Today, one of the main barriers in Europe to successful entrepreneurship, innovation and product development by entrepreneurial SMEs in the Healthcare sector is the lack of different forms of finance along the ‘capital chain’ (i.e. from seed capital to IPO and secondary offerings).

Besides the European market fragmentation, the lack of available capital (i.e. EU-money invested in European companies) has a great impact on the economic and industrial evolution of the European biotech industry.
The problem is particularly acute in healthcare biotechnology because product development can take up to 12 years of research before companies have a viable, marketable product. This means many companies are dependent on external funding for liquidity – a resource that almost disappeared as the financial crisis continues to bite.
In a recent study published by Alcimed (France) and EBE (European Biopharmaceutical Enterprises) over 20 % of European biotech SMEs and start-ups will be facing potential bankruptcy before end 2009 (Feb. 2009 estimate). The number of bankruptcies may be even significantly higher in 2010 if the crisis effect on access to liquidities for biotech SMEs continues through 2010.

This could mean the loss of 20.000 high-skills, high-value jobs and a permanent damage to Europe’s research. The figures underline the fact that the majority of these small companies only have enough funding to cover 18 months of operation or less. The outcome of the ALCIMED survey on behalf of EBE in February 2009 underlines the need to generalise smart national initiatives at the EU level.

The authors recommend coordinating and stimulating the adoption at the European level of well–tested measures that have already been implemented in several Countries for the benefit of innovative SMEs and which should be extended in other Member States. These measures include dedicated funds to support innovation, extra funds for banks, extra banks guarantee of the bank loans to innovative SMEs, tax credit on R&D expenses or “matching funds” that can complement VC’s investment.

Specifically, support to the healthcare biotechnology sector throughout the crisis should aim to help early-stage SMEs in the short term and restore sector attractiveness to Venture Capital companies (VCs) in the mid term.

The authors commented that making the most out of existing EU programmes should also support the financing and development of small and medium-sized biopharmaceutical companies over the long term.

Reference and executive summary: EBE  http://www.ebe-biopharma.org/documents/news/EBEAlcimedSurveyExecutiveSummary6March2009.pdf