Boosting Biotech in Bavaria

A recent life sciences seminar in Erlangen put Richmond’s life sciences sector on the global map -- and laid the foundation for closer ties to the “ Medical Valley of Germany."

Anthony Guiseppi-Elie blends an infectious, “don’t-worry-be-happy” optimism with boundless energy and scientific creativity. The Trinidadian-born professor at the VCU School of Engineering conducts cutting-edge research into biosensors: micro-fabricated devices that combine the specific properties of DNA, enzymes and antibodies with smart materials to detect clinically important analytes (molecules in the human body). He runs a start-up company, ABTECH Scientific, and he leads a $3 million, Pentagon-funded research effort to develop microchips that can be implanted in soldiers to ensure accurate medical treatment on the battlefield.

With one foot in academia and another in the business world, Guiseppi-Elie made an ideal ambassador from the Richmond region to the American Life Sciences seminar in Erlangen, Germany, last October. There, he presented an overview of Virginia Commonwealth University’s life sciences programs to an audience of more than 80 German scientists, business executives and government officials.

The Germans expressed keen interest in what Richmonders are doing to commercialize life sciences discoveries and build a home-grown biotech industry, Guiseppi-Elie says. “The intersection between business, life sciences and the university is one they’re trying to develop as well.” For his part, he welcomed the opportunity to meet peers at the University of Erlangen-Nuremberg who are conducting world-class research in medical imaging and bioprocess engineering. In fact, he’s following up with one scientist, an expert on artificial organs, in the hope of developing a student-exchange partnership that will promote the sharing of knowledge.

smaller, entrepreneurial companies he’s targeting are more likely to consider Richmond if they have first built relationships with institutions like VCU or scientists like Guiseppi-Elie.

This is not your father’s economic development. Traditionally, industrial recruiters have spent their time and marketing resources getting in front of site-selection consultants and corporate real estate managers in the hope of steering the next big corporate investment – usually a manufacturing or back-office operation – into their home town. But, increasingly, companies in technology-intensive industries like biotech are less interested in Interstates and industrial parks and are more focused on gaining access to specialized knowledge resources like those found around universities and research labs.

Established technology centers like Boston, the Silicon Valley and the Washington metroplex have inherent advantages: Tech companies prefer to hobnob with similar businesses engaged in world-class R&D and product development. That leaves regions with assets geared mainly to old-line manufacturing, distribution and fulfillment out in the cold.

As a consequence, the nature of economic development has changed dramatically in recent years. When Wingfield markets Greater Richmond, he’s increasingly selling the intellectual assets that reside in VCU and the region’s biomedical companies. One of the best ways to bring technology companies to the Richmond region, he suggests, is to help forge research relationships with VCU or business partnerships with other companies.

When the Partnership planned its annual international seminar for 2003, Erlangen was a natural location. The Partnership had nurtured a relationship with the Bavarian city for several years as a European partner in economic development. Like Richmond, Erlangen-Nuremburg is a mid-sized metropolitan area with a sound economy. Like VCU, the University of Erlangen-Nuremburg has a strong reputation in life sciences research. Like Richmond, Erlangen is home to major biomedical companies, most notably Siemens Medical Solutions Group with 30,000 employees, as well as Quelle, November AG and Pharmacia GmbH.

Although Richmond has nothing comparable in size to Siemens, a number of pharmaceutical and pharmaceutical-chemical manufacturers -- Wyeth, Boehringer Ingleheim, ECR, Wako and Reckitt & Benckiser – do business here. Richmond also can boast of a growing number of biotech and biomedical companies, many of which have sprung up around VCU. Two biotech companies -- Insmed and Commonwealth Biotechnologies -- are publicly traded.

The university, meanwhile, has become a fount of innovation, supporting $185 million in sponsored R&D funding, and generating 119 invention disclosures, 23 new licenses, $1.2 million in licensing revenues and 35 new companies in the past year. Meanwhile, the Virginia Biotechnology Research Park, adjacent to VCU’s medical campus, houses 45 bioscience companies, research institutes and state and national medical laboratories. The fast-growing park employs more than 1,200 scientists, researchers, engineers and technicians.

Erlangen and the life sciences theme were a natural fit for Richmond, Wingfield says. Like their counterparts here in Virginia’s capital, the mayor and other leaders of the Erlangen community share a vision for building a vibrant, 21^st-century economy around biomedical R&D and entrepreneurial growth. Says Wingfield: “They’re familiar with the ideas behind life science. … Going into this medical/life science center with our story gave us a good pool of companies to deal with.”

