France Biotech reports a 79% fall in equity investments in French biotech companies in 2008

02-10-2009: France Biotech has reported a major drop in equity investments in French biotech companies: funding fell by 79% in 2008, relative to 2007 (€143 million in 2008 versus €694 million in 2007). Investment in listed companies collapsed (only €12 million in 2008 - a fall of 98%). Venture capital investments in private companies (€132 million in 2008) fell by 27%. The trend for early 2009 appears to show continued degradation.

Philippe Pouletty MD, France Biotech’s Chairman, commented that "in order to underpin the optimism of our entrepreneurs, we must adopt an aggressive stimulus plan for young, innovative companies. Assuming that they can access finance, today’s innovative SMBs will become tomorrow’s multinationals and thus constitute an essential driver of strong, sustainable economic growth".

Paradoxically (and in contrast to French President Nicolas Sarkozy’s declarations on 22 January), the French government has weakened its support for young, innovative companies for 2009:

- the budget for the OSEO state innovation agency (a key partner for innovative companies, has been cut by half (€320 million).

- reform of the research tax credit (the "CIR") has led to an average annual reduction of 56% for biotech companies incorporated within the last 5 years, in view of changes in tax rates and the exclusion of OSEO refundable advances as eligible expenditure for the rebate.

France Biotech has recommended the following points for action to the French government:

- A doubling of OSEO Innovation’s budget for 2009 (i.e. a return to 2008 levels) and a tripling for 2010 (i.e. a 50% increase relative to 2008).

- A reform of the CIR, in order to distribute the research tax credit more equitably between SMBs and multinationals.

- Attribution of 50% of the government’s Strategic Investment Fund (FSI) to innovative French SMBs, notably to enable them to acquire undervalued foreign companies and technologies.

- Removal of caps on tax-efficient investments (income tax and wealth tax) in young, innovative companies.

- Extension of the duration of the "young innovative company" fiscal status from 8 to 15 years.

- Reform of the savings system in order to better channel life assurance and pension funds towards financing for young, innovative companies.