Trends in the German biotechnology sector in 2017

Biotech sector continues to grow

Berlin, 12 January – Germany’s biotechnology sector is entering the new year on an optimistic note and is still on a growth path. A majority of companies said they were looking to hire more staff and increase investment in research and development (R&D). The good sentiment is also evident in the current financial figures: Biotech companies took in about €505 million euros of fresh capital in 2016, coming close to the previous year‘s record figure (2015: €550 million). These were the results of a company survey by the biotechnology sector association, BIO Deutschland, in cooperation with the biotech magazine |transkript.

The survey reveals that the mood in the biotech sector is still positive: The responding companies again indicated at the end of 2016 that they plan to make new investments in staff and R&D. Two-thirds of those questioned viewed the current business situation favourably, while 54 percent anticipate further improvement in the business situation in 2017. These results echo the similarly positive results from last year’s survey.

The results are supported by research by BIO Deutschland and the magazine |transkript, which is published by BIOCOM AG. According to this research, investment in German biotech firms once again reached a high level in 2016 (€505 million), despite a decline of 8 percent compared with the record year of 2015 (€550 million). However, the allure of biotech stocks has grown among investors: Listed companies raised a total of €258 million on the equity markets, a 5 percent increase over the previous year (€246 million). In addition, BRAIN AG’s listing was the first biotech IPO in Frankfurt since 2007. Venture capital investors put a total of €216 million into German companies in 2016, down 17 percent over the record year of 2015 (€260 million). 

This development allowed Germany to put itself in a positive light vis-à-vis the European capital market, which in 2016 experienced considerable disillusionment after the boom year of 2015. According to a study by BIOCOM AG, European biotech companies raised a total of €3.3 billion on the equity markets in 2016, only about half as much as in 2015 (€6.16 billion). Some 17 firms took the leap into public ownership last year (2015: 25), the overwhelming majority (14) on one European stock exchange. Only three companies chose to go public on Nasdaq in the United States.

Peter Heinrich, chairman of the board of BIO Deutschland, summed up the situation as follows: “The positive trend we saw last year in our survey has stabilised. Company leaders have a relatively favourable view of the political climate, which can be attributed to positive developments in recent years. For example, the Pharma Dialogue, in which we actively participated, has produced a number of positive results. The reform of the tax loss carry-forward rules for corporations has also sent an encouraging signal to innovative small and medium-sized companies and their investors. Looking ahead to the next legislative period, we hope to see this development continue. That is the only way to ensure Germany continues to be a driver of innovation over the long term.”

Sandra Wirsching, capital markets expert at BIOCOM AG, added: “The financing climate has reached a markedly high level in recent years. We are now again seeing VC rounds in the double-digit million range as well as more and more foreign investors getting involved in funding rounds in Germany.”

Findings of the 2016/2017 trend survey

About the survey:

For the eleventh consecutive time, BIO Deutschland und |transkript polled some 1,100 biotech companies including sector-specific service providers. Some 97 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

The index value fell 0.82 points.

About 61 percent of respondents assess their company’s current business situation as good, a 6 percent decline over the previous year.

Future Business Situation

The index value fell 0.61 points.

54 percent anticipate a more favourable business situation in the future, while only about 3 percent are less optimistic about the future than a year ago.

Current political environment

Biotech companies continue to take a positive view of the current political environment. The index value rose 1.85 points.

33 percent of respondents regard the current political environment as good, while 66 percent see it as satisfactory.

Future political environment

Also persisting is the trend relating to the assessment of the future political environment. The index value increased slightly, by 0.33 points.

Only 6.3 percent expect the political environment to worsen.

Employment outlook index

62.5 percent of responding companies are planning to increase hiring in 2017. The index value increased slightly, by 0.61 points, continuing the positive trend of the previous years.

R&D investment index

The index value dropped 2.33 points, nearly returning to the value recorded in 2016.

5.3 percent of companies are planning to cut their R&D spending. About 45 percent of respondents said they intend to increase their R&D investment.