Biotech’s New Frontier: Europe?

3/19/12Follow @xconomy

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like a classic biotech optimist. He says he and new venture partner Magni are well-positioned to find the best science, and match up those nuggets of intellectual property with talented entrepreneurs in Europe, based on their years of experience working together in Basel at Roche.

Relationships are the key, Bolzon says. Investors will go to Europe for the same reasons they go to Boston or San Francisco—to find executives they are confident enough to bet on.

Despite all that’s said and written about China as an emerging biotech power, Bolzon says Versant doesn’t see the kind of opportunity there. Part of this is because Bolzon and Magni are personally better networked in Europe, but Bolzon says China doesn’t yet have the pool of seasoned biotech executives that are found in the U.S. and Europe.

“You have to have a world-class team to make these companies work,” Bolzon says. “I haven’t yet seen the emergence—and I could be wrong—of an entrepreneurial network in Asia that we can build companies like Amira Pharmaceuticals, Inception Sciences, and Okarios. As early stage investors, the hallmark of our strategy is to find world-class entrepreneurs, proven drug hunters like Peppi Prasit at Amira, and Steve Kaldor at Syrrx and now Quanticel. When you look to Europe and you can get a guy like [Okairos'] Riccardo Cortese as CEO, it takes execution risk out.”

I’m willing to concede that since I don’t write about European biotech, there could be all kinds of fascinating projects and people going on there that never cross my radar. Obviously, some of the world’s biggest pharma companies-Roche, Novartis, GlaxoSmithKline—are Europe-based firms that are truly multi-national, with major operations in the U.S. as well. Many biotech companies have roots firmly planted in both the U.S. and Europe—Alkermes, Elan Pharmaceuticals, and Shire are just a few that pop to mind. Just recently, one of these trans-continental biotechs, Micromet, hit gold with a $1.16 billion acquisition by Amgen.

No question, biotech is a global industry and the trend toward outsourcing that relies heavily on low-cost vendors in China, India, and Eastern Europe is likely to continue. But when you’re talking about where the intellectual property really comes from, and the networks of entrepreneurs and investors that it takes to start companies that create real drugs or devices, there are only a small handful of clusters in the U.S. that really do it well.

While I don’t think the U.S. can take its leadership for granted, I wouldn’t count on any place in Europe becoming the next Boston or San Francisco anytime soon. Europe has its opportunities, and a few VCs will surely find a way to capture them. But it’s hard to imagine a real movement toward one of the riskiest industries on the planet, right when people there will probably be licking their financial wounds for decades.

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  • http://horsager.com Alan Horsager

    One thing to consider is that large investments (from VC and/or strategic partners) have generally (and significantly) shifted towards later stage deals. It really takes good clinical proof of concept to seal a substantial round. It could be argued that the regulatory environment is better, faster in Europe relative to the US, thus presenting a better opportunity for late-stage investors (i.e., VC). I agree that the US has a terrific entrepreneurial ecosystem. However, seed stage investment is essentially absent, necessitating an improvement in the process of getting a drug from discovery into the clinic. I think it’s worth considering whether Europe is better than the US at this.

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  • Jeff McKelvy

    This is an interesting article. I agree that the strategy is unlikely to be a trendsetter. With regard to cultural aspects, note that the talent pool for european company formation will largely be derived from more traditional organizations and conservative cultural backgrounds. While it’s true that China is at an earlier stage, there is an opportunity to begin company formation there now. There are western trained, english speaking scientists, many of whom, in my experience, want to be entrepreneurs; increasingly available technology (which could derive from the west as well) and a cultural trait of entrepreneurship. What’s needed is entrepreneurial investors.

  • Saumitra Rahatekar

    Nice Article Luke – Every Life science company in EU will have US on their radar either for Clinical trials and / or market. Though regulations for Medical Device are comparatively easier in EU, there’s always a reimbursement issue for Med Device and Biotech drugs. VCs which you mentioned are perfectly positioned to take advantage of pros and cons of US and EU sector.