Alex Philippidis Senior News Editor Genetic Engineering & Biotechnology News

Country hopes framework will augment alliances among its institutes as well as assuage industry drug pricing concerns.

Germany boasts having the world’s third highest number of biotech companies (538 as of 2010, behind France and the U.S.). It has the second largest amount of biopharmaceutical production activity (fermentation capacity of 675,000 L as of 2010, behind the U.S.). The country’s drug pipeline grew to 516 candidates last year, up 27% from 2008. Not to mention, it serves as the headquarters of global biotech corporations ranging from Qiagen and Miltenyi Biotec to BASF and Bayer.

Germany, however, is not resting on its biotech laurels. Over the past year the federal republic has worked on advancing translational medicine efforts. It committed to awarding €5.5 billion (nearly $8 billion) in grants from this year through 2014.

Robert-Justin Scheid, manager, public relations for the federal republic’s trade and economic development agency, Germany Trade & Invest, told GEN six areas of research have been identified as priorities: individualized medicine, prevention and nutrition research, healthcare research, health industry growth, global cooperation in health research, and pooling research into common diseases. Germany’s Federal Ministry of Education and Research defines “common” diseases as those expected to afflict growing numbers of people as life expectancy continues to rise.

“In many of these areas the diseases have seemed to be more complex than earlier thought, too complex to be addressed by just developing a drug against a receptor and that’s it,” Siegfried Bialojan, Ph.D., executive director and head of Ernst & Young’s European Life Science Center, told GEN. “If you build these research clusters, combining more than just one institution, you would be able to cover these more complex issues from various perspectives. And by doing that, you are coming closer to solutions. Specifically, it is looking at existing strengths, but combining them better.”

Promoting Partnering

Anchoring the new translational research effort are four national research centers established last year by Germany—each separately focused on infection, lung diseases, cardiovascular diseases, and cancer—along with the German Centre for Neurodegenerative Diseases, which opened in 2009, and the National Centre for Diabetes Research, which opened in 2010.

The four new centers will receive a combined €450 million ($618.45 million) through 2014. For example, the budget of the German Consortium for Translational Cancer Research started at €5 million (about $6.9 million) this year and will rise to about €30 million ($41.3 million) by 2014.

The cancer consortium is a partnership of the German Cancer Research Center (Deutsches Krebsforschungszentrum, DKFZ) in Heidelberg and regional research groups from seven other regions in Germany. It will focus on: carcinogenesis signaling pathways, molecular diagnosis, tumor immunology, imaging and radiation therapy, stem cells, therapy resistance, and prevention and early detection.

The Translational Lung Research Centre will see its funding rise from €10 million next year to €25 million in 2014. That center is a consortium of the German Centre for Lung Research and researcher groups from seven areas in Germany.

The national centers are designed to reshape Germany’s biotech research effort, which has long relied on universities, university-based clinics, and societies like Max Planck and Helmholtz. With 33,000 employees, 17 research centers, and an annual budget of about €3.3 billion, Helmholtz is Germany’s largest scientific organization. Technically, it will fund all six translational centers since the federal government is prohibited from directly funding universities.

Biotech research in Germany is generated by 343 universities and more than 330 research institutes that team up with companies to discover drugs and bring them to market. However, the whole of that research effort has long been less than the sum of its impressive institutional parts as institutions have historically not collaborated much with each other. That hurdle has been surmounted in recent years through the rise of groups that combine researchers from universities, institutions, hospitals, and other organizations, both nationally as well as within 25 regional biotech clusters, called “bioregions,” created to unite businesses with academic and research institutions.

Boost to Industry

Germany also hopes that the strategy will help grow its biopharmaceutical industry, which racked up €5.2 billion in sales in 2010, up 8% from 2009, despite the economic slowdown. It makes up the lion’s share of the country’s medical biotech industry, which brought in €6.17 billion in revenue last year, up 9% from 2009.

Indeed, in aiding drug development efforts, the federal republic may also have another purpose beyond the traditional translational goal of promoting academic-industry cooperation: winning support from drug makers, who are unhappy with German government policies that have in recent years cut prices on some drugs and frozen prices on others in response to public demand for containing the cost of state-run healthcare.

Last year the government raised the discount manufacturers must offer state health insurers from 6% to 16% and also froze drug prices for three years. The German Pharmaceutical Industry Association (BPI) said the higher discount cost the industry €1.5 billion (just over $2 billion) last year.

Last year the government limited the launch price set by manufacturers for new drugs to one year, with the exception of orphan drugs. After that year, officials will cap the price insurers must pay, based on the drugs’ benefit to patients.

Long-Term Plan

Whatever the motive, what will happen to the translational effort when the research framework funds run out? “One goal certainly is to make sure that this is a long-term process rather than a four-year funding program of individual research projects,” Dr. Bialojan remarked.

“The centers are requested to allocate significant parts of the funds also in building structures that enable the research plan to be extended beyond the funding period. This also includes considerations of leveraging scientific ideas by pushing them toward commercial exploitation such as tech transfer, alliances, start-ups, etc.”

 He said the translational medicine efforts are not a signal that Germany is looking to shift its biopharma industry from its traditional strength in producing and manufacturing drugs. “It is actually a question of whether biotech as an industry is part of this game, especially if academia, which is funded by this initiative, moves further down the value chain to proof of concept,” Dr. Bialojan pointed out.

“Which role is left then for biotech start-ups that filled this position up to now?” Dr. Bialojan asked. “On the other hand,” he continued, “biotech companies have refocused anyway more and more on developing new technology platforms including those to produce novel compounds. Due to continuing financing bottlenecks, this model offers better chances to survive through partnerships with pharmas and other players who need innovations.”

Tax Woes

One obstacle to translating discoveries into new companies remains Germany’s tax structure. Germany has failed to match, let alone surpass, the R&D incentives of some other EU nations.

France, for example, offers a research tax credit of 30% of total annual expenditure on research activities up to €100 million ($137.4 million) and 5% of yearly expenditure above that level.

The 30% rate rises to 40% and 35% in the first and second years, respectively, for first-time research tax credit applicants or companies that have not received the research tax credit in the previous five years.

Germany’s R&D incentives include labor incentives such as recruitment support, training support, and wage subsidies; as well as cash grants toward investment-related expenses such as new buildings, equipment, and machinery.

“The tax situation in Germany is certainly not as optimal as it could be, while in some other European nations and countries, taxation has improved over the years,” Bernward Garthoff, Ph.D, chair of the biotech cluster in the German state of North Rhein-Westphalia, told GEN.

In 2008 and 2009, Germany’s Commission of Experts for Research and Innovation also lamented Germany’s competitive position in biopharma. It said the country “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.”

If Germany is as serious about translational research as it would appear based on the creation of the new centers and additional research spending, it should also tackle the challenge of building up its cluster of biopharma businesses with incentives that have been used successfully elsewhere.

Long term, biopharma stakeholders in industry, academia, research institutes, as well as government would do well to gauge which of the numerous regional and national centers is effectively translating research and then consolidate the growing number of consortia into a smaller number that stand a better chance of securing more funding and partners.

Alex Philippidis is senior news editor at Genetic Engineering & Biotechnology News.

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