Monthly Archives: September 2014

photo credit a href=httpswww.flickr.comphotos29225114@N083096220768Sergei Golysheva via a href=httpphotopin.comphotopina a href=httpcreativecommons.orglicensesby-nc2.0cca.pdf

THE CHALLENGES OF THE BIOTECHNOLOGY SECTOR IN SPAIN

The biotechnology sector in Spain has experienced an immense development in the past decade, already being the world ninth and European fifth ranked country in scientific production. In 2012 it had an impact on the Spanish GDP of 7,8 % (last known data according to the Spanish National Institute of Statistics – INE- ). Keeping in mind that this indicator did not surpass a 3% of the Spanish GDP in 2008, we can then establish the fast development of this sector, and how Spanish companies are increasingly relying on biotechnology use as a means to innovate and grow in their respective markets.

Other statistics also prove this development, according to the Annual Report of ASEBIO (Spanish Association of Biotechnology Companies)[1]: the employment rate has grown, creating almost 800 new jobs in 2012, the number of companies that declare to perform biotechnology activities has risen to more than 3.000 and the turnover has reached an annual 80.000 million euro. Finally, another note that shows the importance of the sector in Spain is that 2014 has been declared as the “Biotechnology Year in Spain”.

Catalonia is the region where most biotechnology companies are, concentrating almost 20% of all Spanish biotechnology companies, followed by Andalusia (with almost 15%) and the Madrid Community (with 13%). The Autonomous Community has traditionally been the headquarters of numerous biotechnology companies: for example, 50% of all Spanish pharmaceutical companies are located here, including the five biggest companies, including Almirall, Esteve and Ferrer Internacional. Catalonia also leads the statistics on number of newly created companies, followed by Andalusia and Galicia, fast becoming one of the most strategically important regions in the biotechnology sector in Europe.

There are several reasons why Catalonia has become the biotechnology leader region in Spain and one of the most important in Europe, alongside BioTOP in Berlin, One Nucleus in Cambridge (London) or Medicen Paris Region, among others. It has 56 investigation centers with a biotechnology activity, 17 university hospitals, two big infrastructure centers (Barcelona Supercomputing Center[2] and Sincotrón ALBA-CELLS[3]), as well as 12 technology centres and 16 scientific and technology parks, which have greatly favored the setup of new companies and the attraction of investment.

The scientific and technology parks located in Catalonia have been a key factor in the development of the sector and the creation of new companies, as their mission has been to facilitate the step from R+D groups and departments to startups. They also offer common use facilities, which mean an important saving on the initial investment necessary to create a new biotechnology company. The possibility of interaction and synergies between startups, technology centers, big companies and R+D facilities have created a perfect space where to establish new companies and develop as a competitive business.

As a consequence, and if we take a look at the number of funds granted by the European Research Council[4], Catalonia is the destination of more than half of those collected by Spain and it is where more than 29% of the funds bestowed to Spain by the European Seventh Framework Programme[5] are located. Catalonia has also attracted specialized investors, including corporate funds (which right now amount to more than 136 million euro in resources) and investment banking, as well as venture capital funds. Between 2009 and 2013 the venture capital investment has multiplied by five, being one of the most recent examples the venture capital company “Caixa Innvierte BioMed II”, created by the Spanish financial entity “La Caixa” in partnership with the Spanish Economy and Competiveness Ministry and the Catalonian Financial Institute, and which will invest 35 million euro in developing biomedical companies.

However, the access to investment funding continues to be the biggest challenge that the Spanish biotechnology sector has to face in order to continue growing and being competitive within the European market. Much of the startups and small and medium companies that focus their activities in biotechnological R+D depend on public funding to subsist and this has dramatically decreased in the last few years due to the economic crisis: the resources and funding of the Spanish Industrial Technological Development Center (CDTI)[6] and of the Agency of Competitiveness for Companies in Catalonia (ACCIÓ)[7] have decreased more than 50% since 2012.

Another challenge of biotechnology companies is not only the adequate protection of their research results through patents (in 2012 more than 700 patent applications were published and only 294 were authorized), but also the necessity of continuing research and a reformulation of the business models once the patents have expired.

The biotechnology regulatory framework is also a barrier for companies that want to start manufacturing and commercialising the products resulting from their research. The Spanish Medicines Agency and Sanitary Products (AEMPS) and the European Medicines Agency (EMA) are the competent entities in charge of the approval of clinical research, manufacture and commercialisation of cosmetics, medical and sanitary products, while the Spanish Agency for Food Security and Nutrition (AESAN) and the European Food Security Authority (EFSA) are the competent authorities for the authorization of manufacture and commercialisation of functional foods and products which contain genetically modified organisms. All of these institutions require expensive clinical essays as well as bureaucratic procedures that are a hindrance for many small and medium companies due to their costs.

