12:34 PM
May 17, 2018
 |  BC Innovations  |  Finance

Europe’s piece of the pie

Where European life science innovators can take the lead

With China’s rising infrastructure for life science innovation and the unabated growth of U.S. science, Europe has two cards to play that can help it compete globally: expertise in key core technologies and its centralized clearinghouses to support translation and access early stage investors.

The core strengths, which include cell and gene therapies, biomarker discovery, rare diseases and neurodegeneration, could position Europe as a driving force as precision medicine and genomics become central to biomedical innovation.

In the landscape of increasing cross-border innovation and investment, the competitive challenge doesn’t come from a lack of high quality science emerging from Europe’s top-tier universities.

“In terms of basic research capabilities, our history has been strong. The structure of DNA came out of the University of Cambridge, the first antibody was also discovered in the U.K., and CRISPR gene editing was even co-invented here,” said Jeanne Bolger, VP of venture investments at the J&J Innovation-JJDC venture arm of Johnson & Johnson. “Academic institutions here are certainly capable of pulling their weight in innovation.”

As always, the question is where the money will come from to translate the globally competitive research into homegrown technology and companies.

The picture is improving, according to five VCs and four leaders of European translational centers who spoke with BioCentury.

Since 2013, private funding raised by preclinical companies in Europe increased from $316 million to $585 million last year, peaking at almost $957 million in 2016 (see Preclinical Financings: Private vs. Public).

Figure: Preclinical financings: private vs. public

For European preclinical-stage companies, VC funding fell in 2017 from a large leap the year before, still showing an overall upward trend over five years in both the total amount raised and number of companies. The peak in both values in 2016 reflects several large-scale series B and C rounds. Public financing for preclinical companies is generally less predictable, with large rounds from a few companies such as CRISPR Therapeutics AG (NASDAQ:CRSP), which went public in 2016, having an outsized impact on the data. Debt is included in the figures. Source: BCIQ: BioCentury Online Intelligence

Still, BioCentury’s annual review of the European biotech financing environment shows that figure remains about one-fifth of the amount raised in the U.S. for preclinical companies.

Meanwhile, China’s rush to modernize could knock Europe off its perch as the second most prolific engine for innovation with commercial potential. That national investment in life science research is coupled with a huge influx of Chinese investor money into healthcare.

According to a McKinsey & Co. report presented on May 15 at BioCentury’s 2018 BioEquity Europe conference, VC investment in China healthcare more than doubled from the prior year to reach $11.7 billion, while the size of Chinese VC and private equity funds nearly doubled to $40 billion.

Playing to its strengths will help Europe compete with both a rising China as well as U.S., according to VCs and industry executives who told BioCentury that Europe can leverage several advantages.

Local, small-scale manufacturing capabilities, led by the U.K.’s growing expertise in cell and gene therapy manufacturing, are essential for autologous cell therapies and other personalized medicine technologies.

Extensive patient registries and genomics capabilities being developed throughout Europe can provide an edge in rare diseases and biomarker discovery.

Government and VC funds dedicated to translating discoveries in Alzheimer’s disease (AD) could give the region a boost in a discipline where the lack of progress in clinical compounds is sending all players back to the drawing board.

And the rise of both virtual and brick-and-mortar translational organizations, funded with public and private money, is starting to knit the ecosystem together and create better links between academia, VCs and industry.

“I think the trend will be more cross-border innovation, and that’s a good thing whether we’re going to the East or the West.”

Antoine Papiernik, Sofinnova Partners

Selected clout

Europe has consistently produced about one-quarter of the world’s top translational research as recorded by BioCentury over the past seven years. The U.K. and Germany remain the power players, producing 24% and 20% respectively of the European output (see “Distillery 2017”).

Figure: Distillery 2017

Europe has consistently ranked second behind the U.S. in the strength of academic translational science as measured by the source of papers highlighted in BioCentury Innovation’s Distillery section, but Asian innovators are not far behind. The Distillery contains synopses of papers describing technologies or discoveries with commercial potential, selected from the top 41 biomedical journals.

Top: Similar to 2016, global translational research was led by the U.S., followed by Europe, which produced less than half as many papers (252) and represented 26% of the translational pie. Asia increased slightly from the previous year from 13% to 18%, but remained in third place. China accounted for 89 of those items, making it the number two country overall, representing 9% of the pie worldwide.

Bottom: U.K. took the lead from Germany this year, while Belgium moved up into the European leaderboard as Spain dropped out.

Percentages do not sum to 100% because some papers include authors from multiple regions which led to some double counting. Source: BioCentury Archives

But in many areas of top translational science, Europe is facing competition from China for second place after the U.S.

This is reflected in the Distillery section of BioCentury Innovations, which tracks translational publications with commercial potential. By this measure, China produced more translational publications in cancer in 2017 than any country except the U.S., and was second or third in several other therapeutic areas, including infectious disease, neurology and cardiovascular disease.

In hepatic disease, China matched the U.S. and outranked the European countries combined (see “Race for Second Place”).

Figure: Race for Second place

In 2017, the U.S. maintained a strong lead among European, Asian and American countries in...

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