Support Measures within the Biotech Sector: Public Subsidy as a Success Factor for Young Biotech Companies

Public subsidies to research projects contribute significantly to the success of young biotech companies. They enable the development of technological innovations and have a positive impact on the financing possibilities for companies within the biotechnology sector.

Compared to a control group of companies which had not been supported, the biotech companies supported within the framework of the programmes "BioChance" and "BioChancePlus" were able to significantly increase their activities in research and development (R&D). For each euro of the public subsidy to R&D, they invested 1.50 additional euros from their own funds or external sources, such as venture capital or bank credits, into research and development. Only a few years after the support, 20 per cent of the supported companies have prospered markedly. 70 per cent of the companies expect commercial successes in the years to come. Only 10 per cent of the funded innovations turned out to be commercial flops. These are the central findings of an evaluation of the support programmes "BioChance" and "BioChancePlus" jointly conducted by the Centre for European Economic Research (ZEW) in Mannheim, Prognos, and the Institute for SME Research of the University of Mannheim on behalf of the Federal Ministry of Education and Research (BMBF).

Within the framework of the support measures "BioChance" and "BioChancePlus", young biotechnology companies were granted a total of 169 million euros. 86 per cent of the supported projects were able to realise technological innovations - e.g. new and improved products and services - or important steps in the development of technological innovations. In nearly half of the supported projects, inventions were protected through patents.

From 1999 to 2003, "BioChance" supported high-risk development projects of young biotech companies, while "BioChancePlus" aimed to support the biotechnology companies in their further development between 2004 and 2007. 15 per cent of the biotechnology firms in Germany which were not older than five years benefited from "BioChance". The successor programme "BioChancePlus" reached nearly 40 per cent of its target group. About one third of the submitted project proposals were approved. Usually the projects had a term of three years. The last "BioChancePlus" projects end in 2012.

On the basis of these results, the support programmes "BioChance" and "BioChancePlus" can be assessed as very successful. Both were an appropriate reaction of research policy-makers to difficulties of the German biotech sector between 1999 and 2007. Frequently, there had been a lack of opportunities to fund high-risk research and development projects in order to generate marketable innovations. Developments within the venture capital market had further aggravated this disadvantage.   

The lessons learned from "BioChance" and "BioChancePlus" were considered in the design of the programme "KMU innovative" and were also transferred to other technological fields. In this respect, both programmes "BioChance" and "BioChancePlus" assumed a role as important pacemakers in the modernisation of the support to R&D within the framework of the high-tech strategy of the German government.

For further information please contact

Dr. Georg Licht, Phone +49 163/6235-177, E-mail licht@zew.de