“BERLIN -- A small German company's success in coming up with the West's first Covid-19 vaccine is drawing attention from investors in a country where biotech has struggled to raise funding in recent years.
Mainz-based BioNTech SE partnered with U.S. pharmaceutical giant Pfizer Inc. to develop the first coronavirus vaccine approved in the U.S. and Europe last year. Domestic rival CureVac NV is hoping its own shot will get approved in Europe in the coming weeks.
Now, more German and international investors are looking to invest in the search for the next hidden gem in German biotech, venture capitalists, executives and analysts say.
In 2020, German biotech companies raised a record of 3.05 billion euros, equivalent to $3.7 billion, through venture capital, share offerings and convertible bonds, triple the amount for 2019, according to Ernst & Young. While half of that went into BioNTech and CureVac, companies working on non-Covid-19 related treatments also got important financing rounds.
"People in the industry used to say, 'If a company isn't based in Boston or California or in the U.S. generally, then it will be difficult to attract U.S. investors,'" said Claudia Ulbrich, founder and chief executive of Hanover-based Cardior Pharmaceuticals GmbH, which is developing RNA therapies against heart failure and seeking to raise 50 million euros to 60 million euros for a crucial clinical study. "That's changing," Dr. Ulbrich said.
Germany, once known as the world's pharmacy, was a leading source of medical innovation during the 19th and 20th centuries. Its scientists, for instance, discovered X-rays and invented aspirin. Yet Germany-based startups have struggled to attract funding in recent years, investors and executives said.
Much investment in the sector has concentrated on the U.S., where firms raised $100 billion last year, according to Ernst & Young. China's biotech sector, while still a fraction of the U.S., has also grown rapidly recently, as the government has prioritized the sector.
Luring investment in biotech is always difficult because of the heavy risks involved. Most experimental drugs fail testing. Adding to the difficulties that German biotech startups faced raising capital has been a dearth of tax and other government incentives encouraging the risky investments, said Alexander Nuyken, head of Ernst & Young's Life Sciences branch for Europe, Middle East, India and Africa.
For years, few Germans invested heavily in German biotech and their investments were met with skepticism, said Friedrich von Bohlen, who manages the biotech investments of SAP SE software company co-founder Dietmar Hopp. "It was like the joke of the town: How can these 'idiots' sink so much nice money into such 'idiotic' companies?" Mr. von Bohlen said.
Mr. Hopp holds just under 50% of CureVac directly and via his investment company Dievini Hopp Biotech Holding GmbH, Mr. von Bohlen said.
BioNTech had never brought a product to market before the pandemic and ended 2019 with a loss of 179 million euros. On Monday, the company reported a surge in first-quarter revenue to 2.05 billion euros from 27.7 million euros in the year-earlier quarter and raised its forecast for Covid-19 vaccine revenue to 12.4 billion euros from just under 10 billion euros after signing additional orders.
BioNTech shares have more than quadrupled in value since the World Health Organization declared a pandemic on March 11, 2020.
The success has heightened U.S. venture capitalists' interest in German startups, said Markus Enzelberger, a Switzerland-based partner at U.S. healthcare fund Versant Ventures. Last year, Versant teamed up with Boston-based RA Capital Management to lead a 66 million euro financing round for T-Knife GmbH, of Berlin, which is developing cell therapies to treat solid tumors.
Many wealthy Germans are also reassessing their previous aversion to German biotech firms, investment fund managers said.
"We're getting calls from family offices and other people saying they would like to invest with us in healthcare," said Thomas Strungmann, who with his twin brother, Andreas, is a founding investor and majority shareholder in BioNTech.
While German biotech executives and their investors hope the current enthusiasm will revive Germany's contributions to drug development, they warn hurdles remain.
One problem is that Germany still lacks a pool of experienced executives to lead companies to commercial success, RA Capital Managing Director Josh Resnick said.” [1]
1. Bender, Ruth. Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]11 May 2021: B.4.
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