Many French geneticists and some stock-market analysts are concerned that the government may be planning to prop up the biotechnology company Genset. They suspect that a FF1.5 billion (US$240 million) boost to genome research, reported to be under consideration by the French government, may represent a hidden subsidy to the ailing French company.

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Falling fortunes: the popularity of Genset, the 'jewel' of French biotechnology, has dropped sharply.

Shares in Genset, the largest biotechnology company in Europe and often called the 'jewel' of French biotechnology, have dropped sharply over the past twelve months from almost $40 to around $15. The company, valued last summer at over $700 million, is now worth about half of this.

Genset's change in fortune has — according to several analysts — been largely prompted by market anticipation of the recent creation of a private-public sector consortium that would map and make freely available variations in the human genetic code linked to diseases. Genset's core business is to find and patent gene-sequence mutations involved in common diseases.

Pascal Brandys, chief executive officer of Genset, disputes this interpretation. He says the drop is "conjectural" and that other biotechnology companies are having the same experience.

He claims that Internet companies, for example, are drawing away investment from the sector and predicts that Genset's troubles are "provisional".

Whatever the explanation, information from a number of sources suggests that the company is likely to be the prime beneficiary of a possible FF1.5 billion injection of state funding into genome research.

The government is believed to be examining a proposal that would result in these funds being paid to a consortium made up of Genset, the Institute of Genetics and Molecular Biology near Strasbourg, the Génopôle biotechnology park being built at Evry, near Paris, and the Evry-based National Sequencing Centre (Genoscope) and National Genotyping Centre.

According to several sources, the proposal may give almost half the funds to Genset. Vincent Courtillot, director general of research at the science ministry, declines to confirm or deny this account.

"No public announcement has been made, particularly no numbers given, in any case by our ministry," says Courtillot. "Our prime minister has clearly said that France intends to hold its rank in genome-related innovation, through an alliance between public and private funds. But no other precise numbers are available yet."

Indeed, while France pioneered early genome efforts — its Généthon laboratory published the first physical and genetic maps of the human genome in 1992 (see Nature 359; 794; 1992) — such research has until recently languished through lack of support from successive governments.

Pierre Chambon, head of the Strasbourg Institute of Genetics and Molecular Biology that was built in 1994 with the support of Bristol-Myers Squibb, confirms that the FF1.5 billion proposal is under discussion, but says that no decision has yet been taken. He denies, however, that the proposal is intended to indirectly subsidize Genset.

"If I take part in an operation, it is not to refloat Genset, it is because it is worthwhile," says Chambon, who is rumoured to be a candidate to head any consortium. "The essence of the project is outside Genset."

But many geneticists are concerned by what they claim is a lack of openness in the discussions surrounding the proposal, alleging that the decisions are being reached behind closed doors.

This has further fuelled suspicions that the proposal may partly represent a hidden subsidy to Genset.

"It is very worrying," says one leading geneticist. "Government money should not be used to compensate for the industrial risks taken by Genset — risks that have been punished by the market." This view is shared by several other prominent geneticists.

"It is obvious that, as the principle industrialist in this sector, we will take part in any initiative in this area," says Brandys.

He dismisses assertions that its involvement would amount to a subsidy, arguing that state support until now represents only a few per cent of the $1 billion it has raised on the stock market. "One can't say we are big consumers of public aid," responds Brandys.

If the company did receive a substantial injection of cash through the proposed consortium, the state would also benefit in terms of contracts and work carried out, according to Brandys.

"There would be positive effects for Génopôle and for society at large," he says.

Support for a role for Genset comes from Eric Molinie, an official at the French Muscular Dystrophy Association. The charity has invested more than FF1 billion in the Evry Génopôle and was the largest funder of French genome research before it shifted its focus in the mid-1990s to gene therapy.

The consortium proposal is "a good way to unite public and private genome research", says Molinie, arguing that that there are few genome companies in Europe with the size and expertise of Genset. The consortium would allow France to recapture the lead it has lost in genomics, he says.

But Charles Auffray, a leading French genome researcher, says that — while there is a clear need to relaunch genome research in France — he prefers an integrated approach that would assemble a broad spectrum of public and private bodies within a comprehensive pre-competitive programme. Discussions on the way forward need to be more open, says Auffray.

The need for a broad approach is also supported by Bernard Pau, director of biotechnology policy at the Centre National de la Recherche Scientifique, and a member of a panel set up by the government to recommend a new national strategy for life sciences (see previous page).

Pau argues that genome research itself is increasingly seen as being less important than post-genome research areas. This view seems to be shared by the markets.

Genomics is now considered to be a "low-price commodity", says Genghis Lloyd-Harris, director of equity research for the pharmaceutical and biotechnology sectors at the investment bank, Credit Suisse First Boston.

"The market is more interested in post-genome research, such as proteomics and DNA chip technology, which it sees as being more directly related to drug discovery," says Lloyd-Harris.

Such reasoning is one explanation for market dissatisfaction with Genset. A more immediate cause for the fall in its shares, suggests Ernie Knewitz, from Noonan-Russo Communications — Genset's public relations firm — is the recent decision by ten of the world's leading pharmaceutical companies and Britain's Wellcome Trust to fund a US$45-million map of the variations in the human genetic code linked to common diseases (see Nature 398, 545; 1999).

By agreeing not to patent the map and to make it freely available, the group has implicitly challenged Genset's core business, namely mapping such single-nucleotide polymorphisms (SNPs) and striking alliances with pharmaceutical companies. One industry analyst says the new initiative turns SNP mapping into "pre-competitive research".

Knewitz points out that Michael King, an analyst at Robertson Stevens, has reiterated the firm's "buy rating" on Genset, in the belief that the company has a large head start on the consortium and should complete its own proprietary map by the end of the year. "Investor concerns have been overplayed," says the text accompanying the rating. "The high level of interest in SNPs validates the Genset approach."

But one analyst expresses concern that Genset failed to live up to its "emphatic promises on milestones in terms of the number of SNPs mapped. The market was angry in feeling that it was misled."

Brandys vehemently denies this, arguing that numbers of SNPs or progress in mapping are irrelevant. The wider system for gene discovery is what counts, he says, including large-scale genotyping and analytical methods. "We have always been prudent in our claims," he asserts. "All that counts is our portfolio of patents. Our only milestone is gene discovery."

But the analyst adds that Genset pales besides rivals such as Celera, set up by genome pioneer Craig Venter, "which has patented thousands of genes and has three of its own products in clinical trials".

The market response to any new government support for Genset is unpredictable. "We are working on the assumption that Genset will get a whole lot of money," says one analyst.