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Coronavirus: German biotechs in the spotlight

Thomas Kohlmann
November 24, 2020

Two German companies are at the forefront in the global race for a COVID-19 vaccine. But the potential of top German research could be used much more effectively, especially with the right level of investment.

A woman examining a model of a DNA string
Image: Fotolia/Gernot Krautberger

Germany's biotech industry suddenly finds itself at the center of global discourse. BioNTech, based in Mainz, and its US partner Pfizer have developed a highly promising COVID-19 vaccine. And CureVac, from Tübingen, has said it will have the "best, if not the fastest" vaccine within a few months.

Part of the success of these two German vaccine pioneers can be attributed to the backing of investors like the Strüngmann brothers and Dietmar Hopp, billionaires who are not dependent on a quick return.

Read more: Can we trust recent COVID vaccine successes?

SAP co-founder Hopp has invested hundreds of millions of euros in CureVac over the past 20 years, without seeing a single drug approval for vaccines based on the messenger substance technology, or messenger RNA. It's the same story with BioNtech and its US competitor, Moderna, which also rely on the mRNA method.

Persistence and millions

Twins Andreas and Thomas Strüngmann became billionaires when they sold their pharmaceutical company Hexal to the Swiss pharmaceutical giant Novartis in 2005. At the time, they faced criticism because Hexal produced "generics" — that is, copycat drugs for which patent protection had expired.

Since BioNtech was founded 12 years ago, they have relied on innovations with completely new active ingredients, which they finance. The pair have invested hundreds of millions of euros in the company, in addition to their expertise.

"The Strüngmann brothers and Dietmar Hopp did something extraordinary: They invested a lot of money right from the start, although at that point in time the mRNA technology was still at a very, very high risk level," Siegfried Bialojan, biotechnology expert at the consulting firm EY in Mannheim, told DW. "They took this risk on themselves when no other venture capital investor would have touched it at the time. You can't give them enough credit for that."

Siegfried Bialojan
The Strüngmann brothers and Dietmar Hopp took risks on biotech startups, said Siegfried BialojanImage: Ernst & Young

In the US, venture capital (VC) funds worth billions are financing innovative companies, including those in biotech. In the case of Moderna, which emerged from basic research at Harvard University in 2010, the VC fund Flagship Pioneering, which specializes in the health sector, is on board. It's headed by biochemist Noubar Afeyan, a Lebanese-born US-Armenian and MIT graduate, who is making a big impact in the US biotech scene. His $34 billion (€28.6 billion) fund is currently invested in around 40 biotech companies, according to his financial statements.

More venture capital, but not for biotech

Biotech startups in Europe and Germany can but dream of such backing. Although more money is available year after year in the form of venture capital, little of it goes into the biotech sector, said Bialojan.

"At EY, we did a study at the beginning of the year: Venture capital for startups. And the amazing thing is: it's not so much because there is no venture capital. It's because of the allocation, where you invest. Because of the €6.2 billion [$7.4 billion] for startups in Germany, only about 1.5% goes to biotech," he said.

This corresponds to just over €90 million for biotech startups across Germany. That's peanuts compared with the equivalent of almost €30 billion that a single VC fund like Flagship Pioneering puts into US biotech companies.

And although 2019 was the second-strongest year ever for biotech venture capital in Germany, more than 60% of that came from a single financing round at BioNtech.

Boost for biotech in Germany, too?

Bialojan hopes the success of BioNtech and CureVac will mean that other possible investment opportunities will be recognized.

"There is huge potential from research, from the academic environment, which is funded very widely," said Bialojan, pointing out that only a few countries in the world have such a broad research landscape as Germany, along with state funding for basic scientific research. "But it cannot be that so little comes out in the end because we have a nonfunctional 'biotech ecosystem'," he added, saying that one can learn a lot from the examples of CureVac and BioNtech.

"The question is: At what point does an investor get involved? And what can they do in the early phase in order to set up such a startup correctly from the outset?"

Bialojan said the issue is primarily about the "translation" of a research idea into a viable business, like that of the biologist and CureVac founder Ingmar Hoerr at the University of Tübingen, or the work of the two BioNtech founders, the medical couple Ugur Sahin and Özlem Türeci, at the University of Mainz.

"Germany has to get better at this translation," said Bialojan. "When developing a research project into a company, we have exactly the critical point: How can I translate these great ideas from the academic world into commercial development as professionally as possible? And, of course, such people can play a major role in this."

Ugur Sahin and Özlem Türeci
Ugur Sahin and Özlem Türeci, the married couple behind BioNTechImage: Stefan F. Sämmer/imago images

"The interaction between Thomas Strüngmann and Ugur Sahin is certainly a prime example of the interaction between a corporate and marketing professional and an ingenious cancer researcher," said Bialojan.

"We have a top scientist there, and a lot of effort went into training him how to go about a project. I know Ugur well, very well — he's no real businessman, nor does he aspire to be one. But as a scientist he's very serious about things and there are mechanisms in place to ensure that the link between science and practical implementation works well."

Incubators reduce risk

Several initiatives have been launched to give entrepreneurial support to biotech startups that don't have billionaire backing. In Dortmund there is the Lead Discovery Center (LDC), a spinoff of the Max Planck Society. Another initiative, TRON, was launched in Mainz.

The Biopharmaceutical Research Institute for Translational Oncology at Johannes Gutenberg University, in turn, is closely related to BioNtech founder Ugur Sahin, explained Bialojan. "And both companies are working very carefully to prepare academic projects for commercial development," he said.

Biotech financing chart

There are many of these initiatives in the US, including in the biotech hub around Boston. There, German doctor Johannes Frühauf founded Biolabs, a nonprofit incubator for startups in the life sciences.

The offer ranges from the provision of a turnkey research laboratory to advice from long-serving industry experts and experienced startup entrepreneurs, who put founders in touch with experts on licensing issues and decision-makers in large companies.

The first European branch is currently being built in Heidelberg, Frühauf's former home.

"Biolabs selects the best startups and advances them in the most capital-efficient manner. This is extremely attractive for investors, including pharmaceutical partners. These are models that function smoothly in the US and that we are now trying to bring to Germany," said Bialojan.

There is a very promising approach with the Bonn-based high-tech startup fund, where young companies from the medical sector can also get funding. The fund is supported by state money and private capital.

With the search for a COVID-19 vaccine, the subject of biotech has finally reached a political level. But it's even more important that the wider population and political leaders realize the huge opportunities of biotechnology.

This article has been adapted from German by Arthur Sullivan.