Germany’s medical biotechnology sector has so far proved “immune” from the global economic crisis, according to a new report.

Biomedicines now account for 16% of Germany’s total 29.1 billion-euro pharmaceuticals market, says the report, which was produced by Boston Consulting Group (BCG) for VFA Bio (the biotechnology group within VFA, Germany’s association of research-based drugmakers).

In 2009, sales of biopharmaceuticals in Germany grew 5% to 4.7 billion euros, a sharp drop from the 9% growth reported in 2008 and which had been achieved compared to growth for the pharmaceutical market as a whole in 2008 of just 4.5%, notes the report. The biggest increases last year were recorded for oncology and immunology treatments.

Revenues at medical biotechnology companies in Germany increased 9% each year on average from 2005 to 2009, and these firms represent the most important segment of German biotechnology, accounting for 44% of the total sector, says another new report, from the state’s foreign trade and inward investment agency Germany Trade & Invest. Out of around 500 core biotech companies operating in the country, some 222 are involved in the development of new medicines or diagnostic tests, it says.

Germany is Europe’s largest producer of biopharmaceuticals and it ranks second internationally behind the US. The sector, which mainly consists of “small but innovative companies” generally employing between one and 10 staff, invested 966 million euros in R&D in 2008, which is equal to 90% of total market revenues during 2006-2008, reports Germany Trade & Invest.

In 2008, the industry’s R&D pipeline grew 18% compared to 2007’s, particularly in early research Phases I and II, and increased a further 12% in 2009, the studies note. Firms in the sector currently have 419 biopharmaceuticals in clinical development, led by monoclonal antibodies (MAbs) with 162 projects. At the end of 2008, 19 MAbs were approved for the German market and their sales have grown by a factor of almost five since 2004, to total 1.2 billion euros in 2008 and represent 28% of biopharmaceutical product sales in Germany.

The importance of biopharmaceuticals continues to increase in Germany, and medical biotechnology up to now has proven immune to the economic crisis, according to the VFA Bio/BCG report. However, it adds that, given that biopharma firms, as research-intensive companies “par excellence,” have to continually review their decisions where to locate, Germany needs to adapt its framework regulations further. “In addition to the introduction of research funding by tax credits, the environment for investors has to be improved to avoid problems for small biotech companies within the scope of their essential subsequent financing,” says the report.

- Earlier this year, a survey conducted by the German biotechnology industry group BIO Deutschland and the sector journal |transkript found that 47% of German biotech companies now believe that the future business situation will be more favourable, compared with just 33% who did so last year, while the number who believe their economic situation would deteriorate has gone down from 18% to 7%.

55.6% now say they intend to begin hiring staff again, compared with 50.3% at the start of 2009, but only 38.5% say they plan to increase their R&D spending, against 40.7% who did so last year.

This wariness was created by the withdrawal of many venture capital investors from Germany last year, and the fact that the tax deployment of loss carry forward was made more difficult under the terms of the Corporate Tax Reform Act, according to the industry group, whose board chairman, Peter Heinrich, says investors and companies are now waiting for a political signal. “We need improvements in the tax rebate capacity of R&D expenditure and we demand an unlimited retention of the loss carry forward and the granting of tax credits to innovative companies,” he says.

Added Patrick Dieckhoff, editor of |transkript: “the German biotechnology sector demonstrated amazing powers of resistance last year despite the difficult situation. We did not witness a wave of redundancies or bankruptcies. Unlike the situation at the end of the previous year, the extent of the crisis now seems to be calculable for many biotech companies. Many are now seeing light at the end of the tunnel.”