Biotech, short for biotechnology, refers to the use of biological systems, organisms, or processes to develop products which have applications in many areas including medicine, agriculture, food production, industry and environmental protection.
Biotechnologies provide solutions for numerous societal and environmental challenges such as climate mitigation and adaptation, access to and sustainable use of natural resources, food supply and security and human health. Biotech can also enhance the EU’s strategic autonomy and resilience by reducing industry’s dependency on fossil-based raw materials.
As a result, in 2023 the EU has identified biotech as a critical technology. That’s why on 20th March 2024 the European Commission unveiled its Commmunication to boost biotechnology and biomanufacturing in the EU. The document highlights a number of difficulties the European biotech industry is facing and suggests possible courses of action.
1. Research and technology transfer to the market
Europe boasts significant strength in life sciences and is a frontrunner in producing high-quality publications on health, agriculture and industrial biotech. Nonetheless, numerous research findings fail to progress into market-ready products.
This is partly because biotech research within the EU is dispersed among Member States, with only a few centres of excellence achieving top global rankings. The majority of these top-ranked centres are in the US, with the exception of the French National Centre for Scientific Research (CNRS). Moreover, there is a lack of well-established and systematic mechanisms for technology transfer from universities and research centres to the market.
In its Communication, the Commission pledges to take actions in three areas: a) technology transfer capacity building (including through training, knowledge development and sharing) b) technology transfer financing and c) designing innovation ecosystems through research organisations and technology transfer offices.
In the EU there are at least 130 technology centres active in biotechnology and biomanufacturing. The Commission has launched a first study to investigate the EU’s position compared to other countries regarding the generation and transfer of emerging biotechnology to the biomanufacturing industry.
Among associations reacting to the proposal, we see clear support for the strategy but also further suggestions for improvement. One of the reactions is from The European Association for Bioindustries EuropaBio, who calls for a comprehensive review of the EU regulatory approach to biotech and biomanufacturing to significantly accelerate market access to products. As part of this review, EuropaBio suggests the development of codes of practices (e.g. the Dutch authorities have issued a Code of Practice for cultivated meat tastings), EU market pull measures and biobased targets in product legislation, and EU public procurement programmes, similar to the American BioPreferred Program, to guarantee a minimum level of demand for bio-based products.
2. Regulatory complexity
Innovative biotechnologies and products might face regulatory obstacles when entering the market, both at the Member State and EU levels. As an example, biorefineries that do not meet the requirements of the Net-Zero Industry Act often face lengthy permitting and authorisation procedures. Biotech health products often encounter challenges when navigating the intricate EU and national regulatory landscapes, given the inherent complexity associated with these innovative treatments.
The Commission will assess how the EU legislation and its implementation could be further streamlined to reduce any fragmentation, explore potential simplification, and shorten the time for biotech innovations to reach the market. To do this, the Commission will launch a second study that will map key current industrial bio-based value chains, analyse the regulatory framework and the impact of relevant legislation. The study will be finalised by mid-2025 and could lay the foundations for a possible EU Biotech Act. This means that between now and mid-2025, it is time for biotech companies to influence and provide input to the studies so that the future EU Biotech Act is answers the main challenges faced today by the European biotech companies.
In addition, the Commission will establish an EU Biotech Hub, an operational tool for biotech companies to navigate through the regulatory framework and identify support to scale up, by end of 2024.
3. Access to finance
Due to the long-term financial requirements of biotech companies and the uncertainty regarding returns on investment, conventional loan-based bank financing, which is predominant in the EU, often proves to be unsuitable to meet the needs of the biotech sector.
Startup biotech firms require venture capital financing to initiate their ideas. The considerable uncertainty surrounding the feasibility and success of novel products implies that investments in biotech firms involve both high risk and long investment horizons.
The scale-up stage poses the greatest challenge for biotech firms in the Union. The fragmentation of EU capital markets leads to the prevalence of numerous small-to-medium sized equity funds that primarily invest at national levels. There is a pressing need within the EU for larger and more extensive pan-European funds capable of facilitating substantial rounds of private investment.
