European biotech had a great year in 2000, apparently, and are in bullish mood
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The biotech buzzword is fusion; Born Of Cloning And Enthused By Genome Mapping, Europe's 75bn Industry Is Forging Alliances To Take On Us Rivals
Andrew Clark and Terry Macalister
The Guardian (London) April 26, 2001 SECTION: Guardian City
BODY: Andrew Clark and Terry Macalister In bright spring weather, Amsterdam's canal-side cafes proved tempting for Europe's leading biotechnology entrepreneurs, in town this week for the annual Bio-Deal conference. The mood among delegates was relaxed - there were even some attempts at jokes. Michael Ade, director of German company Ingenium, recited the names of his firm's menagerie of deformed mice - Sumo was genetically altered to be vastly overweight, while Arnold mighty mouse' and Claudia beauty mouse' were luckier recipients of Ingenium's gene fiddling. These are murine Adams and Eves,' he said. If you take the Bible literally, those two are the first examples of cloning.'
Such quips are not to everyone's taste. The public is deeply sceptical, if not angry, about using animals as drugs factories, and biotech is struggling to win popular approval generally. In a Eurobarometer survey last year, only 41% of the 16,000 people polled agreed that biotech would improve the quality of life over the next 20 years.
Those within the industry are in confident form, however, having enjoyed unprecedented success in 2000. Ernst & Young's annual snapshot of life sciences, published yesterday, calculates that European biotech raised 6.5bn ( pounds 4bn) last year, against 1.1bn in 1999, and the total capitalisation of public companies in the sector leapt 108% to 75bn. European biotech had a great year in 2000,' says the report's lead author Glenn Crocker. Every record which could have been broken has been broken. We have now got a fundamentally sound industry, with a set of companies which are actually delivering products - which is, of course, what they're there for.' Setting the pace Britain is setting the pace, accounting for five of the continent's top 10 biotech companies. Celltech and Shire are in the FTSE 100 index, producing both medicines and profits. Of Europe's 105 public biotech companies, 48 are in Britain.
Germany has a larger number of private companies but most of these are small, early-stage enterprises. Last year's surge was driven by enthusiasm about the human genome project, which mapped the body's genetic structure for the first time. Biotech also gained on the back of the dot.com boom, as anything hi-tech became fashionable. The recent downturn in the stock market has depressed valuations, although biotech has suffered less than internet enterprise. Despite this healthy picture, alarm bells are just beginning to ring. There is increasing concern that US biotechnology is pulling away from Europe's. Mr Crocker says: By and large, you could have an almost identical biotech company, and it will be valued at almost twice as much in the US as in Europe.'
In the conference hall at Amsterdam's luxury Krasnopolsky Hotel, overlooking the city's Dam Square, there was an audible intake of breath when one British firm, Vertex, mentioned that it had more than Dollars 700m ( pounds 476) cash in the bank after choosing to float in New York, rather than London. We're an Oxbridge company,' explained vice-president Iain Buchanan. We're based in Cambridge, Massachusetts and Oxford, in the UK.'
Vertex's bank balance outstrips the wildest dreams of its European rivals. America is operating on a different scale - one US firm, Amgen, which has made a fortune from kidney drug Epogen, is capitalised at more than 70bn - as much as the entire European biotech industry. In order to bridge this vast transatlantic gap, European firms are keen to form alliances, gaining strength in numbers and critical mass.
This week's Bio- Deal conference was typical - executives took turns to give 25-minute presentations showcasing their products and technology, in the hope that someone in the room may be a compatible partner. Antibodies British firm KS Biomedix was first up, detailing its method of capturing antibodies from sheep, while Pharmagene explained its technique of testing drugs in human tissue, rather than using animals. A German company, Micromet, then explained its Bites' - bispecific t-cell engagers, which activate helpful t-cells in the blood in the area of cancer tumours. Bites promise to reshape immunotherapy,' said vice-president Christian Itin. Some companies were explicit in their needs - gene therapy specialist Austrian Nordic declared that it wanted a partner to inject precisely 9.7m. Thrombogenics, which takes advantage of Belgian government grants because it carries out research in Flemish-speaking areas, urged someone to step forward to fund phase-three trials of its drug for heart attacks.
Nearly every speaker kept to the conference's 25-minute limit for presentations - a reflection, according to one delegate, of increasing professionalism in the industry. There were few questions from the floor, because the real business of the event was behind closed doors - in a corridor of partnering rooms', where executives could meet in private to thrash out deals. Most companies can boast a relatively healthy financial position, having taken advantage of last year's boom to raise funds from investors. Ernst & Young reckons 60% of firms have at least four years' cash in the bank, while 87% have at least 12 months' money. This means they can be selective, with less need to sell their science to multina tional pharmaceutical corporations. Biotech pundit Mike Ward says: The reasons people are looking for partners are much less defensive. The desperate need for cash is no longer there - it's more strategic.' One delegate commented: A year ago, the attitude was that any old deal would do the job. Now, people can afford to be more discerning.'
The number of tie-ups between biotech companies leapt 41% to 539 last year - including 54 mergers or acquisitions, and 403 strategic alliances. Yet for many in the industry, that is still not enough. Mr Crocker suggests that the only way for Europe to reach a level comparable to the US would be to form a hi-tech stock market along the lines of New York's Nasdaq. The continental equivalent, Easdaq, has failed to take off. He says: Pooling resources has got to be the way forward. Europe is far too fragmented. There are some people who might ask whether it matters that the US is extending its lead. It certainly matters to governments, and it matters to employees.'
One of Britain's best known biotech entrepreneurs, Sir Chris Evans, shares that concern. He told the Institute of Directors in London yesterday that there was no reason why Britain could not catch up with the US - but it would take at least 20 years. We have got a quality of science that is on par with America but what they have is a huge venture capital community, entrepreneurial management and a fantastically vibrant stock market in Nasdaq,' he said.
Dot.com bubble Venture capital firms in the US were ploughing in two to three times as much cash at ever stage of development: While our companies might raise Dollars 70m they will raise Dollars 470m at one go.'
Now chairman of the incubator Merlin Bioscience, Sir Chris complained of the British view that biotech was little different from the dot.com bubble. A young broker, he said, had refused to support his plan to back a biotech venture into a dot.com shell, which had already raised pounds 40m but had no operations. The broker said that biotech was no different from internet businesses. That young broker did not know his arse from his elbow. I hope he is in the audience,' he told Britain's leading directors. Three years ago, the biotech world was rocked by the near-collapse of British Biotech, one of the industry's standard-bearers.
This year, Dolly the sheep's creator, PPL Therapeutics, faces a funding crisis. But the background is very different - this time, confidence in the industry is much less fragile. Rather than battling to stay alive, companies are competing to create the first pan-European biotech multinational.