The last two challenges mentioned revert back to the first one mentioned: the difficulty of accessing public and private funds to develop the business is seriously affecting the sector. Therefore, and now that it seems that the worst of the economic crisis is over, it is time for the Administration to address the problem and again gradually increase the public funds destined to R+D and scientific innovation: with only a few exceptions of companies with a turnover of more than 100 million euro, such as Grifols or Almirall, the vast majority of the Spanish biotechnology businesses are small and medium companies that greatly depend on private or public funding for their subsistence and growth.

Last but not least, it is highly necessary to value and commercialise R+D and innovative investigation in order to encourage private investment, promoting a closer collaboration between the public and private sector. The number and funding of universities and public research centres with biotechnological projects has to increase and a sustained commitment by the Government of R+D is imperative if we want to remain competitive, now that the emerging countries such as China or Brazil are slowly becoming firm competitors in the worldwide market. The creation of more public and private entities would without doubt attract private investment, being able in this way to compete with our worldwide equals.

[1] Annual Report of ASEBIO (Spanish Association of Biotechnology Companies) 2013 (www.asebio.com)

[2] Barcelona Supercomputing Center:  www.bsc.es

[3] Sincotrón ALBA-CELLS: www.cells.es

[4] European Research Council (http://erc.europa.eu/)

[5] Seventh Framework Programme of the European Community for Research, technological development and demonstration activities: http://europa.eu/legislation_summaries/energy/european_energy_policy/i23022_en.htm

[6] The Industrial Technological Development Center (CDTI) is a public company dependent on the Spanish Economic and Competiveness Ministry, which promotes the innovation and technological development of Spanish companies (www.cdti.es).

[7] Agency of Competitiveness for Companies in Catalonia (ACCIÓ): http://accio.gencat.cat/

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WOMEN IN POWER (II)

Red Eléctrica Española, Acciona, FCC, CaixaBank, Inditex or Viscofan are the listed Spanish companies with the most gender-balanced boards of directors based on the gender profile of their members

Spain: new measures, but are these enough?

As we already mentioned in our previous post, the measures contained in the Draft Law relating to corporate governance of corporate enterprises refer exclusively to commercial undertakings listed on the Spanish secondary stock market and provides that a commission set the goal of representation for the underrepresented sex,  in addition to facilitating the appointment of women in the  selection processes for directors.

In 2013, 79.5% of women directors of IBEX-35 companies were independent directors, another 16.4% were consejeras dominicales (directors representing shareholders with substantial shareholdings) and only 4.1% were executive directors, in companies such as Banco Santander, Telefónica, Arcelor and Bankinter. There were also two Chairwomen of the Board: in Dia and FCC.

We cannot deny that in Spain gender quotas on corporate boards are an example of the catalyst effect that the adoption of legislative measures can have. We have to recall that  Organic Law 3/2007 of 22 March 2007 for Effective Equality of Women and Men included a recommendation  that companies (and not just listed ones)  include in  their  boards of directors a number of women that would  permit balanced representation of gender,  leading to a sharp increase  in the presence of female directors in Spanish listed companies (from 3.30%  in 2005  to 17.23% in 2013).

On the other hand, the Unified Good Governance Code, published in 2006 by the National Securities Market Commission (in Spanish “CNMV”) contains other recommendations: in the event that there are no directors or that a limited number are appointed, the Board shall state the reasons for, as well as the initiatives adopted to correct this situation. In addition, the appointments committee must ensure that when filling new vacancies, selection policies involving positive discrimination in favor of women are adhered to.

But what lies behind these equality policies? Do they only seek social justice between genders? Many studies conclude that greater gender parity undoubtedly leads to improved performance by businesses: not only because more women in the corporate governance of companies implies the proper management of diversity, but also because of better quality in decision making, the existence of more innovation, a better knowledge of the market or identification with customers, as well as greater use of European talent (let us not forget that 60% of European students are women).

We therefore welcome the fact that with  the Draft Law this matter will be  incorporated directly into the Spanish Corporate Enterprises Act, and subsequently integrated into the Commercial Code, although it is likely that it  may remain a mere statement of good political intentions. This will certainly help, but it will be insufficient   if the threshold of 40% female presence on boards of directors by 2020 – the target earmarked by proposed European legislation – is to be reached.  Clearer mandatory rules, including deadlines and administrative or financial penalties, would have been preferable.  As things are, the fate of female board directors is sealed… though perhaps it can still be modified in the parliamentary debate.

