities have realized what a bandwagon technology is. Biotechnology is the 'in' technology." Lyn Davies, Bioscience Innovation Centre |
Certainly, Europe's biotechnology industry remains small compared with the transatlantic behemoth. The U.S. industry has stabilized at roughly 1,400 biotech corporations. Europe, by contrast, has no more than approximately 400 established companies in the business, although start-ups are continually emerging from incubators to become fully fledged firms.
Biotechnology clusters like those around San Francisco and Boston are only just beginning to appear in Europe. Such clusters are critical to the industry's growth, according to Pascal Brandys, chairman and CEO of Genset, the largest biotechnology company in France. "It's very important that these centers exist and are developed," Brandys says. "It has been one of the reasons for the success of the U.S. industry. It seems to be an absolute prerequisite to be in a cluster. But there are no more than five or 10 clusters in Europe." That number will grow rapidly, however. Governments, local authorities, and private organizations throughout the continent have plans for biotechnology centers. "Everybody is competing, because the majority of economic development sections and the local authorities have realized what a bandwagon biotechnology is," says Lyn Davies, scientific consultant to the Bioscience Innovation Centre in Sittingbourne, Kent, which is roughly 50 miles southeast of London. "Biotechnology is the 'in' technology."
So far, the U.K. has been the 'in' country. "By any qualitative measure, the U.K. still leads Europe," says Gary Clements, an international technology promoter with the U.K. Department of Trade and Industry. The Thatcher government's encouragement of entrepreneurialism in the 1980s stimulated the creation of a generation of British biotech companies, many of which still survive and even thrive. Indeed, over two-thirds of Europe's biotechnology companies whose stocks are publicly traded are British. "Venture capital is much more developed in the U.K. than elsewhere in Europe," explains Powlett Smith of Ernst & Young. "We have a stock market that is the biggest outside America. And the political environment and links with the United States helped."
As biotech's business image has risen, so has interest in starting up new clusters for emerging companies. Several British biotechnology companies have set up shop in the science parks created a decade ago. Regions throughout the U.K. are now fighting hard to attract both capital and companies.
Britain's route to success in biotechnology is not the only one. Germany has parlayed a unique government-inspired initiative into second place in Europe's biotechnology league. Concerned that the country risked failure in commercial biotechnology, the German federal government set up a competition among the nation's regions in 1996. The goal: to create the best environment for the commercialization of biotechnology, by using monies from the federal government and regional governments, as well as persuasion.
The competition produced far more winners than losers. For while only four "BioRegions" -- centered on Cologne, Heidelberg, Munich and Jena -- received federal funds for winning the competition, the exercise showed that other regions had the ambience and outlook to attract biotechnology companies. "Some of the non-winner regions had dramatic developments." says Kindervater. "It's like catching up to the runners ahead of you in a race." Thus Jena, in the East German state of Thuringia, is becoming a significant center for small biotechnology companies. "We are told we are where the biotechnology center in Research Triangle Park, North Carolina, was 10 years ago," says Kindervater.
Other European nations have joined the trail that leads to biotech success. "There have been a lot of national initiatives like Germany's BioRegions," says Brandys.
Two years ago, "the French government realized that it needed to support a biotech industry," says Donny Strosberg, dean of the biochemistry graduate school at the University of Paris and vice president of the lobbying organization France Biotech. "It has now proposed new laws, tax measures, and support for people who will leave the university system temporarily to start up companies in incubators."
Life scientists in Scandinavian countries have also caught the business bug. "There's a very strong move toward entrepreneurialism in this region," says B±rge Diderichsen, director of corporate research for the Danish pharmaceutical company Novo Nordisk. "Many more people studying science are becoming interested in making inventions and business plans." Indeed graduate schools throughout Europe have started to offer life scientists courses in entrepreneurship and business.
In Amsterdam, meanwhile, a new venture capital fund called Life Sciences Partners (LSP) is seeking investment opportunities in the Netherlands, Belgium, Luxembourg, and other parts of Europe. "We have about $50 million and are aiming for $80-100 million," says Tom Schwarz, one of the partners. "LSP is dedicated to human life sciences and biotechnology." While specialty funds of this type are common in the United States, adds investment manager Mark Wegter, "they're a new item in Europe."
The foundation of any national or local biotechnology cluster is a solid source of ideas with commercial potential and qualified individuals who can exploit those ideas. These questions can usually be found in strong life science departments in universities or research institutions. In this case, Europe has strength in depth.
In England, both the ancient universities of Oxford and Cambridge and more modern institutions provide a steady source of world-class research. Scotland boasts 13 universities, five medical schools, two veterinary schools, and five government-funded agricultural research institutions. The latter institutes include the Roslyn Biomedical Research Institute, home of the first cloned sheep. "The Dolly project gave us worldwide exposure," says Ken Snowden, senior project executive at Scottish Enterprise, a government-funded promotional organization. On mainland Europe, Germany has a long history of excellent life science research in its universities and Max Planck Institutes.
