While industry leaders are unsure whether the U.S. or China will prevail, they are largely united in the belief that Europe is lagging behind.
European biotech executives are divided on whether the U.S. or China will be the most important source of future innovation partnerships, a BIO-Europe survey found.
The survey, published Oct. 7, attracted 81 responses, mostly from the leaders of European, privately-owned biotechs with assets in preclinical and early clinical development. After seeing a wave of deals between Chinese and Western drugmakers, some surveyed leaders believe the Asian country is on course to be the key source of partnerships in the future.
The U.S. was the most popular answer, with 29 people predicting it will be the most important source of partnerships. China followed close behind with 24. Another 12 respondents predicted that there will be no clear leader.
Europe placed a distant third, with just 11 respondents predicting the region will be the most important source of future innovation partnerships. The finding was echoed by a request to rank Europe’s competitiveness as a partnering and dealmaking hub today on a scale of one (poor) to five (excellent). Europe scored 2.8, a result that the report’s authors called “middling.”
About half of respondents believe that policy and regulatory uncertainty in the U.S. has made Europe a more attractive place to build and partner. However, Europe’s ability to seize the opportunity presented by upheaval in the U.S. is being stymied by longstanding constraints on access to capital.
Asked to name the single biggest barrier to getting deals done in Europe, 34 respondents answered the availability of capital. The next most common answers were a valuation gap between buyers and sellers and competition from Chinese assets, which were given by 13 and 12 respondents, respectively.
The perception that the availability of capital is the key barrier is reflected in answers to the question, “If you could solve one industry challenge tomorrow, which would it be?” The most common answer, given by 42 respondents, was access to capital. Clinical trial efficiency and regulatory complexity were the next two most frequent responses, given by 11 and 8 executives, respectively.
Respondents were similarly consistent in their diagnosis of why access to capital is restricted. Almost 80% said risk aversion among investors is the biggest constraint on investment in biotech today. The next most common answer—geopolitical uncertainty—was given by 7% of respondents.
This diagnosis aligns with other assessments of the barriers to biotech growth in Europe, including in the U.K. Last year, the BioIndustry Association said that “U.K. investors do not want to invest in U.K. life sciences.” The biotech trade group attributed reluctance to invest in life sciences to the “widely acknowledged” risk aversion of U.K. investors.
