From Bio-Europe: A Midwest Perspective

02 Dec From Bio-Europe: A Midwest Perspective

Unlike the BIO International Conference always held annually in the U.S., which captures some 20,000 attendees, BIO-Europe is a much more manageable and intimate affair with 2,500 attendees. Although there is a U.S. biotech and pharma presence and influence at this meeting, it is definitely biotech with a European flavor.
The 2008 edition of BIO-Europe was held in Mannheim, Germany, a city of over 300,000 inhabitants situated at the crossroads of the Rhine and Neckar rivers. Very close by are the cities of Heidelberg and Ludwigshafen, the former with a topflight German research university and the latter the home of Abbott Labs’ major European R&D center as a result of its acquisition of Knoll from the German chemical company BASF. This greater metro Rhine-Neckar area comprises some 2.4 million people.
Mannheim was also the home of the German pharma company Boehringer Mannheim, acquired by Hoffman LaRoche. Roche still has substantial operations in the area, as does Bayer, Siemens, BASF and American company John Deere. And Biotech! In fact, Germany has some 500 biotech companies, and several bioclusters, leading the European pack.
Biotech experts Ernst & Young compared the U.S. and European biotech markets in the following way:
U.S. vs. Europe Biotech Market

Source: E&Y: “Beyond Borders: Global Biotechnology Report 2008”
Europe, and particularly Germany, has seen its share of life science mergers & acquisitions in recent years:

• Astra (Sweden) and Zeneca (UK).
• Sanofi (French), which had acquired Synthelabo (French), and Aventis (German), a mixture of HoechstMarionRoussel and RhonePoulencRorer.
• Glaxo (UK) and SmithKlineBeecham (U.S./UK).
• Solvay (Belgium) and Fournier (French).
• Roche (Swiss) and Boehringer Mannheim (German).
• Merck KGaA (German) and Serono (Swiss).
• Bayer (German) and Schering AG (German).
• UCB (Belgium) and Celltech (UK).
• UCB (Belgium) and Schwarz Pharma (Germany).

The reality is that even with all this M&A activity, there are still a large number of European medium to small pharma companies, many of them family owned, with annual sales of $500 million to $1 billion or more in countries like Italy, France, Spain, Germany, Sweden, Denmark, etc., that have strong presence in their home country and perhaps a regional presence in some European countries, but little or no presence in the U.S. or Asia. This list includes companies like Grunenthal (Germany), Almirall (Spain), Pierre Fabre (France), Leo (Denmark), DebioPharm and Helsinn (Switzerland).
These companies will either have to transition themselves into regional powerhouses by merging with other European companies or align themselves with large American or Japanese companies.
European life science companies have a rich product pipeline, according to Ernst & Young:
European Product Pipeline – Clinical Development

Source: E&Y Report: “Beyond Borders: Global Biotechnology Report 2008”
European biotech market metrics
European biotech companies do not have the heft and market cap of their American counterparts. One European biotech giant, the Swiss company Serono, was absorbed recently by German Merck for $13.3 billion. Few, if any, European biotech companies have been able to create a critical mass size like Amgen or Genentech.
Although the overall tone of BIO-Europe was not nearly as negative as the doom and gloom of the U.S. market, the financing news for 2009 for the biotech sector was not optimistic.
Venture capital groups in the U.S. and Europe are, for the most part, flush with cash; however, one of their traditional exit strategies, Initial Public Offerings (IPOs), is indefinitely off the table, leaving the acquisition strategy as the main conduit for a VC investment exit.
To be certain, a number of Big Pharma companies (and Big Biotech companies) are also flush with cash and in dire need of new products and pipelines, so this VC exit strategy is still intact. Nevertheless, VCs on both sides of the Atlantic seem to be bracing themselves for the need to fund companies longer under current circumstances, and, themselves, are giving out the message to their portfolio companies: trim expenses. VC investment for 2008 is definitely lower than last year in both the U.S. and Europe.
The good news
BIO-Europe provided a good forum near the end of 2008 to get a glimpse of what a tough 2009 is looking like. Still, due to the urgent societal need (around the world) for better medicines, and treatment of diseases, the overall mood of the conference was upbeat. As a result, the overall tenor of this (and similar) conferences is one of hope and optimism, as many of the new crop of companies are bringing forward new disease solutions. It was also gratifying to see our Midwest Big Pharma, Abbott Labs, Baxter, and Eli Lilly active and well represented at this conference. All three have important businesses in Europe.
See you soon!
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