Portugal: Life (sciences) beyond the recession
Biotechnology is a fascinating but tough industry anywhere in the world. Business models that rely on scientific data, lengthy and capital-intensive development cycles, and the need for strict regulation all make up a challenging sector, especially for entrepreneurs. As the global crisis renders these challenges all the more acute across Europe, it becomes relevant – perhaps even urgent – to look at what is happening in the countries where the sector is younger and more fragile; countries that are precisely the ones whose economy seems now farther from recovery.
Portugal’s biotechnology industry, like that of other southern European countries, has suffered from a set of well-described malignancies. There is an absence of private “smart money” specialising in the sector, technology transfer from universities is somewhat clumsy and incipient, some crucial skills are lacking – namely on the interface between science and business – and a long-term vision for the sector has been difficult to implement with clear support from governments. As a consequence, no true success stories have yet occurred, foreign investment in Portuguese biotechnology is negligible, and several frustrated entrepreneurs are setting their sights elsewhere. Biotech is regarded by some as a promise that did not deliver.
Many of Portugal’s modern biotech companies appeared during a short period of strong investment in the sector by state-controlled venture capital firms. Those funds have invested over a30m in over fifteen biotech start-ups – mostly between 2005-2008 – but the boom was not sustained for much longer as those funds have not been willing or able to participate significantly in larger, follow-on investments (e.g. series B). That and the resulting tense relationship with state bureaucracy has made it even harder than usual for companies to attract the larger foreign VC funds to invest in Portuguese biotech. At a time when it is challenging to attract any foreign investment to the country, the future of biotech companies may seem particularly bleak.
However, some signs do tell us that Portugal has planted important seeds and could produce a thriving biotech industry if time, politics and the macro-economy would only allow it. First and foremost, the country has made an impressive investment in its life-science basis that is now bearing fruit. A young and ambitious generation, trained internationally, is now gaining control of Portuguese science. Five out of the 28 most recent recipients of Howard Hughes Medical Institute grants (i.e. ~18%) are Portuguese scientists (see EuroBiotechNews 1-2/2012). More than 25% of national research funding goes to the life sciences and related fields, and most of the larger and most productive R&D institutes in the country are dedicated solely or mostly to the life sciences.
The healthcare sector, which can drive these institutes to innovate more and better, is gaining an extraordinary importance in the country’s economy, with close to a900m in exports in 2011 (way ahead of Port wine and very likely overcoming cork for the first time). On the philanthropic side, a a500m private foundation was set up in 2004 with the aim of supporting scientists “working at the cutting edge of biomedical science”. Its state-of-the-art Institute for the Unknown is now functioning in Lisbon. And the country has some important niches of expertise: one relatively small institute in Porto, the IPATIMUP, boasts the world’s best publication record on both gastric and thyroid cancer research, according to SciVal Spotlight.
And the state funds’ investment in the start-up companies, even if lacking continuity, did produce important spill-over effects. Many of the firms funded – all are still alive, even if struggling – have already made their impact. Some were able to attract foreign, sophisticated investors and interest from big pharma, albeit on a limited scale. Others solidified long-term relationships with national and foreign academic labs, indirectly creating R&D jobs. All these companies employed young Portuguese PhDs, many of whom caught the entrepreneurship “bug” and thus may form a future, more prepared generation of biotech executives. And the actual entrepreneurs, having gone through the motions, gained the invaluable hands-on experience that is the life blood of innovation in any successful technology hub.
European money for local projects
All this traction and investment will be lost unless the surviving companies find a way to take the next leap forward and new and old entrepreneurs are motivated to stay in the country. With the credit crunch and ailing economies, southern European governments have the perfect excuse to write off the sector, possibly postponing an entire industry for a decade or two. In the case of Portugal, public statements seem to suggest an intention to support biotech, but also an apparent lack of resources to do so convincingly. Portugal needs more.
The solution should lie, at least partially, in European-level instruments and initiatives. It is crucial that Europe 2020 programmes aimed at enabling access to capital take into account the local contexts of countries like Portugal, interacting with national stakeholders and private (including local) investors to channel funds to the best projects. The European Investment Fund can play a crucial role by paying special attention to biotech-related initiatives in the most weakened economies such as Portugal, leveraging the best private initiatives and designing special programmes that contemplate the peculiar state of the sector.
By 2008 Portuguese biotech had gained significant momentum. Its potential for economic and social impact may still be intact. It needs national and European strategies that reflect an understanding of the country and the sector in order to deliver – at last.A