PRINT THIS PAGE

The Netherlands: fuelling the life sciences industry

Although relatively small, biotechnology in The Netherlands has come a long way in recent years and this sector is now flourishing in the region. Pieter Lucas of Ernst & Young examines the evolution of Dutch biotechnology and the factors that have influenced it, including venture capital.

The success of the Netherlands' biotechnology industry is a reflection of an excellent research infrastructure and a long national history in the life sciences. The country has 80 entrepreneurial biotech companies. Five of them are public firms; the remaining 75 are private. Current entrepreneurial biotechnology has its roots in the historical Dutch beer (Heineken), food (Unilever), and farming industries. However, in recent decades great advancements have come from plant and crop modifications supporting related manufacturing processes.
 
With about 15 million people, the Netherlands is relatively small compared to other countries strong in biotechnology. There are 80 life entrepreneurial science companies in the Netherlands, which is about one-sixth the number found in Germany, a country of 80–90 million people. The Netherlands is also comparatively small in terms of landmass - roughly 16,000 square miles.

Despite this size, the country has many advantages that have been recognised by the global biotechnology industry. For example, the Dutch entrepreneurial biotech industry was jump-started in the 1980s when many American biotech companies came to the Netherlands to enter the European market. The American companies' presence was a catalyst for Europe to follow suit and develop an entrepreneurial biotechnology industry. The British were already involved in the industry at the time, but following the lead of the market in the Netherlands, France, and Germany stepped up their interest considerably.

Public support for biotech attracts foreign investment. The country's strong research infrastructure is especially evident in western section of the country with ten university hospitals in an area that is roughly 35 by 30 miles. The university system has a very progressive outlook toward biotechnology research, as do the Dutch people in general. These factors, combined with the fact that the Dutch are fluent in English, make the Netherlands an attractive place for foreign investment.

Strong biotechnology related infrastructure . . .

Venture capital takes root. Venture capital funding in the Netherlands was strengthened by America's biotechnology presence here during the 1980s. Some of the first US companies that arrived were funded with venture capital seed money, then eventually went public and raised money successfully on capital markets. In support of this model, Dutch venture capital firms began to support the American way of funding biotech start-ups. This funding process was new for the Dutch, and proved to be very rewarding. Along with strong venture capital, the 1980s introduced the concept of universities finding financial return by spinning their technologies into independent companies. It was from these experiences that the country's venture capital system took root.

The premier example of this model was Gene Pharming. Gene Pharming began as a university spin-off, was funded from the beginning by venture capital, and it eventually went public. This success was followed by the creation of IntroGene with Dutch venture capital from research also conducted by Leiden University.

Entrepreneurial university spin-offs. In the mid-1980s, as the concept of growing businesses from university research and funding them with venture capital took hold, Ernst & Young and the venture capital firm Atlas Venture lead successful efforts to nurture and complete the necessary infrastructure for this new industry - such as legal professionals and market analysts.

Along with solid infrastructure, Dutch biotech start-ups are finding that if they have a good business idea, money is not a problem. Currently, four basic funding streams support the industry. The first is government funding to universities for research and development; the second is project related funding; the third is venture capital; the fourth is retail investment from banks. Leading banks such as ABN Amro, ING, and Fortis support retail investment with funds dedicated to life sciences investment.

. . . created the environment for today's success.

The Netherlands has 80 entrepreneurial biotech companies. Five of them are public firms; the remaining 75 are private. Two additional public companies that operate in Germany are Netherlands companies, but they are listed only on the German stock exchange.

Start-up activity has greatly accelerated in recent years, as the Dutch have witnessed more and more product-to-market successes and thus have been encouraged to try their hand at entrepreneurship. Last year alone, seven new biotechnology companies were established. Scientists are finding that - given the availability of venture capital - it is sometimes easier to raise VC investment to support product development than it is to compete for shrinking government R&D dollars earmarked for university research.

By leveraging science with business acumen. . .

Like many European countries, the Netherlands is well-endowed with scientific expertise but lacks the management talent necessary to transform R&D into successful business ventures. It is very difficult to find scientist-entrepreneurs, but it is getting easier, thanks in part to a government focus on redirecting scientific education to include business management skills.

Last year, two successful initial public offerings came from firms that are headed by very skilled scientist-managers, and they offer a model for others to follow. First was Crucell, formed by a merger between IntroGene and U-BiSys, and lead by Dr. Dinko Valerio a professor of gene therapy at the University of Leiden. The second was Isotis - founded by Clemens van Blitterswijk, a professor of biocompatibility at Leiden University. Both companies are now trading on the Amsterdam stock exchange, and Crucell is also trading on NASDAQ. Together, the two companies have successfully raised E250m. The University holds shares in these companies, so it reaps the benefits of its investment in R&D by gaining new funding to support further research or other ventures.

. . . The Netherlands is producing leading products.

The life science industry in the Netherlands is particularly strong in medical technology with special regard to medical devices, regenerative medicine, and disease treatments. Crucell is one of the leading firms in these areas - it makes artificial replacement devices for a range of body parts, from hips to internal organs; it is at the forefront of research to regenerate damaged human tissue and to develop methods of treating disease at the cellular level. It is currently working on creating ‘safe' viruses (called ‘taxis') that will travel through the bloodstream and deliver medicines directly to the source of a malady. While Crucell focuses on developing these taxis, pharmaceutical firms are working to produce the medicines that will attach to them and be delivered via this technology.

Industry leaders excel largely due to a global mentality . . .

The Netherlands has long been active in the global marketplace. Dutch companies are keenly aware that thinking in international terms is vital to growth and success. This global mentality is reflected in the strength of the Dutch scientist as well. Although, small in number compared with their peers in nations such as the US, Dutch scientists are leaders in the well-connected international scientific community. Through electronic communications via the internet, video conferencing, and other venues Dutch scientists routinely work in global partnerships. These globally focused scientists are the true stewards of the biotechnology industry in the Netherlands. This is also particularly true in the pharmaceutical sector.

The Dutch people support biotech. The Dutch are fairly progressive people. They are very supportive of pharmaceutical biotechnology, and the vast majority (about 95 per cent) support other biotech endeavours as well, such as genetic modification of food products. But the minorities that are opposed to genetic modification are vocal and organised. This vocal minority has been successful at keeping certain items off the supermarket shelves. Consequently, supermarket chains are reluctant to promote certain genetically modified products.

. . . and an often supportive government.

Like many governments around the world, the Dutch government wrestles with questions as to how involved it should be with the biotechnology industry. On one hand, the Ministry of Agriculture follows the traditional line in its regulatory policies - which is that nature should not be tampered with. On the other, the Ministry of Economic Affairs gives great effort toward promoting spin-off companies from university R&D. The Ministry of Economic Affairs has made E50m available for business incubator projects to support start-up activities. Although this amount of money is modest, it represents a government attitude positive toward the industry.

With an eye toward taking university R&D to market, the government is also fostering and funding academic reform that will ensure that scientists and other academic professionals learn the basics of entrepreneurship. At the same time, the Dutch parliament opposed the new pan-European patent initiative, which would do much to support the protection of intellectual property in the industry. However, it is expected that eventually the Dutch Government will have no other option but to include the new EU directive into Dutch law.

Copyright © 2002 Ernst & Young

Pieter Lucas is a partner with Ernst & Young in The Netherlands.

Ernst & Young, one of the world's leading professional services organisations, helps companies across the globe to identify and capitalise on business opportunities. For more information, please visit www.ey.com