Pharmaceuticals and Life Sciences Drug Discovery and Biotechnology in Germany Pharmaceuticals and Life Sciences Drug Discovery and Biotechnology in Germany Drug Discovery and Biotechnology in Germany Drug Discovery and Biotechnology in Germany Preface Published by PricewaterhouseCoopers and the Council of German BioRegions By Dr Ernst-Dieter Jarasch, Dr Albrecht Läufer, and Dr Claudia Ulbrich Coordination by Dr Jens Katzek and Dr Kathrin Adlkofer All rights reserved. Reproduction, microfilming, as well as recording, storing and/or processing onto electronic media are not permitted without the express consent of the editor. The results of the study and expert contributions are intended as information for our clients. For Preface of BIO Deutschland e.V. the resolution of relevant problems, please refer to the sources indicated. Parts of this publication may only be reproduced or duplicated with the express prior written permission of the publisher. Statements of opinion reflect the views of the individual authors. Drug discovery nowadays is a highly innovative process by which new drugs are discovered and/or designed. It is expected that in the year 2010 at least Printed in Germany 50 percent of all new approved drugs will come from the biopharmaceutical sector. The discovery and validation process is mostly carried out by new innovative and medium-sized companies. But despite advances in technology and greater understanding of biological systems, drug discovery is still a lengthy process. Specialised drug discovery companies need an ideal business climate, that is, political, economic and social conditions, to be able to cope with the entrepreneurial risks of drug development. Dr Peter Heinrich The Commission of Experts for Research and Innovation set up by the German Government has noted for the second year in a row that “Germany’s competitive position will be at risk in the medium and long term if research and innovation are not improved and the major obstacles caused by the taxation system are not removed.”1 Since their foundation, many biotech companies have invested their entire assets in innovative R&D. Expenditure on research is usually completely funded by equity capital. Expenditure on drug development is particularly high in biotechnology. It takes many years before companies make a profit. This is primarily due to the development periods of ten years or Dr Viola Bronsema longer, which are typical of groundbreaking innovative drugs. In the current situation, investors are less willing and able to invest because of the need to account for the loss of the loss carry forward due to the investment. There is a fundamental discrimination against innovative drug discovery companies as compared with large, profitable pharmaceutical firms. On behalf of the biotechnology industry, BIO Deutschland is working to have the increased discrimination against small and medium-sized drug discovery companies resulting from the 2008 Business Tax Reform Act overturned and replaced by innovation promotion that is fit for the future. The Commission of Experts for Research and Innovation has made clear how important it is during the current worldwide economic crisis to improve conditions for research and innovation in a targeted way – especially and above all in the private sector. BIO Deutschland will continue to lobby for political activities to be rapidly undertaken so that innovative small and medium-sized companies are actively and sustainably strengthened and investments are made in one of the most future-oriented pillars of our economy. Yours sincerely, Dr Peter Heinrich Dr Viola Bronsema Chairman of the Board of Managing Director of BIO Deutschland e.V. BIO Deutschland e.V. © Mai 2009 1 Commission of Experts for Research and Innovation (EFI) (Ed.). Report on Research, Innovation PricewaterhouseCoopers refers to the German firm PricewaterhouseCoopers AG and Technological Performance 2009. Berlin: EFI, 2009. Wirtschaftsprüfungsgesellschaft and the other member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. 3 Preface Drug Discovery and Biotechnology in Germany Drug Discovery and Biotechnology in Germany Preface Preface of the German BioRegions Preface of PricewaterhouseCoopers Germany The biotechnology landscape in Germany is particularly colourful. The pharmaceutical marketplace is changing significantly with huge Start-up companies, so essential for the development of a new innovation challenges ahead for the industry and biotech as a whole. The major sector, however, have quickly recognised that it is helpful for their own socio-economic trends expected to have most impact can be summarised development to be in an environment which supports them. as follows: increases in chronic disease due to the demographic shift; the health care payers’ influence on how doctors prescribe with impending Supply companies, scientific excellence, financial investors, and cluster talks on pay for performance, and the growth of emerging markets and management with its support network: all of these are factors relevant to demand for innovative medicines. In addition, many governments are the further development of German companies. The BioRegio competition beginning to focus on prevention, which will create new opportunities in Dr Kai Uwe Bindseil in the mid-1990s was an important new initiative which finally led to drug discovery. Dr Volker Fitzner BioRegions all over Germany, with approximately 200 start-up companies – a landscape which today is well established and attractive to investors. Pharma’s traditional strategy of placing all their bets on a few molecules, promoting them heavily and turning them into bestsellers worked well A solid network represented by the German BioRegions supports the for many years. However, productivity in the lab is now plummeting, as future development of the biotech industry in Germany. The BioRegions, attention switches from diseases that are relatively common and easy to with their close connections to the different actors at a regional level, have treat to much more complex or rare diseases. recently focused their common interests in a nationwide Council of German BioRegions within BIO Deutschland. Moreover, the patents for many of the medicines launched by the industry in the glory days of the 1990s are due to expire over the next few years, Biotechnology, however, was an international business right from the leaving Big Pharma very vulnerable. beginning and still is today. The Council of German BioRegions has developed the idea of bringing together all relevant information from the There is now a strong need to alter R&D business models to sustain future Dr Jens A. Katzek Volker Booten individual regions regarding drug discovery to create a bigger picture growth and performance. The changing R&D process will result in a much showing the strength and attractiveness of drug discovery expertise in sharper increase in the number of biotech companies involved than in Germany. the last decade. The current need for funding through sources other than the capital markets is driving interest in biotech companies, helping to Although every region has its particular strength, Germany is like a jigsaw establish them as serious partners for Big Pharma in drug discovery and puzzle – every single piece is colourful, but the full picture emerges only development. when the pieces are viewed as a whole. Innovation is still strong in Germany’s excellent research organisations and The study is intended as a contribution towards attracting further small to mid-size biotech companies, which will prove extremely valuable international investors. This will ensure that the industry continues to to the pharmaceutical industry. To get a clearer understanding of the great flourish and become ever more colourful over the coming years. potential and opportunities offered by biotechnology-based drug discovery, we carried out an investigation of the German landscape of drug discovery We would like to thank Dr Albrecht Läufer and Dr Ernst D. Jarasch and biotechnology together with the Council of German BioRegions. We from the Working Group as authors of the first part of the study, would like to thank the authors and study coordinators for their excellent PricewaterhouseCoopers (PwC) for their great support and co-authorship, research and for bringing together all relevant data to demonstrate the Dr Kathrin Adlkofer for compiling all the relevant information from attractiveness of Germany as a place to develop innovative drugs for our the individual regions and the entire team for their efforts, all clearly growing and ageing society with its changing needs. demonstrating that Germany is an attractive place for cooperation! We would also like to express our appreciation for the expert opinions we Yours sincerely, gained from a series of interviews with academics and managers from pharmaceutical and biotech companies, which we will share with you in this publication. Yours sincerely, Dr Kai Uwe Bindseil Dr Jens A. Katzek Managing Director BioTOP and Managing Director BIO Chairman of the Council Mitteldeutschland and Project of German BioRegions Coordinator of the Council of German BioRegions Dr Volker Fitzner Volker Booten Partner, Chemicals and Pharma Partner, Industry Leader PricewaterhouseCoopers Chemicals and Pharma PricewaterhouseCoopers 4 5 Table of contents Drug Discovery and Biotechnology in Germany Drug Discovery and Biotechnology in Germany Table of contents Table