Europe’s health sector worried about post-Brexit investment dearth

Within Europe, most investments in the biotech sector go to the largest markets, with Germany, the UK and France attracting 51% of all foreign direct investments. [Shutterstock]

Fragmented, multilingual and over-regulated: Europe is currently not an attractive place for investors and things could get worse after Brexit, experts from the life sciences industry have warned.

Even with a much larger market than the United States and a wealthier one than China, the European Union still lacks attractiveness for investors, industry experts said in a closed-door roundtable held as part of this year’s Biotech Week in Brussels.

Considered as the main biotech event in the world, this year’s edition focused on the link between biotech and the United Nation’s Sustainable Development Goals (SDGs). The event took place across four continents, from 24 to 30 September.

The organisers’ aim was to highlight the biotech industry as a driver for the advancement of SDG number three, which is related to good health and well-being. Biotechnology, they argue, is a cornerstone of Europe’s competitiveness in terms of research, innovation and industrial growth, as well as the number of jobs and new companies created.

But industry morale in Europe is low. Today, all the fastest-growing companies in the world top 50 of the life science industry come from the United States or Japan. Every year the US launches more than 60% of new drugs, compared to 15% and 10% respectively for Europe and Japan.

The roundtable “Life Science Investments in Europe” organised by the pharmaceutical company Johnson & Johnson tried to address the lack of investment in the sector, with contributions from industry, academia, research institutes, and venture capitalists.

Biotechnology in Europe

Biotechnology could help patients across Europe gain access to innovative therapies, for example, against rare diseases. Proponents of bio-medicines also claim that precision therapy, because it is more efficient, will ease the burden on member states’ ailing healthcare systems.

Fragmentation, the Achille’s heel

“United in diversity” is proudly used as the European Union’s motto, but when it comes to attracting new investors in the biotech industry, diversity is seen as a massive obstacle.

Language is a natural barrier that makes everything more expensive, one of the participants said. But fragmentation affects also tax systems, research funds and investments.

Within Europe, most capital goes to the largest markets, with Germany, the UK, and France attracting 51% of all foreign direct investments. And tax incentives are sometimes focused only on certain regions within a country, which discourages nation-wide investment strategies.

While harmonisation is the best way of addressing fragmentation, it is not the only one. Other solutions include increasing cooperation and building an academic network in order to bring more people from different countries together.

This is where the digital revolution comes as a big opportunity: it allows better communication among countries and a more connected research infrastructure.

If fragmentation and over-regulation are still seen as Europe’s biggest weaknesses, political stability has become an emerging risk, with Brexit adding another question mark. The uncertainty about the outcome of negotiations does not provide a stable environment for investors, both in the UK and EU.

After Brexit, the United Kingdom will join the front of non-EU drug developers along with Switzerland, Russia, and Norway, depriving the EU of the strongest new drug pipeline in Europe.

UK biotech boasts Europe's best pipeline as Brexit looms

Britain’s biotech sector boasts the strongest new drug pipeline in Europe but industry leaders say it needs continued access to global talent, funding and regulatory clarity to thrive in the future – all of which could be jeopardised by Brexit.

We need money

Not all indicators are negative, however. There are some reassuring results when looking at  markers such as the percentage of investment related to GDP or investments per capita. But this could lead to misinterpreting the situation in Europe, industry experts warned.

“The only indicator that matters for investors is the amount of money spent,” said health policy consultant Stefan Gijssels, who presented the findings of a study commissioned by Johnson & Johnson.

The amount of public research investments made by the US in health is almost three times that of the EU, with €27.1 billion against €11.7 billion. The Johns Hopkins University alone has a research budget of €2 billion, while the most “innovative” European university, KU Leuven in Belgium, has a research budget of €454 million.

Lack of follow-up investments in EU research project funding is one area where Europe could improve.

“Europe could decide to prioritise research on a certain disease, for instance, colon cancer for three years. At the end of the time period funds run out or are no longer provided, but it does not mean that the disease is eradicated,” noted a participant during the debate.

The quality of research in Europe is highly regarded, but more efforts are needed when it comes to the translation of this research into something that could entice investors.

Europe’s lack of entrepreneurial culture was highlighted once again in this context. “In Europe, you are not allowed to fail, while in the US you can learn from your errors and start all over again,” an attendee said speaking about biotech startups.

Switzerland is viewed as an example of a small country with limited resources which acts like a giant on the biotech global stage, thanks to its cultural attitude of doing business.

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