The pharmacogenomics wave does not seem to have hit European shores just yet: Venture capitalists there have a tepid interest in local SNP and pharmacogenomic startups, and companies there anxious about private-equity financing are in for a long, hot summer, most experts agree.
European VC companies invested around €1.3 billion in 170 local biotech companies in 2002, according to Windmill Reports, a private-equity tracking firm based in the Netherlands. Of those, 20 genomics firms managed to pocket €182 million.
By comparison, biotech companies in the United States, whose market is similar in size to the European Community’s, raised $3.2 billion among 262 deals during the same period, according to New York-based Venture Wire. Of this, $231 million went to 23 genomics startups. (The euro and the dollar enjoyed relative parity during most of that time.)
“Venture-capital interest in Europe is only a fraction of what is invested in the United States,” said K.K. Jain, head of Jain PharmaBiotech, which has recently published a report on pharmacogenetics and pharmacogenomics efforts worldwide. “The money’s there. It’s just that most of it has been spent on American companies. I think there is greater disinterest [among private-equity and institutional investors] in Europe” than in the United States.
But even though pharmacogenetics experts attribute several long-term factors to Europe’s arid VC climate — pharmacogenetics is in its infancy in Europe, stricter regulatory hurdles, a darker overall economic picture — some of them point to a quiet, slow-moving resurgence in at least one European country.
Johnny Come Lately
Europe came late to the pharmacogenetics ball. The discipline “started in the States,” Jain said in a recent interview with SNPTech Reporter. “Plus, the largest number of the biggest companies are in the States, so in terms of the amount of activity, it’s much more in the States than in Europe.”
To be sure, some countries in Europe play a greater role than others: Germany and the UK currently lead most biotech races on the continent. Meantime, pharmacogenetics activities in France and Sweden — with the French Centre National de Génotypage and the genotyping and sequencing muscle of Pyrosequencing, respectively — are enjoying increasing market traction.
These examples notwithstanding, there are “maybe two or three European companies and a couple of academic institutes” involved in pharmacogenetics, he said. “It is there, but it’s just the question of the magnitude.”
One factor behind Europe’s position is government regulation. The Food and Drug Administration’s relatively encouraging stance on pharmacogenetics has helped spur greater investment in these technologies. According to Jain: “There are some differences between European countries and the US that is mostly to do with the systems of health care. You can develop [genotyping or gene-expression] technologies in the same ways in Europe or in the US, but when it comes to applying it to patients, then it is different.”
Logistics also plays a prominent role in determining the speed with which new technologies are nurtured and commercialized. In Europe, for example, Jain said a “lack of cohesion” among disparate governments and various interests tends to nurture a bureaucratic hurdle to collaborative R&D.
“There is no common plan within the European Union,” said Jain. “Each country has its own style of investing in pharmacogenetics.” Pointing to the United States and the National Institutes of Health, Jain said “many projects start there. The NIH has an impact throughout the country because they support many projects and finance many things. There’s much more cohesion in the United States, even though each company there develops its own technology and many are competing. But on the whole, there is greater uniformity.”
Can You Spare a Euro?
One force that has helped slam the brakes on European pharmacogenetics R&D has been the global slump in capital markets. Because they are younger and more fragile, many European pharmacogenomics companies fare less well than their US-based counterparts in the current economy, said Jain. In fact, the current economic slide in Europe, particularly in Germany, has been a tremendous roadblock to European pharmacogenetic innovation.
“I would say Europe was catching up [to the States] very fast for a while,” said Jain. “But now with the economic slump, Europe has suffered much more than the US.”
German companies, until as late as one year ago, had been approachng the level of development present in the UK. “But in the last year I have seen a slump there,” said Jain. “The German government used to support pharmacogenetics research much more than any other government in Europe; they were giving good support to startup companies. But they are having financial problems, and the amount of cash has been cut down.”
It is difficult to determine how much money is spent to support European pharmacogenetics or genotyping companies. Groups like the SNP Consortium and the HapMap Project make it only slightly easier to take a snapshot of the pharmacogenetics industry in the United States.
“When I talk about personalized medicine, from the financial point of view [in Europe], it doesn’t appeal so much. It’s not so exciting for investors,” said Jain. “They still are going after technologies that promote drug discovery because there is still a demand for that; one can still earn some revenues by providing a technology to pharmaceutical companies,” he said, referring to technologies like antibodies rather than microarrays or PCR.
“Pharmaceutical companies are the only ones that have money in this crisis,” he said. “Governments don’t put up … very much money; insurance companies would like to benefit from [pharmacogenetics] because they know it will lower the cost, [but] they are just watching right now. They are not investing.”
One corner of Europe has bucked the trend in recent months. The Netherlands has recently inv-ested around €500 million for local genomic startups — a substantial amount for a country whose gross domestic product amounts to roughly €400 billion.
“I would say that five years from now the Netherlands will be one of the leading countries” in genomics research, said Jain, who was asked by the Dutch government last year to sit on a panel that helped form the initiative.
Jain said the five-year Dutch genomics initiative is unique in one major way: In other countries, including his native Switzerland, Jain said companies with the best contacts in government stand the greatest chance of securing government grants and research funding. Consequently, “the little scientist doesn’t get very much.” Not so in the Netherlands, he said. “With this project we wanted to make it fair, because we wanted to fund the most promising technology regardless of what connections they had.”
Jain said the Netherlands initiative would not entertain applications for less than €25 million. Funds, which will be doled out every year over five years, will go to academic centers as well as companies based in the Netherlands. To date, around five grants — including at least one that deals with genotyping — have been approved and processed since the program began several months ago, Jain said. Five others are currently under consideration.
There are other bright spots in Europe: A recent report by the European Venture Capital Journal stressed that the European biotech segment is “historically under-funded and can now productively absorb increased investment.” In fact, the report reads, in Europe, where the supply of capital from the public markets to biotech companies “lags behind the US, there is an increased opportunity for private equity.”