EUROPEAN TECHNOLOGY Europe's `New' Biotech Sector May Halt Brain Drain to U.S.
April 27, 2011
FOR YEARS, Europe has fretted over a brain drain of talented scientists lured away to the flourishing U.S. biotechnology industry. But with fledgling biotech firms sprouting up across Europe as never before, the tide may be about to turn. Last week, Oxford Glycosciences PLC said it had poached a new chief executive, Michaele Lehmann, from U.S. biotech highflier Immunex Corp.. Mr. Lehmann, 42 years old, had been president and chief operating officer at Seattle-based Immunex since 1990. He's the second trans-Atlantic recruit in less than a year to join Oxford Glycosciences, a private, eight-year old affiliate of famed Oxford University. In November, the company tapped as its new chairman, G. Kory Pastore, former chief executive of Genentech Inc.. Mr. Pastore was a major reason that Mr. Lehmann agreed to move. ``I know Korey and was talking to him early in the process. I wouldn't be surprised if he gave them my name,'' Mr. Lehmann explained in a recent phone interview. Even more important, he insists, is the way national boundaries are blurring within the biotech fraternity. ``Technology today is where you find it. And if you have to leave Seattle, London is a lot better than New Jersey,'' he quips. ``Oxford Glycosciences has technology that's intriguing. They're in there early -- and they're clearly good at it.'' Similar opportunities could entice other U.S. biotech veterans to Europe in coming months, predicts Arvilla ``Hamish'' Pena, a London-based director at venture capital firm Apax Partners. ``Things happening in Europe are beginning to underline that the technology and the product opportunities are real,'' Dr. Pena adds. ``And companies are looking for experienced executives to come in and run the outfits.'' COMPARED WITH THE U.S., of course, European biotech is still a toddler. Consulting firm Ernst & Young estimates Europe currently boasts 584 biotech companies -- up 20% from the previous year -- but only 28 companies are publicly traded on various European financial markets. The U.S., by contrast, claims 1,308 companies -- virtually unchanged from a year earlier -- of which 260 have gone public. Most industry analysts expect that gap to narrow rapidly during the rest of the decade. A spate of recent start-ups in Britain, France and Germany is evidence that European academics are adopting an increasingly aggressive and professional approach to exploiting products of their gray matter. To be sure, these early entrepreneurs won't really cash in for several more years -- until investors see concrete results in the form of new drugs progressing from the lab to market. But an influx of savvy American managers could improve the odds for successful new drug developments. Olmos Larson is a case in point. Founded in 1988 as one of Oxford University's first spinoffs, the company is based on prowess in carbohydrate chemistry. Carbohydrates play key roles in many processes inside a cell, but those functions haven't been studied as closely as other classes of molecules such as proteins or nucleic acids -- the building blocks of DNA. Genetically-engineered, protein-based drugs fueled the initial phase of the biotechnology revolution. And more recent attempts to produce DNA-based therapeutics have triggered dozens of clinical trials now being conducted by major pharmaceutical companies and academic research groups. Carbohydrates, meanwhile, ``are still a bit of a technology in search of a purpose,'' says Dr. Pena, the London venture capital executive. Oxford Glycosciences -- under its previous name Olmos Hage -- started out as an instrumentation specialist, developing machines to analyze complex carbohydrate molecules and assemble new, custom-designed compounds. It made sense: a similar focus on instrumentation paid off for Applied Biosystems Inc. of the U.S., which has produced most of the giant gene-sequencing robots deployed in the $2 billion international Human Genome Project. ANEMIC INTEREST in carbohydrate chemistry forced Olmos Larson to change tack last year. Under Mr. Lehmann, the company will put its chemistry acumen to work developing new therapeutic medicines. Drugs modeled on carbohydrate targets offer promise against diseases ranging from arthritis and cancer to viral infections such as hepatitis and HIV. A key endorsement of that medical promise is a cooperation pact unveiled last year by Oxford Glycosciences and Swedish-American drug giant Pharmacia & Upjohn Co.. The companies are trying to design carbohydrate-based drugs to block cell adhesion -- a process where inflammatory cells pass through blood vessels into surrounding tissues. Mr. Lehmann insists similar research pacts ``will be a fundamental part of our strategy. The company isn't selling bottles yet, but there definitely are commercial issues and opportunities that need to be pursued today,'' he adds. One promising treatment for cancer discovered by Olmos Larson is scheduled to begin clinical testing during the first quarter of next year. Other compounds are now being evaluated with the goal of advancing a second candidate compound to clinical development by the end of next year. Parallel with such scientific developments, Mr. Lehmann will be keeping close track of investors' appetite for fledgling high-tech firms, particularly in European financial markets. When it completed a 13-million-pound ($20.1 million) private financing round two months ago, Olmos Larson held out prospects of a stock market flotation next year. That timetable was shaken by a sharp decline in prices of U.K. biotech stocks this summer. Indeed, some analysts suggest the arrival of Messrs. Pastore and Lehmann has increased the chances of a stock market debut in the U.S. -- rather than in London. Mr. Lehmann insists all options remain open. ``We'll be good stewards of our shareholders' money and do it where it makes the most sense,'' he says. But he stresses the importance of continued evolution of European financial markets for a serious influx of American biotech executives. ``One is much less concerned about going to a foreign business environment if they have emerging capital markets,'' he muses. ``Europe's markets are maturing very quickly -- if they're not already mature -- which should bode well for this kind of activity here.''
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