Sensing that its window of opportunity was closing, over the last two years France has begun to intensify efforts to grow its biotech industry. Evolving French policies governing business creation are helping to fuel a new generation of companies. In fact, according to industry proponents, an ambitious plan under consideration by the government could put France's efforts onto the same scale as those in Germany.

Following 1999 legislation to stimulate investment in biotechnology, the creation of French biotech startups has accelerated. And despite minimal government financing schemes, an increasing number of French venture capital investors raised more money for biotech in France than ever before.

Still, despite their nation's tradition of excellence in biomedical research, French entrepreneurs have more work ahead of them to overcome the politically powerful socialist presence that has precluded more aggressive government support for the biotech industry. As a result, the country has not had a clear vision of how to build a successful sector.

Specifically, France's policies regarding taxation, stock options, and intellectual property transfer, combined with a general lack of subsidies for growing companies, have made entrepreneurial undertakings much more difficult than in the U.K. or Germany. The difficulties range from a general inability to attract talented management because French laws necessitate inferior compensation packages, to "drip" financing deals, which force young companies to focus on their next round of financing rather than on developing their technology.

In contrast, France's non-profit scientific research sector is healthy. The Pasteur and Curie institutes, both of which receive significant amounts of state funding, bear witness to the country's long tradition of supporting academic achievement.

While a handful of biotech companies emerged in France in the early 1980s, none of the first-generation companies can yet be considered successes. In fact, the two high profile first-generation companies, Genset S.A. (GENXY; NM:Genset, Paris), which began as a genomics play in 1989, and gene therapy company Transgene S.A. (TRGNY; NM:Transgene, Strasbourg), founded in 1979, have failed to reward investors.

GENXY, which went public in 1996 at FF249 ($48) and closed Friday at E7.13 ($6.548), has reinvented itself as a drug development company (see Ebb & Flow, A15). TRGNY, which went public in 1998 at FF266.48 ($43.44) and closed Friday at E6.8 ($6.245), is now majority-owned by partner bioMérieux-Pierre Fabre Group SA (Marcy l'Etoile).