Achievement at the basic research level does not necessarily point to commercial exploitation. France has strong academic centers for bioscience in Paris and Strasbourg, among other cities. However, says Strosberg, "we have a unique system. Most scientists in universities and research organizations are civil servants. So all their discoveries are owned by the state. Until Parliament passes a new law that is now before it, scientists are not allowed to own shares in companies they start."
The Netherlands has a similar problem. "The research system is relatively strong," says Clemens van Blitterswijk, CEO of the tissue engineering company Iso Tis. "The level of expertise in life sciences is high. But we lack a good entrepreneurial climate."
| Entrepreneurial Attitudes |
 | "Universities in the U.K. are finding that funding is less freely available from the government than it used to be. Forced to look at alternative ways to raise funds, these institutions are exploiting the knowledge from proprietary research for commercial gain." Carolyn Keenan, Ernst & Young |
Universities across Europe have started to wean themselves from dwindling government support by capitalizing on their biotechnological research. "The last five or six years have seen an increase in the demand for private capital to support promising inventions in Scandinavia," says Bj±rn Nordenvall, CEO of OXiGENE, a biotechnology company based in Lund, Sweden, and Boston, Massachusetts. "A lot of small biotechnology companies have been created by new collaborations between private capital and universities." Venture capitalists have begun to realize the promise of investing in biotechnology. "The creation of markets designed to fuel high-growth companies has been critical," says Brandys, Genset chairman and CEO. "This is a consequence of Europe's financial deregulation in 1996, which has reduced competition for capital among different companies." The emergence of small European stock exchanges has provided a necessary back-up for venture capitalists. "It gives them the choice of holding and selling stocks in an organized way," explains Strosberg of the University of Paris, who has started up several companies. "Investors need to know they can get out without hurting the company they helped to form."
Genset, France's largest biotech company, has emerged as a leader in taking advantage of stock exchanges. "We were the first biotechnology company to be listed on the French stock exchange," says CEO Brandys. "In June 1996 we had a very successful initial public offering (IPO) that raised almost $100 million. There haven't been many IPOs of that size even in the United States." Genset's actions set the stage for venture capitalists to support biotechnology throughout Europe. In France alone, says Brandys, "more than 800 million francs (over $130 million) is available for biotech start-ups." Some American venture capitalists, disappointed with low returns on biotechnology in the United States, have started to put their money into European ventures.
New investors are finding a ready welcome in Europe because their European counterparts are so cautious. European venture capitalists "won't get out of bed for an investment of less than ±2 million ($3.2 million)," says Powlett Smith. Davies, the scientific consultant in Kent, agrees. "Our venture capitalists don't know what venture means," he complains. "Most biotechnology start-ups have been self-financed or have relied on business angels."
Owners of businesses that go broke suffer particularly from this aversion to risk. "If your company fails, you're a loser in Europe," says Schwarz, a partner in LSP. In other words, it is almost impossible to obtain backing for a second venture after the first one has failed.
Ironically, the cautious nature of European venture capitalists can stimulate the flow of ideas in start-up companies. When IsoTis was founded in late 1996, says van Blitterswijk, "we almost had to make a profit from the start." As a result, adds Kindervater, "most new biotechnology companies are active on the international platform and have innovative ideas and technology. The typical German biotechnology start-up gets its first products to market very quickly."
German biotechnology owes at least as much to the federal government as to venture capitalists. Its BioRegion competition "acted like a catalyst," says Kindervater. So far, more than 400 biotechnology companies have started up in the top four BioRegions alone. In those regions, continues Kindervater, "different modules have been developed to promote start-ups and to run relocation programs for overseas companies, which will enrich the BioRegions."
Individual BioRegions determine their business strategy according to the amount and types of academic and industrial expertise available to them. Jena, for example, has a polytechnic engineering school that focuses heavily on medical technologies and biotechnology. It provides a ready source of engineers interested in business. Science faculty at the local Friedrich Schiller University and University Hospital promote local efforts to establish biotechnology companies. And several high-technology institutes, administered by the federal and state government, focus on tools such as new drug targets and optical techniques that will benefit biotechnology start-ups.
Other European nations have learned a lesson from the German federal government's financial encouragement of biotechnology. The Dutch government recently started a 100 million guilder ($47 million) program to encourage the creation of high-technology companies, particularly in the life sciences, during the next five years. Belgium pumps about half that total into biotechnology each year, largely into the Flanders region. The British government agreed this year, for the first time, to provide tax credits for small businesses. And the Danish government has recently established its Vaeksfonden growth fund. "If you come up with a reasonably convincing product and you have secured some investment already, you will almost automatically get about 40 percent extra in attractive loans," explains Novo Nordisk's Diderichsen.
| Finance at the Grass Roots |
In Britain, meanwhile, "Kent County Council has recognized the need to attract technology-based companies," says Stuart Holmes, site director of Sittingbourne's Bioscience Innovation Centre. "A lot of local areas in the U.K. are looking to attract biotech companies as they begin to realize their growth potential."
