The global biotech business model is "breaking down" as investors tighten purse strings and the industry's research base shifts to emerging economies, according to a report from PricewaterhouseCoopers.

Last year, biotech companies in Europe managed to raise just US$1.1 billion ($1.3 billion) in venture capital - the lowest haul since 2003.

The omens are also grim: 84 per cent of the participants at a recent biopharmaceutical conference in Monaco viewed funding as the industry's prime challenge.

Historically, the biotech industry has relied on external investment to develop innovative ideas that have often sprung from the world of academia.

But the business model is risky, and many investments end up in the red. The PwC report cites a recent study of 1606 biotech investments realised between 1986 and 2008. Of these, 704 resulted in a full or partial loss, and 16 only managed to cover their costs.

Moreover, many of the external conditions that supported the industry's success stories are "rapidly vanishing".

One the one hand, investors that have been battered by the recent economic slump have become more cautious. On the other, the research base is shifting, with emerging economies competing more aggressively.

Between 1998 and 2006, for instance, the number of students graduating with doctorates in the physical and biological sciences grew by 43 per cent in India. China recorded 222 per cent growth.