The biotechnology sector industry in Europe is facing its toughest time in years, says an annual biotechnology industry overview by Ernst & Young.
While the sector does continue to attract capital - more than € 1 billion last year - it is cautious capital.
According to the report, entitled Endurance 2003, a total of €1.1 billion was invested in entrepreneurial biotechnology firms, the third highest total ever.
Some 26 percent of the venture capital investments made in Europe last year went to biotechnology firms, but the money went to later stage firms, reflecting a cautious attitude among investors.
And first round financing of startup companies in the biotechnology sector fell by 50 percent.
It was a year that saw the biotech industry's decade long expansion cease as industry turnover fell by 2 percent to €12.9 billion. Ernst & Young also reported that the number of companies active in the sector decreased by 6 percent to 82,100 in Europe.
EY experts, commenting about the losses and decrease in biotech value, said that this is part of the "typical biotechnology cycle".
Sleepy Swiss biotech
The report, which assessed different criteria, quoted industry sources as saying that Switzerland is a "sleeping giant" when it comes to biotech.
The country ranks number 6 in Europe in terms of number of companies active in the industry with 129 firms in the sector employing more than 11,000 people.
But it still falls way behind the leaders, Germany and the UK, who have 360 and 331 firms, respectively
For market capitalization and turnover generated in biotech, Switzerland has moved up to the number two spot.
And the UK, Switzerland, and Netherlands are the top three countries for biotech stocks.
But EY reported that the market caps of biotech firms across Europe fell last year by 50 to 60 percent.
The firm said the assessment of market caps is based on the performance of some 102 publicly traded firms.
Further information gathered by EY about the Swiss biotech scene suggests there are three "hotbeds" for biotechnology in the country.
According to EY's Markus Blaser, who undertook a study that also included privately held firms, Basel has the largest cluster with 69 companies, followed by Zurich with 52 firms, and then the area around lake Geneva which has 48 biotech firms. A further 47 are located elsewhere in the country.
Blaser's report included 87 suppliers to the biotech industry.
A government favourite
Biotech remains highly popular with governments throughout Europe and attempts continue to be made to stimulate the industry locally.
It has been reported that there has been a shift away from loans and similar "soft" funding towards a restructuring of tax systems, which is intended to encourage entrepreneurial activity and investment.
The study only covered "entrepreneurial" biotechnology companies, which are defined as companies that use modern biological techniques to develop products or services to serve the needs of human healthcare or animal health, agricultural productivity, food processing, renewable resources or environmental affairs.
Medical device and large pharmaceutical companies (big pharma) were excluded from the scope of this report.
By Valerie Thompson