Life's what you make it

Many countries throughout the world have identified life sciences and biotechnology as key sustainable technologies that will foster economic growth and enhance the competitiveness of many sectors of industry, including healthcare, agriculture, food and the preservation of the environment. By 2010, the global life sciences market is expected to be valued at $200bn (£127.12bn).

In tune with this worldwide trend, the Irish government's support in recent months for the life sciences industry demonstrates that biotechnology is a priority in its future industrial policy strategy; it will be the next sector to see major US inward investment, as happened in the IT sector some years ago. The US is the largest foreign investor in Ireland, representing 65 per cent of foreign direct investment. Ireland also attracts 27 per cent of all new 'greenfield' investment in Europe so there is sure to be major US-backed activity in life sciences in the coming years.

At present, the life sciences sector across the whole of Ireland, comprising 59 companies, employs more than 4,000 people; 41 companies are based in the south, primarily clustered around Dublin, Cork and Galway, where university institutes provide the breeding ground for new start-up companies, while the 18 companies based in Northern Ireland are primarily clustered around Belfast and Coleraine, again near the local universities.

The sector is diverse, covering diagnostics, pharmaceutical services, bioenvironmental, pharmaceutical-biologics and agrifood. Of the 59 companies, 18 are multinationals and 41 are indigenous, with the number of employees per firm ranging from one through to 800. Almost half of the companies, though, are micro-enterprises employing fewer than 10 staff, and 25 can be identified as university spin-offs. In the pharmaceutical/biopharma sector, 14 of the 15 largest global companies are now in Ireland: Abbott Laboratories, Aventis, Bristol-Myers Squib, Eli Lilly, GlaxoSmithKline, Johnson & Johnson, Merck & Co, Novartis, Pharmacia, Pfizer, Roche, Schering-Plough, Takeda and Wyeth.

Apart from Elan, two of the most prominent companies, Biotrin and Trinity Biotech, manufacture diagnostic products. Enfer Scientific has developed tests for detecting BSE in cattle. Newer players such as Erix Therapeutics and HiberGen are concentrating on therapeutic development. HiberGen has developed a gene-tagging technology, which it is licensing to other firms. It is also using this technology on its internal research into pre-eclampsia, a life-threatening high blood pressure condition in pregnant women, as well as its research into kidney disease associated with diabetes. Yet the major initiative from one of the existing life science companies in Ireland is the decision by Wyeth to construct the world's largest biotech manufacturing and development facility, costing e1.83bn (£1.26bn), in Dublin.

The Irish government's state agency Enterprise Ireland has launched a biotechnology strategy aimed at capturing technology from university research and at supporting start-up and growing companies. This endeavour has been facilitated by the related state agency BioResearch Ireland, which has been instrumental in developing at an earlier stage in the process university-university and university-industry contacts. Additionally, the Ireland Industrial Development Agency has made life sciences a priority sector in its ongoing search for inward investment for the Irish economy, especially from the US. Similarly, Invest Northern Ireland is actively working to contribute to and facilitate the birth and growth of innovative life science companies.

Up to now, though, the emergence of a strong indigenous biotechnology industry has been hampered by the lack of a strong science base and the absence of a positive investment climate for science-based industries.

The government's e2.5bn (£1.74bn) programme of investment in R&D as part of Ireland's National Development Plan is intended to address this investment deficit with three major elements:

• Developing research capabilities in the universities. e700m (£487.4m) is to be spent on state-of-the-art research facilities in biotechnology and IT research centres.

• The establishment of Science Foundation Ireland (SFI), which will provide e650m (£452.6m) up until 2006 to fund cutting-edge scientific research. Grants of between e1m (£696,000) and e5m (£3.5m), for example, will be available each year, as well as matching funds for related new laboratory buildings. SFI has established the US-All Island Task Force, which aims to build research partnerships with the US to create an international world-class life sciences capability in Ireland.

• Support for corporate research through capability grant programmes for R&D.

Besides the advantages of low corporate tax rates for foreign investors in the life sciences sector, Ireland has the additional benefit whereby royalties or other sums received from the use of an invention covered by a 'qualifying patent' are exempt from Irish income tax. A qualifying patent means a patent in relation to research or experimentation, the main bulk of which took place in Ireland. This benefit is additionally advantageous to foreign investors, since it is not necessary that the patent be registered in Ireland in order for it to be deemed a qualifying patent, provided the research and experimentation is carried out in Ireland. Income from patent royalties is also disregarded for corporation tax purposes.

In the most recent EU Euro-barometer poll of Europeans and their attitudes to biotechnology, citizens in Ireland strongly supported various applications of biotechnology, from genetic testing of inherited diseases to GM crops/GM foods. The Irish public is far more favourable to biotechnology and the life sciences than its Continental counterparts in Austria, France, Germany and Italy. This bodes well for the life sciences sector, when taken in conjunction with the efforts by the Irish government to facilitate the growth of this sector.

The major blot on the horizon in relation to the regulatory environment for life sciences, though, is the threat of a World Trade Organization case being taken by the US against the EU over its new legislation on the labelling and traceability of GM foods, which must be implemented in Ireland. This prospective showdown between the US and the EU has the potential to undermine Ireland's attempt at establishing the country as a hub for life sciences in Europe. If the US sees the EU as obstructing the advancement of the life sciences sector in this fashion, many US investors may take the strategic decision to locate their facilities elsewhere in the world, in a regulatory environment more favourable to biotechnology.

Ireland is preparing to join the wave of economic development that will occur in the coming years in life sciences. Law firms will obviously hope to gain from this new economic activity, but since biotechnology businesses require a special blend of legal advice and support covering intellectual property, regulatory, corporate finance, investment and litigation, it will only be the major law firms that will have the capacity to provide this kind of service.

In the long run, though, the hope is that any difficulties and disagreements between the US and the EU can be rectified soon, in order that the country can gain the full benefits of foreign investment in biotechnology, thereby creating itself as a hub for life sciences in Europe.

Raymond O'Rourke is a food and life sciences lawyer at Dublin firm Mason Hayes & Curran