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Mid-sized European biotechs ‘need more support’

New report finds that the industry is fairing better in the US than in the EU

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The European bio-pharmaceutical sector faces a range of challenges that need to be addressed if the sector is to flourish, according to the European pharma trade group EFPIA.

In a new report commissioned by EFPIA and compiled by Charles River Associates (CRA), the authors were asked to explore the extent to which barriers to growth exist, and to what extent companies of different sizes face a variety of challenges in raising capital to fund R&D.

The report: Access to finance and barriers to growth in the innovative biopharmaceuticals sector, examines the gap between Europe and the US in terms of growth of companies in the sector, and the underlying causes. 

Its authors underscore the point that growth rates of mid-sized European-based companies “lie substantially” below those of US counterparts. 

While Europe has a similar number of biopharmaceutical companies investing between €100m and €999m and even over €1bn annually in R&D, there are significantly fewer companies in Europe investing in the €30-99m range. 

This happens irrespective of the fact that quality and quantity of fundamental research is broadly similar in the EU and the US.

A lack of private venture capital to fund early, loss-making development phases of proof of concept and essential safety testing in the EU has been identified as a major factor for this discrepancy. Yet equally importantly, these European funding shortfalls extend to other sources of finance used in later stage development.  

The traditional model for funding this sector came from investment firms and venture capitalists (VCs) that had plenty of money to invest in risky - but potentially highly rewarding - life science start-ups.

But VCs both in the UK and globally have become less prone to risk since 2007, as the banking crisis that led to the financial crash was due in part to high-risk financial ventures. 

This means more VCs have shied away from making bigger investments and this has decimated the sector in Europe, as traditionally biotech lives and dies by this type of funding. 

They have come back in the US - in fact 2014 saw something of a boom in this area - but this investment level is not being matched in Europe. 

The report's authors add that public funding sources in Europe are providing investment support for companies, but historically this has mostly focused on the earliest stages of their development and on particular types of company.  

Article by
Ben Adams

11th May 2015

From: Sales

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