The French government has launched a new investment fund to attract capital to the country's languishing medium-sized biotech companies. However, scientists argue that the fund is not nearly generous enough to help ease the chronic investment shortage for French biotech companies hoping to grow into global players.
The fund -- termed the fund of funds for technology (le Fonds de Fonds Technologique (FFT)) - plans to spend 150 million euros each year over the next three years, matching VC investments in medium-sized companies that have the potential to go to the stock market. In contrast to previous funds, which have distributed funding more equally among companies, the FFT will support VCs targeting companies that have been identified as innovative and most likely to bring new products to the market according to the highly competitive criteria of the European Investment Bank, which is itself contributing 50 million euro to the FFT.
Government representatives said they hope the fund will help bolster biotechnology in France, which is currently outpaced by other developed nations. France has only 6 listed biotech companies, compared with 46 in the UK and 310 in the USA. No biotech company has gone to the stock market in France since 1999, sparking fears that the country's bioscience industry is no longer capable of exciting investors.
Indeed, investors pumped only 155 million euros into the French biotech industry last year - down from 230 million euros in 2002. According to France Biotech's 2004 Annual Overview of the French Biotech Sector, the decline in investment in 2003 is even steeper if the analysis excludes the 53 million euros raised by Flamel Technologies on the NASDAQ. Only one French biotech company managed to raise more than 30 million euros in 2004.
Laurens Theunis, director of the Emerging Enterprises Council at EuropaBio, the European associations of bioindustries, said that the new FFT funds could prove to be significant if they are channeled to the few companies in France that really do have the potential to bring innovative products to the market. "France badly needs a success story to attract capital," he told
But while this new fund could make a dent in the problem, it is not nearly big enough to solve it altogether, said Theunis. "A company needs 200 to 300 million euros to bring a drug to Phase II levels, not including failures, and the overall cost of drug discovery and innovation approaches 900 million euros," he said. "Of course, this new fund is a step in the right direction, but compared with the budgets for biotech of the National Institute of Health in the US, for example, it is peanuts."
Caroline Carmagnol, spokeswoman for France Biotech, the French biotechnology association and lobby group, said that the government had done a lot to improve the legal and business framework for biotech companies in 2004, including creating a special status for young, innovative companies that exempted them from tax and social contributions. Still, more needs to be done, she added.
"The FFT fund is a great step, but not sufficient. We need to give investors fiscal incentives, such as tax breaks, to invest in biotech," Carmagnol told
Adeline Farrelly, communications manager of EuropaBio, told
She added that European biotech would also benefit from "harmonized legislation and a central stock market," like in the US. "As it is, there are 31 stock markets in Europe creating lots of problems."