Around EUR 630 million flowed into companies from the IZB MartinsriedAlmost simultaneously with the publication of these figures, another prestigious project of the Free State of Bavaria was unveiled: the "Center for Advanced Regenerative Engineering," which aims to combine modern stem cell technologies with pharmaceutical research. The state is contributing €15 million to the construction of the translational center. So, is everything buoyant in the Bavarian biotech scene?
Prof. Dr. Horst Domdey in conversation with the VC Magazine.
Biotechnology was long considered a challenging field—especially in the post-Neuer Markt era. What is the current state of the industry in Bavaria?
Biotechnology in Bavaria has performed very well over the years. Due to the unfortunately very small venture capital landscape for biotechnology and life sciences in Bavaria – and Germany as a whole – most companies have the unique feature of generating revenue as early as possible in their business plans to avoid relying on large investments. Examples include service or technology companies or device developers such as ibidi. Nanion Technologies or NanoTemper TechnologiesWe are excellently positioned in these areas. Unfortunately, the great potential of new therapeutic concepts, which lies dormant at universities, for example, is still underutilized.
The topic of startups is currently receiving considerable media attention. Is this also affecting the number of new companies founded in Bavaria's biotech sector?
In my opinion, the increasing media coverage surrounding startups has no impact on the founding process. Rather, we observe a generally very positive mood in the Bavarian biotech startup landscape. Many scientists are convinced of the quality of their products and are taking the step toward founding their own companies – also with a view to finalizing the scientific question. An interesting development that has been observed in recent years is that the scientific mind behind new technologies no longer necessarily joins the company. This is often not even necessary, as many researchers are excellent in their field but unfortunately have never learned how to sell a product.
Entrepreneurial thinking should be able to find its way into the natural sciences even more easily
How can the transfer from research to industry be successful? What challenges exist?
The industry in Bavaria is based almost exclusively on the activities of the academic scene. Most start-ups therefore originate from the two Munich universities, the Max Planck Institutes, or the Helmholtz Center. Spin-offs from existing companies – such as those seen in Switzerland with Roche and Novartis – have been virtually non-existent so far, although perhaps the business policies of more mature companies are changing somewhat. For academic education, it would be highly desirable if entrepreneurial thinking could be more easily integrated into the natural sciences. Unfortunately, decision-makers still have reservations about integrating this into course content. In my opinion, there are concerns that this would distract students too much from the actual goal of their specialized training. A lot has happened in technology transfer from universities in recent times, but the status quo is still unsatisfactory: technology transfer offices and patent and licensing agencies remain chronically underfunded.
The companies from the IZB Martinsried alone raised approximately EUR 630 million through IPOs, financing rounds, and sales in 2015. What are the financing options available in the industry?
Some of this seemingly high financial volume is a "blank check for the future," so one has to keep things in perspective. However, many start-ups take place in and around Munich, as access to capital is easier here than in most other regions of Bavaria. When it comes to financing young companies, the High-Tech Gründerfonds (HTGF) an important role. Before the HTGF was founded, BioM was almost solely responsible for seed financing in the biotechnology sector. Nowadays, we act more as a co-investor. The challenge, however – as in many other industries – is to raise the first round of financing following a seed investment. In 1999, there were around 35 venture capital firms in Munich alone that provided financing in the life sciences sector; today, there are only a handful across Germany. Therefore, it is important to find new financing sources and, for example, to collaborate with the local biotechnology industry on innovative projects in order to bring them to market despite the unfavorable starting position. We are currently working on setting up a team to develop the concept for a Bavarian life sciences and biotechnology venture capital fund.
What funding options are available to address the funding shortage?
For pre-seed financing, there is the GO Bio program, whose concept we originally developed at BioM. We then passed this concept on to the Federal Ministry of Economics and Technology, and it thus became part of the template for the Exist funding program. In addition, Bavaria has the Flügge Initiative, which offers scientists the opportunity to take a break from research and focus on innovation. Most recently, we have supported the m4 Award The award is presented annually to five teams from the biotech and medtech sectors and supports them with up to EUR 500,000. A great example of start-ups supported by the award is the company PreOmics, which emerged from a working group led by Prof. Matthias Mann, MPI for Biochemistry.
Prof. Dr. Horst Domdey is Managing Director of BioM Biotech Cluster Development GmbH and BioM AG, Martinsried. He is also the spokesperson for the “Biotechnology Cluster Bavaria” on behalf of the Bavarian State Government and spokesperson for the Munich-based excellence cluster “m4 – Personalized Medicine and Targeted Therapies”.
