“These are very small companies,” says Rod Budd, Ernst & Young’s Canadian life science leader. “Many of them received only seed or angel money, and they continue to operate within government or educational institutions. Their ability to grow is limited.”

Montreal and Toronto host the largest concentrations of biotech activity in Canada and in many ways resemble the classic clusters found in San Francisco and San Diego. Greater Toronto is one of North America’s largest centres of biotech activity and is home to more than 100 life science companies, including GlaxoSmithKline (GSK), Eli Lilly, Aventis Pasteur and AstraZeneca.

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BioMed Développement, a private non-profit organisation, is dedicated to promoting companies in Quebec’s greater Sherbrooke region. It runs the Sherbrooke Biomedical Park, a 180-acre site adjacent to the Sherbrooke Health Campus. The site is dedicated to innovative companies in their research and development (R&D) or production and commercialisation phases. A host of tax incentives are available to encourage companies to the location.

With more than 40 research institutes, the Canadian capital region of Ottawa is an emerging cluster for life science activities. More than 100 life science companies are creating new, highly skilled jobs there at a rate of 15%-20% annually. Anchoring Ottawa’s biotech sector is the 22-acre Ottawa Life Sciences Technology Park (OLSTP), home to Adherex Technologies Inc, Canadian Molecular Research Services Inc, the Ottawa Biotechnology Incubation Centre (OBIC) and Gamma-Dynacare Medical Laboratories.

Europe lags behind

Europe’s biotech industry is scrambling to reposition itself after its setback in recent years. For 2003, the latest year for which figures are available, Ernst & Young reported total European revenues fell by 12% to €11.27bn, a first for the industry.

“On the whole, the European industry has not enjoyed the buoyancy seen in the US,” says William Powlett Smith, leader of Ernst & Young’s health sciences group in the UK.

About 20 companies in the UK, Germany, France, Italy and Switzerland have the maturity, products and late-stage clinical trials necessary for their first listing on a stock exchange. Yet, overall, Europe is still trying to catch up with the US in launching new biotech companies.

“During the last market window, from November 2003 to June 2004, 30 to 40 companies went public in the US and there were only three major IPOs in Europe,” says Denis Lucquin, a managing partner at Sofinnova Partners, a venture capital group in Paris.

The EU does not offer EU-wide financial support to biotech development. “The industry is dealt with country by country,” says Johanna Pitman, vice-consul for trade at the British Consulate General in Boston.

UK hubs

The UK is Europe’s biotech leader in terms of revenues and market capitalisation. Although, even there, according to Ernst & Young, revenues fell from €2.9bn to €2.4bn, while market capitalisation increased from €9.4bn to more than €11bn.

Nevertheless, some regard the UK bioscience sector as second in the world in terms of size and importance. A quarter of the world’s top 100 medicines were discovered there and the country contributes 43% of Europe’s drugs. About 480 bioscience companies reside in the UK and 220 of them are involved in drug discovery, delivery and development. Among them are GSK and AstraZeneca.

The city of Cambridge is the UK’s long-time hub for biotechnology, particularly for drug discovery. Cambridge Science Park, established by Trinity College in 1970, is the UK’s oldest and most prestigious science park. Recently, park tenants Ionix Pharmaceuticals, a specialist in the discovery and development of analgesic drugs, and Reckitt Benckiser Healthcare, a subsidiary of the global health and household products company, formed a multi-product strategic alliance there.

Cambridge’s UK rival, the city of Oxford, is known for work in vaccines and antibodies. Other growing UK biotech centres are the cities of Manchester, York, Newcastle and Liverpool.

London, especially, has a stronghold in biotechnology thanks to its concentration of biotech companies and the number of trade shows held there. Last year, GSK and Imperial College announced a unique research collaboration in medical imaging that is leading to the construction of a new Clinical Imaging Centre next to Hammersmith Hospital in west London. The centre will be part of a new £60m research development by Imperial College. The agreement was one of the world’s largest industry-university collaborations in financial terms.

The UK is also making gains in stem cell research, which should create more investment opportunities. The Institute for Stem Cell Research in Edinburgh, Scotland, has undertaken world-leading research into mouse embryonic stem cells and associated growth and transduction factors. Northern Ireland, with Queen’s University and Belfast University, is also making contributions to animal and food science.

Across the English Channel, France, too, is promoting its biotech sector. Of the 300-odd biotech companies active in France, about 80% are spin offs from research organisations, such as CNRS, INSERM, CEA and INRA. The French biotech sector employs about 10,000 people.

“Today, 40% of all drugs manufactured in Europe are made in France,” says Olivier Griperay, vice-president of life sciences at the New York office of Invest in France Agency. The first subsidiary that US biotech heavyweight Genezyme Co formed was in France, he says.

French promotion

French prime minister Jean-Pierre Raffarin has set up a strategic council to promote the healthcare industry, which includes biotechnology. The council, which is made up of three government ministers (industry, research and health) and six French and international company CEOs, is charged with working on new measures with three priorities: innovation, legislation and taxation.

“Already one out of three biotech companies receives biotech public funds,” says Mr Griperay. “Eighty-five per cent of those funds come from national and regional agencies.”

One such agency, the French Agency of Innovation (ANVAR), provides interest-free loans to small and medium-size enterprises, covering up to 50% of expenditures relating to innovation programmes or technology transfer. “In 2003, it funded 489 life science projects for a total of $64m cumulative,” Mr Griperay says.

France already offers increased support for start-ups that are less than eight years old and expanded R&D tax credits. The credit cap has been increased from $7.2m to $9.6m and the total R&D tax credit pot is set to double to $1.2bn annually. Not all of that money will go into biotechnology, although these and other incentives are among Europe’s most aggressive for the industry. “The only other country with such an aggressive programme is Canada,” says Mr Griperay.

Paris holds its place as France’s magnet for R&D and biotech development due to its critical mass of infrastructure and its status as a financial centre and capital city. Other hubs include the Rhone-Alps region, Alsace, and Nord Pas de Calais. Lyon in the Rhone-Alps region offers a wealth of pharmaceutical companies in addition to being home to the bi-annual World Life Sciences Forum BioVision.

With 339 private and 11 public biotech companies, neighbouring Germany leads Europe in the number of biotech concerns. Research by Ernst & Young, however, shows that a number of these firms are financially strapped and running out of cash. Added to that, a large number have specialised in the development of a single product, thereby placing themselves in a vulnerable position. On the bright side, the number of drugs in pre-clinical development increased by 14% in 2003.

Clusters are found around Berlin, where the Max Planck Institute (MPI) of Molecular Cell Biology and Genetics is located; Heidelberg, where the European Molecular Biology Laboratory and venture capital company Heidelberg Innovation are situated; and Munich, where the Max Planck Institute for Biochemistry, the Ludwig Maximilian University, the Technical University of Munich and other research facilities are sited.

Swiss start-ups

Switzerland’s central location gives Swiss multinationals Novartis, Roche, Serono, Lonza and Syngenta easy access to biotech activity in the key markets of France, Germany and Italy. About 50 start-ups have been created in the past five years in fields such as functional genomics, research into premature birth and bioinformatics.

Biotech firms are located in 20 of Switzerland’s 26 cantons, although four regions stand out: the BioValley Basel Area, which is home to 78 companies based around Lonza, Novartis, Roche and Syngenta; in Zurich where there are 65 companies; the lakeshore from Geneva to Lausanne; and the Greater Geneva Region.

 

Part One (US, California, Boston)

Part Three (Asia, Singapore)