The Biotech Boom

Cultural barriers to genetics research are also coming down. The big head start the United States currently enjoys (U.S. biotech firms total more than 1,300, compared with about 700 in all of Europe) has as much to do with society, culture and politics as with science. There's the fabled American entrepreneurial spirit, which means that a person with an idea can try and fail and try again. A German scientist who set out his shingle would never have been welcomed back to his university if things didn't work out. Moral and ethical objections to genetic manipulation, especially in Germany and Denmark, delayed scientific research for years and drove scientists to the United States (they still do in many places with GM foods). By and large, though, attitudes toward genetics are quickly changing.

The financial industry is also showing more sympathy toward new biotech ideas. In the past, financial markets outside the United States also simply were not geared to support start-ups. Since most big pharmaceutical companies found biotech research too risky, scientists rely on cash from venture capitalists to fund their research and commercialize it. But venture capitalists won't fork over the dough unless they can make a killing when the start-up sells its stock on the market. In the past three years Germany, France, Italy and other countries have set up Nasdaq-like markets for small, high-tech companies, which have allowed firms to lure researchers back from the United States with stock options. "It's increasingly attractive for bright young scientists to work for start-up companies rather than go and work for the big corporate giants," says Andre Pernet, president of French biotech firm Genset.

Venture capital has only recently made an appearance in continental Europe. Total investment in European biotech was ¤579 million in 1999, less than half that of the United States. But that's up 53 percent over the year before. And this year several big players such as Merlin Bioscience have raised hundreds of millions in new funds (interview).

Britain, of course, was first out of the gate in starting its own biotech industry back in the mid-1980s. It now has 560 biotech companies. Of 70 or so publicly quoted biotech concerns in Europe, half are British. This includes the grandfather of British biotech firms, Celltech, which has pioneered drugs that exploit the body's own antibodies to combat disease. This year Celltech posted a profit for the first time.

Germany is the next big bet. Peter Stadler, former head of biotechnology for chemical giant Bayer, remembers all too well the protests over the 1980s plant. "We had already had a scientific brain drain because of the Nazis," says Stadler. "I was so convinced this should not happen in our country again." These days no one is trying to cut him down. In a whirlwind about-face, Germany has embraced biotech as key to its long-term competitiveness. In 1993 the government passed new legislation designed to streamline decision-making in biotech projects. It then held a so-called BioRegio contest among 17 regions in 1995 and awarded 50 million marks each to Munich, the Rhineland near Cologne and the area including Heidelberg to help build research centers. And it is proposing to spend some 1.2 billion marks over the next five years on human-genome research at universities and institutes. Indeed, grant money has flowed so freely that for a while entrepreneurs could triple their start-up cash overnight with matching regional and federal grants. A law was tweaked to give scientists at universities and institutes the rights to their intellectual property should they decide to leave for start-ups. Suddenly, everyone was talking to each other. To rally the country, the government in 1997 even declared a national goal of catching up to Britain by 2000. It hasn't, but last year German researchers claimed 14 percent of all biotech patents applications, up from 10 percent five years ago. More than 400 biotech-related start-ups now pepper the country.

From across the Rhine, France has been paying close attention. The French government has increased its funding of biotech research tenfold since a decade ago, to $260 million. One of the beneficiaries is the Genopole research campus at Evry, near Paris. Founded in 1998, Genopole, also known as Genetic Valley, is a rambling series of buildings housing some of France's most promising new biotech companies. Geneticist Pierre Tambourin, president of Genopole Evry, aims to have 50 or 60 new companies up and running on the campus within the next two years. Other "Genopoles" are slated for 20 French cities. "It was absolutely essential that France do something," says Tambourin.