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Volume 1, article 2
This edition of Buck’n’Ear is launched the week of the European BioVision conference, the annual Go-To gathering of people and things interested in biotech in Europe. The event is of particular importance to European governments that hunger for the type of biotech activity that exists in the United States. BioVision is convened in Lyon, a mecca of gastronomy which, of course, is biological.
For all the exhortation, however, biotechnology has not, with the exception of the United Kingdom and possibly Sweden, become an industry in the countries of Europe. Here, Buck’n’Ear insights on the issue.
European scientists and academicians are as smart and prolific as those in the United States. If the number of scientific publications per capita is any guide, the US ranks only eighth behind Sweden, Denmark, Finland, the Netherlands, the UK, Belgium and Austria. Germany is close behind. Europe probably has a greater number of biotech companies than the U.S. in absolute terms. The governments see to that with easy seed capital financing in an effort to ignite biotech spontaneous combustion. Europe also has great academic institutions and abundant capital.
But with all that, the entirety of European biotechnology, all the companies combined, trail, in such important criteria as market capitalization and revenues, just one single US biotech company by a factor of two. And Amgen is hugely profitable. European biotech still loses money. Then there is also Genzyme, Biogen, Chiron, Genentech, Centocor, Agouron, IDEC, Medimmune, Immunex, Affymax/Affymetrix and Millenium. What’s going on here? Is there a secret sauce?
Simply put, the answer lies in the recognition that biotechnology is not nearly as much the commercial realization of science or technology, or even products for that matter. Rather, biotechnology is largely a technology of finance and risk. Once that principle is accepted, the algorithm for success is quite simple.
By example, in Europe a principal motive for propagating biotech is the creation of the highly paid lab-coated jobs that it can spawn. Unemployment rates of 10+ per cent and the snare of oppressively high tax structures make those highly paid biotechnologists look like some mighty juicy prey. In the US, however, the industry was created because a small number of risk capital dollars could be leveraged into high market capitalizations in large part by minimizing the number of highly paid employees. Ironic that the result is a greater number of highly paid jobs.
Flowing from the principle is the conclusion that a biotech industry exists in the US because there conservatism is turned on its ear. The US biotech entrepreneur creates a story of the development of an invention that has many a slip between cup and lip. These gaps are filled with hope and imagination and are forded with canoes carved out of the courage tree. It is a wild country. There is danger. There are sleepless nights. And occasionally one must leap into the void. Everybody. Management, scientists, investors-off the cliff. They driven to make it to the other side because when they do, the journey ends in quite a verdant valley.
A different style prevails on the other side of the Atlantic. Instead of cowboys there are serious minded bankers. Milestones along the journey must be mapped. The approach is typified by the European Union’s Biotechnology Initiative. That phenomenon takes the form of a vast tome that considers all the non-commercial, and thus to the American collateral, issues, ethical and otherwise, that the most imaginative of seers might conjure. Specters abound-- GMO’s, stem cells, genetic screening to promote vilification, body parts shops supplied by clone factories and so on. So before innovation and value will be permitted, a legislative scaffolding of regulation and bureaucracy must be put in place. First protect society from biotechnology. Then seed it with government money and Voila.
Somehow, it is that miracle in Step Three that is never elucidated.
And because the entire process is coated over with the ponderous eloquence of very elegant people, the real impediments - onerous tax policy, regulatory structures, employment burdens and price controls - don’t seem to get addressed. They are the real problem.
And we have tried GMO’s. We find them quite delicious.
The issues are, of course, more complex and the solutions more vexing than offered here. As well, the US has some other unfair advantages like vast equity markets with great liquidity and large floats. But what is cause and what, effect. Germany only last month began the process to authorize hedge funds so necessary to the liquidity of modern capital markets.
But we promised that Buck’n’Ear would be short and sweet. And we think we have the nub of it here.
The only hope, as we see it, to advance the creation of a biotech industry in the European markets is to legislate the opportunity to chill out and let it happen. After that the algorithm for success is easy.
In the meantime, BioVision should heed the insightful admonition of Matt Ridley, a Brit, in his book, Genome,"It is the hardest thing for human beings to get used to, but the world is full of intricate, cleverly designed and interconnected systems that do not have control centers. The economy is such a system. The illusion that economies run better if somebody is put in charge of them - and decides what gets manufactured where and by whom - has done devastating harm to the wealth and health of peoples all over the world, not just in the former Soviet Union, but in the west as well. From the Roman Empire to the European Union’s high definition television initiative, centralized decisions about what to invest in have been disastrously worse than the decentralized chaos of the market. Economies are not centralized systems; they are markets with decentralized, diffuse controls."
A un bon gout de la gouttelette de bio, Lyon.
©Copyright-Jan Andrew Buck 2003