The French biotechnology sector is in need of new growth solutions as companies struggle to finance themselves.

That is the principal finding from a new report from France Biotech, the French association of life science companies, in partnership with Ernst & Young, looking at the sector in 2011. Almost 200 firms took part in the survey.

The report notes that France ranks second in the world in terms of number of life science companies (about 1,400) and states that in terms of partnerships with the pharmaceutical industry, 85 were entered into in 2011. It also reveals that funding for French companies in the sector (via venture capital, initial public offerings or refinancing on the financial markets) dropped sharply between 2010 and 2011, falling 40% to 277 million euros.

However, this trend could also be observed in the biotech sector across Europe, where financing was down 36%. Respondents to the survey "continue to overwhelmingly favour" a number of public initiatives such as Oseo - the French state innovation agency -  and CIR (tax rebates for research), but point to "the extremely negative impact of the reform of the Young Innovative Company status".

Andre Choulika, chairman of France Biotech, said that "in spite of the difficult period we are going through, our sector is proving its vitality".  However, he asked whether venture capital, "which remains the source of financing for the expansion of our industry, be able to meet the needs of the sector, taking into account the unprecedented drop in financing observed in 2011"?

Mr Choulika went on to say France Biotech "has warned the government about the impact of the innovation grant reforms, which have blocked the path of many of our fast-developing companies, and may continue to do so". He argues that "each small and medium-sized enterprise in our sector is a large company in the making" and the association "will continue battling to get the government to review its standpoint on the recent reforms". Franck Sebag, a partner at E&Y, added that "as financial resources continue to dry up, companies in the sector will have to develop more rapidly".