Like their regional counterparts elsewhere in Europe, local governments in the U.K. recognize the need to build up clusters of universities and companies of different sizes. "We've been looking at the interactions among organizations and the research base and the outside world," explains Snowden of Scottish Enterprise. "The more we can help companies interact, the greater the value we create, and the more competitive the companies become."
| The International Context |
Germany's BioRegions take a similar approach. "We look for U.S. companies that have problems with a bottleneck in their technology, or access to European markets, or manufacturing technologies," says Kindervater. "We are convinced that we have probable solutions in Jena 99 percent of the time--or we can set up a project team to find solutions. With this dedicated, problem-solving approach, I call Jena the biggest application lab in the world."
Several European clusters have devised business strategies to differentiate themselves from their competitors. At Sittingbourne, for example, Holmes is working to attract overseas biotechnology firms that want to test the European waters before committing to them. "My goal is to attract U.S.-based companies looking for a foothold in Europe for five or 10 years, rather than 25," he explains. "They can also dip their toes in the water for two months. We try to offer flexibility."
Internationalism is a two-way street. A few European biotechnology companies, including Genset, have started to establish research centers in the United States and Asia. Those centers help them forge business alliances with pharmaceutical companies, which many observers regard as a way to ensure stability for individual biotechnology firms. "In this area," says CEO Brandys, "European companies are maybe doing better than American companies."
Capable managers represent another target for Europe's biotechnology industry. "Many of these European companies desperately need people who have strong managerial skills," says Brandys. "This is a very new industry, and you need management with experience."
North America is the obvious source of such managers. However, European firms have great difficulty attracting even European-born executives back to their native lands. "There have been discussions about more extensive stock options and modifying the tax rules," says Novo Nordisk's Diderichsen. "The real stumbling block is the very high income tax levels in Europe. To pay an American a salary that gives him or her the same living standard found in the United States is next to impossible."
Of course, Europe can offer a few incentives. "Denmark is a safe country with a very pleasant living and working environments," says Diderichsen. "We don't worry much about criminals in the streets. We have high concern for the environment. And there are fewer social inequalities." Nevertheless, he continues, "the best way to attract managers is for Scandinavians to marry them." That is not entirely a flip comment. Ron Perot, an American professor who founded OXiGENE, moved the company to Sweden soon after he married a Swedish woman.
Individual governments and the European Union have started to tear down a significant roadblock to biotechnology start-ups: patent laws that fail to clarify whether discoverers or their academic institutions own the rights to inventions. In France, says Strosberg, "patent applications have to be taken out and then guarded against infringement by the research organizations, which are reluctant to do so as they don't have the resources. So opportunities have gone begging."
New legislation on patents and university-industry collaborations are already reaping dividends. "We have established a technology transfer committee, and formal regulations for the commercialization of discoveries," says Dirk Bohmann, a senior scientist at the European Molecular Biology Laboratory (EMBL), an organization based in Heidelberg, Germany and created by 16 nations. "We have formal ways in which EMBL can start spin-off companies and own stock in them. And since scientists became aware of this, there has been more patenting and licensing." So successful has been the process that EMBL has just created a company, EMBLEM, to coordinate its commercial activities.
| The Force of Public Opinion |
The debate has not halted the development of Europe's biotechnology industry. But it has forced policy makers and entrepreneurs to think hard about the industry's processes and products. Even Britain, which has the most market-oriented economy in Europe, has not avoided a major debate over the possible dangers posed by genetically modified foods.
"The more we can help companies interact, the greater the value we create, and the more competitive the companies become." Ken Snowden, Scottish Enterprise |
In the Netherlands the agriculture minister, acting on the recommendation of a government-appointed committee of ethicists and other independent advisers, banned a process called nuclear transfer, which was used to produce transgenic animals. The ban forced Pharming NV, a Dutch company that produces medications in the milk of such animals, to close its farm facilities in the Netherlands, and to transfer its nuclear transfer work to Belgium and the United States. "Biotechnology companies are vulnerable to pressure groups, who choose their opponents very carefully," says Hans Herklots, a life science consultant with Praaning Meines, based in The Hague. "We don't have the counterweight of a political establishment that dares to say that biotechnology is an industry of the future, with high-quality jobs." The biotechnology industry has found an effective counterargument to protests by green groups and animal rights organizations. Companies emphasize the likely health benefits of their activity and downplay the use of biotechnology in agriculture. "The industry in Europe still focuses primarily on biomedical applications, which are regarded positively by the public," says Snowden of Scottish Enterprise.
Indeed, pressure groups' suspicion of biotechnology has had one valuable outcome. Because of the public debate, says Snowden, "the industry is very highly regulated. The public regards that as a positive thing because it means that the industry is transparent."
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