While the United States has historically been a dominant player in the field of biotech research, innovation and commercialization, other global communities are striving toward new levels of achievement. Europe is no exception.

Biotechnology encompasses all that is exciting — and all that is risky — and Europe faces many challenges in its quest for biotech accomplishments.

However, one by one, European countries are rising up against the hurdles of public and private funding issues, high manufacturing costs and product approval timelines.

In the big picture, Europe continues to communicate why it should be considered a viable location for expanding biotech companies — U.S.-based and otherwise.

For Protherics, a company that specializes in oncology and critical care products, the United Kingdom proved the perfect home base. Intricate business needs dictated much of the reasoning behind the company’s initial set up in Wales.

“The choice of Wales was a result of the founder buying a farm in Wales to use as a base for a contract antibody business using horses, sheep, hens, etc. to raise the antibody,” said James Christie, director of operations for Protherics.

The creation of Protherics in 1999 evolved from the merger of two businesses — Proteus and Therapeutic Antibodies.

The original premise was that Wales offered the ability to hold livestock in proximity to the manufacturing facility. However, fate intervened and forced the company to alter its plans.

“With the advent of BSE [mad cow disease] and foot-and-mouth disease in Europe, the decision was taken to site the sheep flocks in Australia, which is disease-free,” Christie said. “Thus, the benefit of the manufacturing facility and livestock proximity was lost. However, the Wales location has offered a number of benefits, especially around access to funding and a stable work force.”

Homegrown success stories aren’t the only examples of companies taking advantage of Europe’s growing biotech environment.

U.S. companies are also striving to put Europe’s intellectual assets, strategic location, logistical benefits and quality of life to work for their operations.

Cambridge, Mass.,-based Biogen Idec, for example, opened a new international headquarters in Zug, Switzerland, last year.

The global commercial and administrative operations were fully staffed with about 50 employees by the end of 2004. The office supports Biogen Idec’s international operations, which include facilities in Australia, Austria, Belgium, Denmark, Finland, France, Germany and Ireland.

“As we partner with other companies and continue to develop our pipeline, the Zug headquarters will be key in coordinating our international commercial operations for maximum efficiency,” said James C. Mullen, CEO of Biogen Idec.

The company is a leader in therapies in oncology and immunology.

Thanks to a variety of business incentives, the availability of venture capital and proximity to international airports, the Netherlands is also evolving into a favorite European locale for U.S. companies.

U.S.-based companies that have R&D or manufacturing facilities in the Netherlands include South Oaks, Calif.,-based Amgen; Pennsylvania-based Centocor; New York-based Axonyx, a biopharmaceutical company creating drugs to combat Alzheimer’s; and Chicago-based Biovec BV.

U.S. startup Biovec BV began its basic research in the United States but is conducting its clinical trials in the Netherlands, specifically for regulatory climate reasons.

“It is often less cumbersome to obtain regulatory approval in the European Union [compared] with the U.S. FDA,” said David Wolf, CEO of Biovec Idec. “You can normally get a product to market with approval faster in Europe than in the U.S. For us to get to Phase I human trials is probably [more than] two years from now. To get all the way through Phase III could be six years from now. In the U.S., it could be longer.”

Wolf said those extra years can either make or break a company, especially when the outflow of money is not offset by any income.

In choosing the University of Groningen (founded in 1614) in Groningen, the Netherlands, complete with a 1,200-bed hospital, the company found a European location home to a wealth of experience in cardiovascular therapy and bypass surgery, as well as English-speaking researchers.

Biovec BV is focused on developing new gene therapy products and currently employs five people in Groningen, but plans to grow that number to 10 by December as research expands.

Market Entry Through Acquisitions

Acquisitions are another route that U.S. biotech companies are using to enter the European market.

San Francisco-based McKesson Corp. moved into France via an acquisition in the late 1990s. In 2004, McKesson also acquired CrossWay Hospital Software from Integrated Care Systems France.

Today, McKesson France is based in Canejan, near Bordeaux, and has a facility in Poitiers.

“We were attracted to the French market for a variety of reasons,” said Marc Owen, executive vice president of corporate strategy and business development for McKesson Corp. “First, like the United States, France has one of the most advanced health care systems in the world. Second, also like the United States, there is a significant opportunity to improve the existing system. Third, the French government and the marketplace in general have been highly receptive to working with McKesson. The combination of these factors made France a natural fit for us.”

Seattle-based Cell Therapeutics made major advancements recently when it acquired Bresso, Italy-based Novuspharma, a company researching new chemotherapies that are more effective and less toxic.

The transaction was completed a year ago, and the company is currently on the brink of marketing a drug for lymphoma and another drug for prostate cancer and other solid tumors.

Italy’s life sciences industry is the third largest in Europe in terms of turnover and number of employees. The sector is going through a period of transformation that places greater emphasis on innovative offshoots connected with biotech developments.

Spending on research and development is on the rise, and the number of new biotechnology ventures continues to grow, frequently as spinoffs from academic work or from a foreign industrial presence in Italy.

This process of change, aided by the existence of research centers with a track record in health care research and stronger ties between the academic and the business community, has already given life to several biotechnology clusters, including some specialized in the fields of diagnostic and therapeutic trials.

Recent applications in the biomedical, bioinformatics, biomechanics and nanobiotechnology fields, in particular, are drawing the interest of investors.

The Big Question

There is little doubt that Europe faces its share of obstacles in the evolution of its biotech industry.

The 2004 Ernst & Young European biotech report, “Refocus,” said, “The industry is in the midst of reappraising priorities and redefining essentials to move forward.”

The report went on to say that the right financial and regulatory infrastructure must be balanced by the appropriate level of management ability.

That said, Ernst & Young researchers wrote the European biotech industry is showing signs of maturity.

“The big question is whether the biotech industry in Europe is robust enough to be sustainable and ultimately profitable,” said William Powlett Smith, leader of Ernst & Young’s Health Sciences Group in the UK. “Competition from well-financed U.S. biotech companies is going to intensify. Quality companies need to evolve and revenue generation needs to accelerate.”

Protherics’ Christie spoke candidly about the challenges the biotech industry faces in Europe.

“The biotech industry in Europe is probably about 10 years behind the U.S. in terms of its maturity,” Christie said. “The UK continues to lead the way, although there are thriving biotech industries in Switzerland, Scandinavia, Germany and France.”

On the upside, he said that, in general, the European biotech industry has undergone a pipeline-stocking effect, and that products are finally starting to make it to the commercial end of the pipeline.