Biotech is one of the hottest industries in the world right now. Globally, biotech generated $42 billion in revenue in 2002, up 15 percent, supported by $22 billion in R&D spending, up 34 percent, according to Julia Schüler, a senior health industry specialist with Ernst & Young’s office in Mannheim, Germany. Schüler, an Erlangen native, set the tone for the life sciences seminar by describing the challenges and opportunities facing the industry. 

The U.S. biotech industry is roughly four times larger than Europe ’s, Schüler says. Biotech took root earlier in the U.S. than in Europe and it has had more time to mature. Among other advantages, American companies are located in the world’s largest market for pharmaceutical drugs, and they have access to more venture and IPO funding.

Still, there are about 1,800 biotech companies in Europe. Germany is the leading player there, with 360 firms, followed closely by the United Kingdom. The Germans have strong academic research institutions, but they’re still struggling with moving technology from the lab to the marketplace. German biotech experienced a flurry of start-ups between 1997 and 2001, but capital to fuel continued growth is scarce right now, Schüler says.

Despite the difficulties, she advises, German companies are well advised to consider establishing a presence in the U.S. It’s practically impossible to be globally competitive without serving the U.S. market, the world’s largest. Additionally, a U.S. presence provides a window into the largest biotech industry in the world.

Most German companies that she’s talked to, says Schüler, are most interested in the East Coast, six time zones away, where the business day overlaps with Germany’s. Despite the exciting research taking place in California, the West Coast is more difficult to work with. The question then becomes whether to locate in Boston, Philadelphia/New Jersey, Maryland/Washington, D.C., the Research Triangle, or perhaps somewhere else.

Wingfield is hoping that German companies will consider “somewhere else” – in other words, the Greater Richmond region. Central Virginia offers a number of advantages over and above the research strengths of VCU, he suggests:

o        Greater Richmond is in the biotech corridor, midway between Research Triangle and Washington, D.C. It offers easy access to D.C. for anyone seeking access to the Food and Drug Administration or the National Institutes of Health, not to mention the significant biotech communities in both regions.

o   Richmond hosts a large German business community. With more than 40 companies in the region, the Germans have their own “stammtisch,” or chamber of commerce, and support a Deutsche Schule. One stand-out is Boehringer Ingleheim which is the midst of a $260 million expansion of its Petersburg chemical plant and maintains three laboratories in the Virginia Biotechnology Research Park .

o        Greater Richmond enjoys a significantly lower cost of doing business than biotech centers to the north.

o        Greater Richmond makes sense for any German enterprise thinking about manufacturing in the U.S. A substantial chemical and pharmaceutical industry in the region supports a labor force and vendor community with relevant skills.

“It makes no sense to develop products just for Europe. Successful German [biotech] companies have to begin thinking about entry into U.S. markets,” says Robert Skunda, president of the Biotechnology park. “The question is how.”

Richmond is a good location for a company new to the U.S. to familiarize itself with the drug-approval process. VCU conducts numerous clinical trials, and the FDA is only a couple of miles up the Interstate. Yet costs in Richmond are much lower than in the Washington metro area. Says Skunda: “A lot of our advantages are geographic – proximity to D.C. and regulatory agencies, coupled with a superior business climate. … If you’re a company that’s going to move into assembly or manufacturing potentially, your cost of doing business in Virginia is less than Maryland, Pennsylvania and New Jersey.”

Both Wingfield and Skunda recognize, however, that it may take years of building ties before a German company decides to move here. And they’re prepared to go the distance. The Greater Richmond Partnership has renewed its partnership agreement with the city of Erlangen, and VCU has reactivated an educational partnership with the University of Erlangen-Nuremberg.

Next spring, the Virginia Biotech Research Park will host a follow-up to the Erlangen event – a “Medical Valley of German Life Sciences Seminar” giving German representatives a chance to tell U.S. companies why they should consider locating in Bavaria. Meanwhile, the Greater Richmond Partnership has announced the creation of a new German American Life Sciences Council to keep communications open.

Skunda believes that events like the Erlangen seminar are indispensable to building Richmond’s biotech sector. Despite controversy in Germany surrounding the U.S. invasion of Iraq, Skunda says, “There was no evidence of political differences or economic differences. There were people brought together in a common interest of learning how the life science industry is coming together in the U.S.”

-- January 12, 2004

Greater Richmond Partnership