BioWorld International Correspondent

PARIS - The French government announced a 3.9 percent increase in the public research budget for 2004, following a 1.3 percent cut in 2003, and reiterated its goal of boosting the country's total research and development spending to 2.6 percent of the gross domestic product by 2006 and to 3 percent of GDP by 2010 (the latter being a Europe-wide objective).

Biotechnology is singled out for special treatment, and the Ministry of Research is preparing a "Biotechnology Plan 2004-2008" for launch in January. Finance for that will come from a new €150 million fund for priority programs, which include fighting cancer and enhancing food safety.

When those measures were announced, most of the French biotechnology industry was attending the 7th European Biotech Crossroads conference in Nantes. France Biotech, the industry association, was not slow in both welcoming the rise in state research funding (although it disputed the true size of the increase) and stressing the need for a greater effort in the future if the government's stated objectives are to be attained.

In addition, the conference heard the results of two new surveys of the French biotechnology industry, which confirmed that most French firms still generate no revenues and suggested that one of the reasons the French industry lags so far behind its British and German counterparts is the lack of state support it receives.

The research ministry's biotechnology plan for the 2004-2008 period is aimed at "making France one of the most attractive locations for the biotechnology industry." In particular, it is planned to create three "biopoles" - biotechnology research and business clusters - around the country (most likely in Paris, Lyon and Toulouse), which would have an international outreach. The sector also would benefit from more general measures for high-tech industries, such as more generous research-related tax credits, the introduction of a new corporate entity for young innovative companies giving them various tax breaks and the creation of a special tax status for business angels.

For France Biotech, however, the authorities still are not going far enough. Maintaining that the French economy suffers from a "growth shortfall of 1 percent to 2 percent as a result of insufficient [R&D] spending over the past 20 years," the association urged the government to "focus its economic policy on a massive investment in R&D" in order to achieve the 3 percent of the GDP target by 2010 (of which industry is expected to finance 2 percent itself and the state 1 percent).

The president of France Biotech, Philippe Pouletty, pointed out that R&D spending in France had risen more slowly over the past 10 years than in any other European country - 9 percent vs. 40 percent to 60 percent in the main European countries and 100 percent to 120 percent in some Scandinavian countries. Following the cut in the government's research budget in 2003 and even given the modest rise in 2004 and future growth in GNP, the state's research spending would need to increase by 12 percent annually from 2005 on, if the 3 percent target were to be met by 2010, he said.

Among the specific measures proposed by Pouletty were a proportion of the proceeds from the planned privatization of state-owned corporations be channeled into scientific research and new technology, and that the life insurance industry be required to invest at least 5 percent of its funds in small business, especially young innovative companies, which would translate into annual investments of €4 billion. At present, the industry had less than 1 percent of its assets of €600 billion invested in venture capital and development capital, which Pouletty described as a "French economic aberration," given that the international norm was 4 percent to 8 percent. He also advocated the creation of a European stock exchange for technology-based companies modeled on the Nasdaq.

According to a survey of the French biotechnology industry commissioned by France Biotech, the sector suffered from a drop in venture capital funding but nevertheless increased its work force by 32 percent last year (to 4,500). The survey also established that 160 new drugs were being developed by the industry at the end of 2002, of which 21 were in Phase I work, 31 in Phase II and seven in Phase III trials.

Another report, this one carried out by Biotech Planet, concluded that the French industry suffers from a number of handicaps relative to the British and German industries. Although public subsidies are the main source of funding for four-fifths of firms, total public sector funding for the French biotech industry is a fraction of that in Germany (€500 million a year), while the British industry enjoys much greater support from venture capitalists and business angels. The French industry not only is smaller, but is far less mature, being dominated by small firms engaged in early-stage research that have not begun to plan a business development strategy for the commercialization of products. Few are listed on any stock exchange, in contrast to the large number of quoted companies in the UK.