Successfully dealing with multiculturalism during the process of business internationalization

It seems that in the world of business there are no longer frontiers. Internationalization has become the main objective of all organizations. Albeit, companies that want to conquer the whole world, and especially the world’s emerging and most densely populated countries (BRIC[1]), are confronted with the challenge of cultural diversity and the duty to respond to it as the key to success.

Indeed, cultural difference is one of the most latent problems which a business faces in its process of internationalization. This is due to a lack of knowledge about foreign cultures, about the way they work and do business, as well as an inability to adapt to the corporate policies of other countries. In my view, this is due to the deeply rooted world view that the individual has regarding himself or herself, as well as the conception of one’s own culture.

For example, in countries like the United States, Canada, Australia, Holland, Germany, England, Denmark, Sweden, Switzerland, etc., employees tend to pursue personal interest at the workplace. In other words, they have a highly developed sense of responsibility and commitment in order to be efficient, aiming to reach the best results. In short, these are individualistic cultures.

At the other end of the spectrum, are more community-oriented cultures in which collective interests take precedence over personal ones, that is, the company-employee relationship is a moral or “family” type relationship with strong personal involvement. Communication is more diplomatic, courteous and imprecise. The countries of Central America and South America, Spain, Japan, China, India, etc., should be included within this group.

Dealing with these differences as efficiently as possible, that is, working with teams from different cultures and interacting and negotiating with persons having a different nationality from one’s own, requires, in addition to technical skills, cultural intelligence and emotional intelligence, understood to mean (i) the ability to empathize and identify with others; (ii) intercultural communication skills; an enquiring and open mind; (iv) the desire to break down cultural barriers; and (v) the capacity for self-criticism and to determine how other cultures perceive ours.

Thanks to my experience in Shanghai during four years I experienced how important was to develop the abovementioned skills in order to interact with Chinese people. In fact, I discovered that certain rituals and protocols are crucial if we want to seduce a Chinese business person.

For example, in a business meeting in China, greeting the person who is most senior is critical, irrespective of whether or not this person is a man or a woman. In other words, respect for hierarchy is essential, as opposed to what happens in our culture, where women are given priority.

Furthermore, giving and receiving a Business Card is not a mere formality, but more like a ritual: it is done with both hands. The interlocutor has to read it and show interest, otherwise, it is considered disrespectful.

Gan Bei! An expression to which one cannot remain indifferent! In a business dinner with Chinese business people, when one of them says ¡Gan Bei! it means that everyone must gulp down their drink in one shot and then show that the glass is empty. Throughout dinner several toasts are raised to create a more personal bond in business dealings. Nevertheless, familiarity has its limits: one should never talk politics and avoid social issues.

[1]BRIC: Brazil, Russia, India and China.

Much Ado But Very Few Yuans

Almost a year has passed since the entry into force of the Spanish Entrepreneurial Support Act, Law 14/2013, of 27th September 2013, which was approved with the hope that it would attract foreign investors to our weak post-crisis economy thanks to its “promise” of visas and residence permits for investors, entrepreneurs and highly skilled professionals through a streamlined and simplified procedure. Undoubtedly, the most widely known measure introduced by this law was the granting of a residence permit to the foreign investor who makes a real estate investment of at least €500,000.

However, after this implementation period the results are not what were expected. Based on an initial assessment of 8th May 2014 the figures are clearly much less than those expected: only 81 non-EU citizens have benefitted from the new Law in Spain. Of this number, 72 made a real estate investment (of a minimum of €500,000 in real estate), while 6 made a capital investment (of a minimum of two million euros or one million in Spanish public debt securities, in shares or in company shares in Spanish business entities, respectively) and 3 presented a project to be developed in Spain and of general interest. Almost half of the investors were Chinese or Russian.

But, why has the Law not yielded the expected results? Among other reasons, one could argue, the fact that in other neighbouring countries the benefits of the “Golden visa” are much greater. One example of this is Portugal, where 1,340 visas have been granted since the Portuguese Law entered into force in October 2012, and some 900 from January 1st 2014 to August this year.

The main difference between the Spanish and Portuguese systems which explains this difference in result is that in Portugal one can expect Portuguese/EU nationality to be granted if the foreign investor maintains the initial terms of investment during a minimum period of residence of six years in Portugal (this being understood to mean a minimum stay of two weeks in the territory every two years).

Once again, the Spanish legislator has legislated, yes, but has clearly done so inadequately and with little reflection. Once again, it has put on a show for the gallery.