Suddenly in the spotlight: biotech industry hopes for corona money rain

The German biotech industry has been complaining for years that a lack of tax incentives is preventing potential investors from investing. But in the Corona crisis, two companies, Curevac and Biontech, are taking center stage. Competitors hope that they too will benefit from the money and exposure.

First neglected, now the focus – for years the German biotech industry has been complaining that its research-intensive business lacks state support and funding. But thanks to Corona, hundreds of millions of euros of tax money are suddenly flowing into the sector. The federal government is even getting involved with the Tübingen vaccine developer Curevac – unthinkable before the pandemic. Only a few biotech companies are in the spotlight – besides Curevac, Mainz-based Biontech, which is also developing a corona vaccine. But the rest of the industry is hoping to get some of the unfamiliar attention and is rethinking politics.

Even if a lot of light is now shining on the German biotech industry, many companies remain under the radar of investors, says the President of the Bio Germany industry association, Oliver Schacht. "Many small companies are being forced to postpone clinical trials, and it is almost impossible for other companies to complete financing rounds," he says. "All the common diseases don't go away, we also have great companies that depend on sufficient capital available to them."

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The industry in this country has long complained that a lack of tax incentives is preventing potential investors from investing in biotechs. Many companies struggle to obtain funding, especially for mid-stage clinical trials before the first proof of concept of a new drug has been established. In between there is often a financing gap, also known in the industry as the "Valley of Death", in which many a promising start-up dries up financially.

Individual lighthouses

In 2019, German biotechs were able to raise almost a quarter more risk capital than in the previous year, at 479 million, according to the annual biotechnology report by the consulting company EY. However, 290 million euros of this came from a financing round from Biontech. "Once again we see the old problem that capital primarily benefits individual lighthouses," says study author Siegfried Biajolan. After deducting the exceptional financing, there is only a modest amount left for the entire industry.

After calls for help from the industry went unheard for years, there are now signs of a trend reversal. "The way of thinking in Berlin is changing. We see more interest and awareness in biotech research because of Covid-19," says Rainer Lichtenberger, CEO of Atriva Therapeutics from Tübingen, which focuses on the development of drugs against infectious diseases the respiratory system specializes.

A development that also defines Merck boss Stefan Oschmann. The exchange with politicians increased in the wake of the pandemic, he says. "I hear from governments that we need a certain autonomy and that they want to work more closely with companies."

Future fund with ten billion euros

The Federal Ministry of Economics now sees it this way: "In the course of the pandemic, it is clear how important biotechnological companies are for health research and health care and for protecting the population," says a spokesman.

The measures already introduced by the Federal Government to strengthen Germany as a research location include, for the first time, tax subsidies for research and development since January. As part of the multi-billion dollar economic stimulus package that the federal government put together to cope with the Corona crisis, the tax research allowance was doubled to one million euros per year.

CureVac
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Access to risk capital in Germany still needs to be improved, says the Union's research policy spokesman, Albert Rupprecht. Up until now, local companies have found it difficult to secure the money they need in Germany. "We want to change that and have decided on a future fund with ten billion euros. This must now be implemented by the federal government in such a way that biotechnology companies can also receive more venture capital, grow faster and thus assert themselves in international competition." However, it is still unclear when the fund will be launched.

State participation must remain an exception

Curevac and Biontech, which are among the main beneficiaries of a 750 million euro special federal program to accelerate corona vaccine research, can show impressive growth stories: Biontech plans to employ 1,800 to 2,000 people by the end of 2020 – around 1,300 at the end of 2019 Last year the workforce grew by around 40 percent. The company is developing a vaccine together with US partner Pfizer. At the beginning there were still 50 employees working on the project at the company, now there are around 500 across all functions.

Curevac is also getting a boost from Corona: The company currently employs around 500 people and plans to hire around 200 more in the next twelve to 24 months. Production capacities are to be increased tenfold over the next 18 months. The federal government acquired a stake in the company for 300 million euros. This also attracted other investors, such as the British pharmaceutical company GlaxoSmithKline, which contributed just under 150 million euros.

Bio-Germany boss Schacht calls for state holdings to remain the exception. "The goal must be that the state does not act as an investor, but that attractive framework conditions are created for investors." He hopes that more biotech companies will benefit. "We hope that the crisis will do something good for the whole industry." At the moment only a few individual companies are in focus. "Now we have to succeed in writing this success story to other companies as well."

. (tagsToTranslate) Economy (t) Biontech (t) Curevac (t) Medicine (t) Medicines (t) Coronavirus (t) Corona crisis (t) Pharmaceutical industry