Clustering In Heidelberg

IT'S NOT EVERY DAY that one competes with bigger and better known players to win a big cash award from the federal government. But that's what happened in September 2008 to a loosely organized network of biotechnology concerns in and around Heidelberg, Germany. By pulling together into a more formal, focused grouping, the Heidelberg network was one of five German technology clusters to take home a prize of more than $50 million in the country's Top Technology Cluster competition.

Each of the clusters, whose specialty areas range from biotech in Heidelberg to aerospace in Hamburg, is expected to use the funds to build on the strength of the cluster concept: achieving intensified research and business synergies from a network of expertise in a defined region.

The Heidelberg cluster is named BioRN for the Rhine and Neckar Rivers that flow through it. BioRN was formally launched in November 2008 at the BIO-Europe trade show in nearby Mannheim by the team that had put together September's winning bid. Bernhard Kirschbaum, head of global R&D at Merck Serono, contends that the cluster won its spot in the German competition "thanks to the quality of the projects and partners involved. The common goals set by the projects have helped bring together all those different players into a type of network that's much more than the separate entities."

The newly formalized cluster, Kirschbaum adds, "will further attract talent, and it will bring highly specialized companies into the region. All major and smaller companies now have the chance to transform the discoveries and partnering opportunities into tangible results and benefits for patients."

In fact, there are already roughly 100 business and research entities in the BioRN cluster, including some major pharmaceutical producers, points out Jürgen Schwiezer, chief executive officer of Roche's diagnostics division, which has major facilities in the region.

Christian Tidona, managing director of BioRN Cluster Management, says the cluster's winning effort reflects "world-class research and education centered around the University of Heidelberg," as well as strong partnerships with industry. "Global players like Roche, Merck, and Abbott are present in our region with major research and manufacturing sites, making the Rhine-Neckar metropolitan region the place with the highest density of employees in pharma and diagnostics R&D in Germany."

The region itself is roughly a triangle—in fact, it formerly was known as the Rhine-Neckar Triangle—that takes in Darmstadt to the north, the twin river cities Mannheim and Ludwigshafen, and Heidelberg.

The cluster includes academic research institutions such as the University of Heidelberg, the German Cancer Research Center, and the European Molecular Biology Laboratory. It's also home to 60 small and medium-sized biotech enterprises and sizable operations of several pharmaceutical giants.

BioRN Cluster Management was established as a partnership between the Rhine-Neckar BioRegion, the Heidelberg Technology Park, the Rhine-Neckar Chamber of Commerce, and the Rhine-Neckar Metropolitan Region. It is charged with coordinating, integrating, developing, and marketing BioRN.

BioRN's biggest responsibility will be to provide grants and other funding to help cash-starved companies usher biotechnology ideas into the lab and onward to the testing phases needed to get potential partners interested. "What we are trying to do with this grant money is transfer ideas through this financing gap," Tidona says.

"We thought that we would win the project in September and come home and simply begin the projects," Tidona recalls. But he was quickly disabused of that notion. "I spent the next three weeks just on public relations," he says.

Tidona is now in the middle of setting up what is, in effect, a public-private agency. Because it is funded by the federal and state governments, he points out, "the paperwork is challenging." In addition to federal government funding of about $7 million, his company has annual funding of about $1.3 million from the German state of Baden Württemberg and similar amounts from other public authorities and from private investors.

Among the current projects are such prosaic tasks as leasing office space, hiring staff, developing software tools, and getting project management up and running. According to Tidona, the cluster is structured in such a way that all grant applicants must sign on to its rules and timetables. "It really is a unique opportunity—to develop new Web-based project management software that is easy to use and at the same time gives detail that the financial people will accept," he says.

"We have funding for five years," he points out. After that time, he predicts, the management agency will be "a very profitable one that can earn money by marketing worldwide these key assets and innovating output of the cluster." Moreover, BioRN-funded projects that progress toward industry worthiness can be sold to the pharma industry.

Compared with biotech concentrations in places such as the San Francisco Bay area, the Rhine-Neckar cluster "is really small," Tidona concedes. "We have about 10,000 people in biotech, including all the large companies." The largest biotech clusters in Europe, he notes, are in Basel, Switzerland, and Cambridge, England, followed by Paris and then the Rhine-Neckar region. Munich's biotech cluster, which is perhaps more widely known, is in the same league as BioRN, he adds.

"What we don't have are the middle-sized companies, with several hundred employees," Tidona frets. The region has the highest density of operations of global pharma and diagnostics companies—even more than the German cities Berlin, Munich, or Frankfurt, he argues—but by and large, the other companies in the BioRN cluster are much smaller.

That became apparent, he says, at the time of Germany's first technology competition, the BioRegio contest, in 1995. That effort was focused strictly on biotech. Three regions came out winners, he recalls: Munich, Rhine-Neckar, and Cologne-Dusseldorf.

In that contest, the winning regions each received about $25 million. The task then, Tidona says, "was to generate the first wave of spin-outs from academia. We had only very few biotech companies then. That was the first spark."

That competition also identified another shortcoming, he says: Germany "didn't have the serial entrepreneurs—the type that really knows how to do it." Start-up companies hired managers from the big companies, he says, "but that didn't work well—those managers were too used to support from company facilities, and so on." So the success of start-ups was patchy at best.

Tidona speaks from experience. He was a molecular biologist who started a company in Regensburg "that didn't really go well," he acknowledges.

But lessons were learned, he insists. Those lessons now underpin the second development wave marked by follow-on support for companies that already exist—even large ones—and bringing them to the next level of value creation. "There have been a lot of studies about what makes a successful cluster," he points out. "We tried to work out how to apply those lessons and to determine what needs still to be addressed."

At the top of the region's strengths, Tidona notes, are its human resources. He points out that there are more than 1,000 students every year holding or pursuing an M.D., doctorate, master's, or bachelor's degree in medicine, biology, or biotechnology at the University of Heidelberg and at Mannheim University of Applied Sciences. "Life science is really strong here," he says. The challenge for the region to leverage that strength into technological and commercial momentum has been to determine what is missing.

"How do we convert those life scientists into top managers and entrepreneurs?" Tidona queries. "There is no program to identify these people and teach them the competencies you need." A major program will be the BioRN Academy, which will identify and educate talented life scientists who will benefit from a new M.B.A. program combined with practical training spending at least one semester in top management at a company in the cluster.

"Production per se," Tidona argues, "is dead in Germany. What we manufacture here can be manufactured anywhere around the world at the same quality and at lower cost. So what can we do to retain top-quality jobs in Germany?" The answer, he suggests, comes back to the human-resource base and innovation potential in the region. "Every global company that wants to be innovative needs to be in close proximity to high-quality university campuses. We have the asset of the University of Heidelberg, and we can use this as an attraction point."