The biotechnology industry in Germany has seen explosive growth since the mid-1990s.

The German government is actively promoting the industry, beginning with its sponsorship of a contest called BioRegio in 1995, a competition among German biotech firms to secure government funding.

Growing at a phenomenal rate

Aided by government support, the biotechnology industry in Germany is doubling in size about every 18 months. The total number of companies varies from 287 to 1,250 depending on how much of the industry is included.

However, Germany still lags behind the UK in total industry output. At the current rate of growth, however, Germany could be the biotechnology leader in Europe by the end of the decade.

Opportunities abound for U.S. companies to establish strategic alliances and set up centralized bases in Europe. But the investment picture was not always so positive.

One of Germany’s historic weaknesses was the lack of venture capital from private investors. For that reason, German companies turned toward their U.S. counterparts for partnerships. Germany now ranks second in Europe for the number of strategic alliances formed between U.S. and German biotech companies.

Approximately 75 percent of Germany’s biotech companies work in the pharmaceutical industry, but there is also a growing potential for biotech agricultural applications.

Of the several main clusters of biotech locations within Germany, some lie totally within one state, such as Bavaria, and some overlap individual states, such as Rhineland-Palatinate, Hesse, and Baden-Wurttemburg.

Southern Germany

The largest state in terms of land area, and holding the second largest number of biotech firms, is Bavaria, in southeastern Germany, bordering Austria and the Czech Republic.

The state of Bavaria encourages business growth by providing infrastructure and space for new businesses. A popular spot is the Munich suburb of Martinsreid, where a Biotechnology Park is located at the Max Planck Institute of Biochemistry.

This project is part of a venture capital program with $30 million for biotech start-ups.

"We will locate in Regensburg by the last quarter of this year," said Dr. Uli Schindler, immune disorders program director for Tularick Inc., a drug company based in San Francisco, Calif. "The major factors we considered in choosing Bavaria as our location include the biopark (in Martinsreid), which was just established.

"We received support from the city and state. And proximity to both airports and universities is important."

What caused the sudden growth of the biotech industry in Germany?

According to Schindler, Germany realized that it was behind the United States and the UK, so the country increased spending on biotech.

"Bavaria performed well in the BioRegio," said Schindler, "matching all of the venture money raised and then doubling it. It didn’t take us long for the total site selection process. We began looking in November (1999) and by May (2000), the process was complete".

The change in cultural attitude is evident to Dr. Uwe Maschek, country manager for Cephalon Inc., a West Chester, Pa.,-based biopharmaceutical firm founded in 1987.

"German universities have provided multitudes of highly qualified molecular biologists and chemists," said Maschek. "Whereas in the past these people had to go abroad to pursue a career in pharmaceutical and biotech research, now they have the opportunity to stay in Germany. Governments have begun to realize how important the biotech industry would be to Germany."

Another German state with a developed biotech sector is Baden-Wurttemberg, in southwest Germany, bordering France and Switzerland.

The city of Heidelberg is part of the Rhine-Neckar Triangle, which includes the adjoining areas in the states of Rhineland- Palatinate and Hesse.

Heidelberg is home to such institutions as the European Molecular Biology Laboratory and the German Cancer Research Center, and was one of the BioRegio winners. A number of start-up biotech companies are located at the Heidelberg Technology Park.

One U.S. company in the park is BASF-LYNX Bioscience AG, a joint venture of Lynx Therapeutics Inc., of Hayward, Calif., and the German BASF AG.

The alliance marked the first joint venture in genomics between U.S. and German biotech companies.

Eastern Germany rebounds

Berlin and the surrounding state of Brandenburg form one of the most developed biotech areas in Germany. Berlin has the highest number of biotech companies per million residents of any city in Germany.

Atugen Biotechnology GmbH, in Berlin, is a subsidiary of Ribozyme Pharmaceuticals Inc., of Boulder, Colo. The company investigates the use of RNA in human therapeutics.

Atugen acquired Transgenetics Berlin-Buch Ribozyme and established its European headquarters at the Max Delbrueck Center, which employs thousands of researchers.

The German government handled half of the $18 million in start-up costs for Atugen, and helped the company arrange venture capital for the remaining amount.

The cost of business is also a positive in eastern Germany. Rent is as much as 50 percent less than in other parts of Europe.

North Rhine-Westphalia

A state with a large number of biotech firms is North Rhine-Westphalia (NRW), in west-central Germany, bordering Belgium and the Netherlands.

The heaviest concentration of firms centers around Dusseldorf, the capital, followed by Cologne to the south.

NRW established a non-profit organization, consisting of representatives from business, research, chambers of commerce and government, to assist in the establishment of biotech companies.

The state boasts of a strong educational system. There are different areas of concentration among different parts of the state. Aachen is known for bioengineering and biotechnology, and Dusseldorf and Cologne are known for pharmaceuticals.

"One of the differences between Germany and the United States is that although labor costs are similar, public funding is more popular," said Dr. Georg Kox, of BioGenTec. "Up to 40 percent of project costs come from public funding."

According to Kox, some positive changes have taken place in the German biotech industry.

"Changes in regulations include easier access to technology, and it’s easier to apply for grants, and to obtain funding," said Kox. "The government is promoting venture capital access. The risk is actually lower for venture capital companies than it is in the United States."

Prices also vary in Germany, depending upon the region.

"Berlin is the cheapest of the major cities, and the surrounding Brandenburg area is cheaper still," said Kox. "Pharmaceuticals are the largest industry that biotech serves, with approximately 70 percent or more. It is much more accepted by the population than agricultural or environmental."

One U.S. company with headquarters in Leverkusen, in NRW, is Verigen, a health care biotech company specializing in cartilage repair.

"We considered other places, but we chose Germany due to its visionary investment capabilities," said Dr. Samuel Asculai, CEO of Verigen.

Anthony Coia is a Washington, D.C.,-based freelance writer.