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Innovation underfed

Europe's Iceberg 2015: Finance at root of translational gap in innovation

Europe's Iceberg 2015

Despite world-class research institutions and a crop of novel drugs making their way through the clinic, European biotech is finding it hard to reach the end zone with its innovations.

Stakeholders almost universally agree there is tremendous research coming out of European institutes. And new companies are continuing to be formed to commercialize European science.

European companies also are driving programs into the clinic, which is reflected in an increasing demand for cash. BioCentury's 13th European Iceberg survey shows that, on a euro basis, demand for capital by private companies with a lead asset in Phase II has continued to grow, while the demand for funds by unprofitable public companies with a lead asset in Phase III has grown faster than any segment in the survey (see "Cash Cravings," page 8).

Yet Europe continues to lag the U.S. in the share of approved innovative drugs based on the drug's origin, rather than by which company filed it.

The key problem with translating Europe's innovative discoveries into drugs appears to be the struggle to finance companies looking to generate proof of concept, or to complete the transition from Phase II to Phase III.

This excess of demand for money over the supply, which BioCentury has chronicled as Europe's "financing iceberg," is reflected in the 225 private Phase II companies polled in the surveys over 2011-13. Only 13% of that cohort have moved into Phase III or beyond.

For those that make the grade, innovation is a predictor of success in attracting funds. In the 2011-13 cohort, the 133 companies (59%) whose lead program is innovative - defined as either first- or second-in-class molecules, or products using advanced technology such as gene or cell therapy - raised significantly more cash, struck more lucrative partnerships and were more likely to be acquired than non-innovators.

"The bottom line is that innovation pays," Apposite Capital's Allan Marchington told BioCentury.

A slew of registration and Phase III data milestones expected over the next two years could reset the innovation scorecard in Europe.

End of the telescope

Nine investors who spoke to BioCentury agreed that Europe's science is competitive with any region in the world. But they said there is a perception that Europe hasn't been as good at translating academic discoveries into approved drugs.

Omega Funds' Otello Stampacchia's comment was typical: "Where there's a fundamental issue in Europe is the translation capability of getting that science into a commercial endeavor and then to develop it properly," he said.

Certainly some of the hottest discoveries now making their way through industry's pipeline originated in European institutions, for example, the gene editing technology CRISPR-Cas9 (CRISPR-associated protein 9) and next-generation T cell receptor (TCR) therapeutics. Further back, the founding patents

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