In the later stages, biotech companies may consider seeking financing through accessing public stock markets. But these markets remain dispersed across Member States.
In order to remove obstacles to investments, the Commission will complete a third study to identify barriers and ways to support the consolidation of investment funds, stock exchanges and post-trading infrastructure, by mid-2025.
To encourage private investments in the sector, the Commission will advocate the inclusion of biotech and biomanufacturing as part of the European Innovation Council (EIC) accelerator Work Programme 2025 to develop and scale-up innovations.
4. Skills
European biotech and biomanufacturing companies face rapidly evolving skills needs. Compared to other products, biotech products are more complex to develop, and their manufacturing requires highly specialised equipment and a highly qualified and multidisciplinary workforce. The EU is at risk of losing these skilled workers because they are attracted to other parts of the world, primarily the US.
The Pact for Skills addresses the most pressing industry skills gaps with active involvement of industry and key actors in education and training. Under this initiative, so called Large-Scale and Regional Skills Partnerships can have a substantial impact by offering upskilling and reskilling opportunities in biotech and biomanufacturing-related subjects for adults, especially in the agri-food health and textile sectors, where Large-Scale Skills Partnerships are already established. A specific large-scale partnership for the biotech and biomanufacturing could also be explored. Such partnerships can be co-financed through the Blueprint Alliances activity of the Erasmus+ programme.
The Strategic Technologies for Europe Platform (STEP) is a new budgetary tool with the objective to support the development of critical technologies and to address shortages of labour and skills in the three STEP areas, including in the biotech sector.
The New European Bauhaus Academy supports upskilling linked to circularity and biotech and biomanufacturing in the construction sector. The Commission will explore expanding the concept to other sectors such as textiles.
5. Value chain obstacles
Companies encounter supply chain difficulties and struggle to find enough sustainable raw materials to move away from fossil-based sources on a large scale. The European biobased industry heavily depends on imports of oilseeds, cork, pulp, algae, chemicals, textile fibres, as well as animal and vegetable oils.
The Commission suggest encouraging the use of EU sourced alternatives that may be available that are not yet fully exploited, such as organic waste and by-products. Moreover, the EU has a strong domestic supply of wood that can be used for batteries or healthcare and pharmaceuticals applications such as nanocellulose-based wound dressings.
6. Public acceptance
Despite their numerous advantages, there is a need for greater public awareness and acceptance of biotechnology and biomanufactured products within the EU, particularly evident in areas like vaccines. It is essential to provide strong assurances to citizens regarding responsible use, safety, and sustainability of biotechnologies. This will be a key objective of the possible EU Biotech Act.
Moreover, biotechnology and bio-manufactured products are usually more expensive than their fossil-based counterparts and, at the same time, their societal and sustainability benefits are not apparent to many consumers.
To enable fair comparison with fossil-based products, the Commission will further develop methodologies in 2025. This will include reviewing the Product Environmental Footprint (PEF) to assess the environmental impact of products.
Even though they are most often voluntary, standards ensure products or processes meet recognised benchmarks for quality, safety, and sustainability. Therefore, the Commission will encourage the elaboration and update of European standards for biotechnology and biomanufacturing, with support of the European standardisation organisations and in compliance with EU competition rules.
And now, what can biotech SMEs do?
If you are a biotech company, chances are that you are encountering one or more of the challenges listed above. As we have seen, the Commission is putting forward several initiatives to address the various obstacles facing the biotech sector. Our consultancy Lykke Advice, which specialises in helping SMEs, can guide you through these policies by:
- Scanning the different funding programmes eligible for your business and assisting you with the application process.
- Monitoring and influencing the many legislations affecting the biotech sector in general and your product in particular.
- Helping you contribute to the various studies that will be launched by the Commission, which will feed the potential EU Biotech Act.
- The Communication has quite a general scope and tackles biotech as a whole. We can help you raise awareness on issues that are specifically linked to your product. The European elections, taking place in June, will change the composition of the Parliament but also of high-ranking officials of the Commission. This provides a perfect window of opportunity for action to meet EU policymakers and make your voice and concerns heard.
If you would like to know more about our service, do not hesitate to contact us.
by Farweb