Fifth of small EU biotechs 'at risk of closure'

Without immediate EU support one in five small, innovative biotech companies face the prospect of going to the wall due to the credit crunch, according to industry representatives.

The European Biopharmaceutical Enterprises (EBE), a trade association representing biopharmaceutical companies of all sizes operating in Europe, warned that the industry was in a parlous state and without protection long-term damage would be caused by the imminent failure of many companies.

A report comminssioned by EBE and published by French research group Alcimed claims that the majority of these small companies have enough funding to cover only 18 months of operation or less. "For many, the clock on those 18 months has been ticking ominously for some time," it added, warning that the crisis could deepen further in 2010 if the current situation persists.

EBE president Carlo Incerti said: "EBE is looking towards short term emergency solutions, which could be implemented in the next six to 18 months, and longer term sustainable measures."

He called in the short term for an expansion of tax credit on r&d expenses in beyond the three EU countries - France, Denmark and Austria - that have implemented them so far. Start-ups could be boosted by extending and implementing the Young Innovative Company status to more member states based on specific inclusion criteria, such as level of innovation and size of r&d expenditure.

The report sees a major setback to Europe's future competitiveness in the medium-to-long term, with bankruptcies erasing the benefits of health research already undertaken by biotech SMEs. "For medicinal products under development, which already have a limited patent life, this will further reduce their appeal to potential investors," it added.

According to Incerti, Europe could do much more to help biotech's long-term sustainability. He highlighted EU programmes, like CIP (Competitiveness & Innovation Framework Programme), EIF (European Investment Fund) and JEREMIE (Joint European Resources for Micro to Medium Enterprises Initiative). "By using these instruments, matching funds could be provided in support of Venture Capital in an attempt to bring back investors' confidence in the biotech sector," he suggested.

The report predicted the loss of 20,000 high-skill, high-value jobs and a permanent damage to Europe's "most innovative sectors". The problem is particularly acute in healthcare biotechnology because product development can take up to 12 years of research before companies have a viable, marketable product.

The EBE has begun a dialogue with the European Commission regarding the recommendations outlined in the study for the EU and member states to act. Emmanuel Chantelot, executive director of EBE, said: "The present situation does not demand new legislation so much as helping out with the present situation by mobilising the European institutions like the European Investment Bank (EIB)."

Ton Van Lierop, spokesman for Enterprise & Industry Commissioner Gunter Verheugen, pointed out that for small and medium-sized enterprises the EIB has doubled its lending capacity for the period 2008 - 2011 to Euro 30bn, adding that there may also be "research money" from the Commission.