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Swiss biotech lead linked to sluggish public support

While European biotechnology in 2003 witnessed its first-ever year of declining revenues, in Switserland the sector showed surprising growth.

According to the first Swiss Biotech Report, prepared by a taskforce joining Ernst & Young, the Swiss stock exchange and the Swiss government and published in March, last year the number of biotech companies grew from 129 to 139. By the end of 2003, the report says, together these companies employed 13,071, versus 11,648 one year earlier.

Other figures were up, too. Expenditures on research and development by biotech companies increased by 2.5 percent, revenues climbed 0.5 percent and profits grew 3.0 percent.

Stars of the show were companies like Serono (Geneva), which managed to raise €382 million ($460 million) in bonds last year while its profits rose 31 percent, and Actelion (Allschwil, Switserland), which raised €97 million ($117 million) and recorded its first profit since its foundation in 1997. Other highlights include the Speedel Group (Basel), which raised €47 million ($57 million) since July 2003, and Addex Pharmaceuticals (Geneva), which recently announced €33 million ($40 million) in venture capital funding only two years after the company was founded.

While achievements like these normally wouldn’t jump out right away, things look markedly different when compared to the situation in the rest of Europe.

According to Refocus, the 11th Annual European Biotechnology Report recently published by Ernst & Young, the biotech sector actually faced its first real decline on the European continent.

The number of companies shrunk 1 percent, while employment was down 5 percent. Revenues dropped over 12 percent, expenditures on research and development fell by more than 17 percent. The best thing that could be said about the European sector in 2003 as a whole was that it was burning less money than it did the year before.

After presenting his country’s successes in Basel, David Syz, the Swiss state secretary of economic affairs, in March offered an array of explanations: “Excellent university research, highly qualified staff, advanced networking between research and industry, favorable tax conditions and access to a large number of venture capital firms and private equity funds” all attributed to the strong showing, Syz said — apart from the more than 40 incubators and technology parks.

But others express doubts whether actions of the Swiss government really played a role in the accomplishments. In June, at a conference of the Danish Research Unit for Industrial Dyamics (Copenhagen, Denmark), Alexander Mack, researcher at the department of Political Economics at the University of Neuchâtel (Switserland) presented findings on factors influencing the development of the Swiss biotech sector.

Their review doesn’t exactly paint a glowing picture of Swiss policies on biotechnology. After interviewing key players in the sector, Mack and his colleagues found government efforts generally seen as below standard.

Even more than elsewhere, technology transfer from universities unril rescently was lacking in Switzerland, Mack says. Tax breaks weren’t particularly attractive either; the government’s Commission for Technology and Innovation (CTI, Bern), while supporting some start-up companies, was regarded as not responsive enough.

Clustering of biotech in three hot spots (Basel, Zurich and Lausanne/Geneva) was probably key to Switzerland’s current strong position, says Mack. But there, too, the government was hardly instrumentel. “In Zurich, it took a private developer to create the laboratory buildings that then attracted biotech companies,” Mack says.

Yet according to some, the hands-off approach of the Swiss government actually has made its biotech sector strong.

In countries like Germany, says Jürg Zürcher, Health Sciences Industry Leader at Ernst & Young Switzerland, many biotech start-ups were founded partly on public subsidies, often making up one half to two thirds of the seed capital. In Switserland, Zürcher says, most start-ups had to scramble for money in the marketplace.

Other factors played a role, Zürcher says: the closeness of pharma-giants Roche and Novartis, as well as universities with strong traditions in science and chemistry, produced a steady stream of new biotech companies long before the boom of the late nineties, making the Swiss biotech sector now relatively mature.

But the take-home lesson for other countries, says Zürcher, should be “to let entrepreneurs be entrepreneurs right from the beginning.” Supporting nice but unworkable ideas with public money, he says, only serves to prop up many weaklings.

“Many Swiss companies weathered a harsh investing climate because they have strong survival tactics built in,” Zürcher says. “In Switserland there’s only snow and water, so we always had to be creative.”

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