Trends in the German biotechnology sector in 2022
Biotech sector sees strong investment, but new government provides little boost
Last year, the German biotechnology sector attracted some €2.3 billion in investment, the second highest total ever in the industry’s more than 30-year history, after raising a record-breaking €3 billion in 2020. Companies are more positive about their current and future business situation than in the previous year. In addition, more respondents say they intend to invest in research and development (R&D) and increase their workforce. They also describe the political climate in more positive terms in 2021 than in 2020. However, the new government is not giving the sector cause for fresh optimism, according to the results of the annual trend survey by the biotech association BIO Deutschland, which were released at a press conference today. Moreover, the survey found that the impact of the pandemic on the current and future business situation is waning compared to the previous year.
Private biotech companies raised around €851 million in venture capital in 2021, which included an exceptionally strong series A funding round of €87 million by therapy developer Emergence Therapeutics. Capital increases by German public companies amounted to around €748 million. IPOs, all on the US technology exchange NASDAQ, contributed €694 million to the overall total.
The assessment of the current and future business situation has improved further and shows a positive trend. Some 64 percent of respondents described their business situation as good (2020: 59 percent), and 52 percent expect it to improve (2020: 48 percent). The impact of the pandemic on business is declining. Some 33 percent say the coronavirus crisis had an impact in 2021 (2020: 41 percent), while only 16 percent expect this to be the case in 2022 (2020: 29 percent). Meanwhile, hiring sentiment has seen a turnaround. The employment outlook index rose by seven points, with 69 percent of companies stating that they intend to boost staff numbers (2020: 56 percent). The R&D investment index painted a similar picture. Some 57 percent of companies expressed their intention to increase investment (2020: 49 percent), with the index climbing by nearly five points. The assessment of the current political climate also remains positive. Around 4 percent consider the current climate to be bad (2020: 8 percent), while 59 percent consider it to be good (2020: 53 percent). Germany’s new “traffic light” coalition has not created high expectations in the biotech industry and has therefore not significantly altered the assessment of the future political climate. Some 61 percent expect the climate to improve this year (2020: 58 percent), while 9 percent expect it to worsen (2020: 4 percent).
Oliver Schacht, Chairman of the Board of BIO Deutschland, stated: “The financing situation of the German biotechnology industry is developing in a positive way. This is a good sign and one that is urgently needed so that our innovative small and medium-sized companies can fully realise their potential. Yet there is still much room for improvement if, as stated in the coalition agreement, we want to seize the opportunity to make Germany a leading biotechnology location. The ‘traffic light’ government should now make biotechnology a top priority, so that we can soon tell even more success stories – not only in the field of health, but also when it comes to combating climate change and advancing sustainable bio-based production, the circular economy and food science.”
Viola Bronsema, Managing Director of BIO Deutschland, added: “Our trend survey shows that the sentiment in the sector is positive and improving. Skilled workers are in demand, and R&D spending is on the rise. But the fact that the change in government has not resulted in a significant change in the views on the future political climate, although the promotion of biotechnology is mentioned in several parts of the coalition agreement, must give us pause for thought. The crucial factor for the sector remaining firmly rooted in Germany is whether, how and when the policies in the government programme that are beneficial to our sector are actually implemented.”
Carsten Dehning, Executive Board member and CFO of Emergence Therapeutics, commented: “We at Emergence Therapeutics can confirm the positive growth in biotechnology investment. By raising €87 million in series A funding in late 2021, we have shown that it is possible to convince top international investors to invest large sums in a pan-European company based in Germany that has good data, promising technology and an excellent team. Today it is much easier to raise large sums even in early stages and thus to provide decisive support to outstanding technology strategies and experienced Franco-German or European teams.”
Findings of the 2021/2022 trend survey
About the survey:
For the 16th consecutive time, BIO Deutschland polled biotech companies and sector-specific service providers. Some 111 (14.2 percent) of them returned the questionnaire this year. The survey’s aim is to predict development in the current year, using the survey as a barometer of the sentiment within the sector. The index values are calculated by a method similar to that used by the ifo Institute. The values mainly represent the difference between positive and negative answers. The norm values are based on the results from 2006 (= 100%).
Current Business Situation
Some 64 percent of respondents rated their business situation in 2021 as good, while 7 percent said conditions were bad.
About 67 percent reported their business situation was not affected by the pandemic, while 33 percent reported they felt an impact. In percentage terms, the pandemic had the least impact on companies that described their current business situation as good. The greatest impact was seen among those who found it satisfactory.
The influence of the pandemic on the current business situation has diminished.
Future Business Situation
Some 52 percent of respondents believe the business situation will improve in 2022, while only 5 percent expect it to worsen.
About 84 percent of companies do not expect the pandemic will affect their future business situation, while 16 percent think it will leave a mark. The pandemic had the greatest impact on companies expecting a less favourable business situation, at 50 percent, while the pandemic’s impact on those companies expecting their situation to improve or remain consistent was seen as negligible, at 17 and 12 percent respectively, with both numbers coming in much lower than last year.
Some 59 percent of respondents thought the political climate in 2021 was good, while 4 percent said it was bad.
Some 61 percent of respondents believe the political climate will improve in 2022, while 9 percent expect a change for the worse.
Employment outlook index
Some 69 percent of respondents intend to hire more staff, while some 3 percent plan to decrease their workforce.
R&D investment index
Some 57 percent of respondents said they plan to increase their R&D investment, while 4.5 percent intend to lower investment spending.