Hungary, Czech Republic, Poland, and Estonia lead the way in terms of industry presence and infrastructure.

Biotechnology in the 12 newest and two candidate EU member states is an emerging industry with a highly skilled workforce but varying national levels of infrastructure, government support, and available financing, according to a new European Commission-funded report by EuropeaBio and Venture Valuation.

The 14allbio report titled “Biotech in the new EU Member States: an emerging sector” claims to be the first to assess and evaluate the biotech industry in Bulgaria, Croatia, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta Poland, Romania, the Slovak Republic, Slovenia, and Turkey. Whereas most biotech evaluation initiatives in Europe have focused on those countries with the most highly developed industries, the aim of the 14allbio report was to evaluate the current state and growth potential of the emerging biotech sector in the 14 new member states and candidate countries, 11 of which are former Eastern Bloc nations. 

The overall findings suggest the biotech sector in these countries is still young and immature, with different countries displaying very varied levels of infrastructure, industry-academic collaboration, and forward thinking at the financial and governmental levels.  Hungary, the Czech Republic, Poland, and Estonia were identified as the most advanced early movers in terms of their existing biotech industries. These countries are also home to the highest number of biotech companies and the most developed biotech sectors.

The report identified 260 biotech companies in the 14 countries analyzed. This is small in comparison with, for example, Germany and Switzerland, which together house about 1000 biotech companies including 200 focused on human therapeutics, the report notes. However, it continues, many of the new member states have recently undergone “drastic overhauls of government and economic policies.” As a result they have only recently established development strategies and funding for their biotech sectors.

Of the 260 companies identified, about 10% are involved in human therapeutics. 177 are service companies, operating primarily in the areas of contract research, diagnostics, manufacturing, and analytical services. This is roughly equivalent to the situation in Germany and Switzerland, where about two third of the biotech industry is focused on services. Moreover, service companies in the new member states and candidate countries may have certain advantages over their Western competitors with wages being traditionally lower. The region is thus establishing itself as a technology-outsourcing destination.

Whereas a growing therapeutics industry tends to reflect higher degrees of advancement within a region or country’s biotech sector, the development of a biotechnology services sector contributes significantly to the creation of scientific and managerial expertise in the health sector. It also boosts employment and promotes the establishment of an R&D and SME support infrastructure. As the report notes, many countries with an emerging biotech industry, including Israel, China, and India first promoted a strong biotechnology services industry prior to moving into therapeutic development.

In a separate Policy Recommendations document, EuropaBio and Venture Valuation pinpoint ways in which biotech growth in these countries can better be fostered. Recommendations include the formation of governmental incentives. The Hungarian government, for example, prioritized growth in its biotech sector by establishing a 2005–2010 development plan. The program is focused on the key growth drivers of human resources—technology transfer, incubation, SME financing, and global positioning.

As a result, legislation and corporate taxes are used to promote foreign direct investments and the formation of new companies. Tax credits are offered on R&D investments, and R&D corporate tax allowances are generous, particularly if the company laboratory is located at a university or public research institute. Tailor-made incentive packages are offered for investments in biotechnology for projects over €10 million (about $15.09 million) that will create more than 10 jobs.

Highly educated students can also be employed tax free in the field of educational and research activities. This will help reverse the brain drain in countries where wages have traditionally been too low to encourage highly skilled workers to remain within their own borders.

The Policy Recommendations document also highlights the need to facilitate SME access to national or European funding schemes. Improving the availability of private and venture capital to SMEs by encouraging national incentives and setting up professional assistance for biotechnology SMEs will also provide better information about access to funds that are already available.

Besides Bulgaria, Cyprus, Malta, and Slovenia, the remaining 10 countries have already established biotechnology associations to promote their companies and facilitate domestic and international networking. This is another area highlighted by the Policy Recommendations document. Lithuania, for example, is part of Scanbelt, the organization for the Baltic Sea Region Life Science community, which actively promotes private-public cross-border project activities.

Encouraging the formation of science and technology parks, incubators, and the more efficient use of existing networks will also help with the establishment of SMEs and raise awareness of companies for private and public funding. The Czech Republic, for example, has at least 10 established technology parks and clusters, which together form the Science and Technology Parks Association and offer services such as consultation on innovation, project-management support, IP support, and business advice. Hungary is home to four state-funded bioincubators. In Cyprus there are several business incubators, and the first technology park is in the process of being built.

“Critical mass of innovation, support, and resources in terms of manpower and financial means” are prerequisite if a country’s biotech industry is to grow and flourish, stress Willy De Greef, secretary general of EuropaBio, and Patrick Frei Ph.D., CEO at Venture Valuation, in the 14allbio report. “Thus, the countries that are successful and will be successful in the long-term are the ones putting in place a coherent (taking into account the multiple aspects of innovation support) and consistent (long-term) framework with support dedicated to the biotechnology and healthcare sector.”

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