L essons learned in a turbulent economic climate

Nobody likes the word "redundancy"--particularly when you have the education and training for a job in the biotech industry, redundancy is something that should happen to someone else.

But according to Ernst & Young's recently published report on the German biotechnology scene "At the Crossroad" (" Zeit der Bewährung"), the number of people employed in the biotech sector dropped by 7% between 2001 and 2002. And although there has only been a modest decrease during this period of 1% in the total number of German biotech companies, 32 have gone bankrupt. Many more companies have undergone dramatic restructuring, rationalising, or even shedding complete departments and divisions.

So where did these changes leave the employees working at various levels in the companies, in terms of knowledge gained, future prospects, and lessons learned?

Get Broad Experience, Make Plenty of Contacts

"Working in a start-up is very exciting. You are involved in pioneering projects, designing new and innovative approaches to drug development," says Rainer Constien, a molecular biologist and former research scientist at Munich-based Ingenium Pharmaceuticals AG. In 2002, Ingenium abolished its immunology department and cut two-thirds of their genomics division, shifting its focus instead to the immediate-term cash-generating service wing of the company.

After 2 years of employment, Constien was given just 1 month's notice. His experience, however, was that finding a new position was not particularly difficult, and he feels that having prior experience at a biotech firm "definitely helps." He suggests that, for research scientists to guard against the risks of unemployment, gaining expertise in technologies that have broad, rather than highly specialised, applications is extremely important, making "you more marketable and employable in the future." He also feels that developing contacts and building intercompany partnerships is essential.

However, Constien found things more difficult on a personal level due to the need to relocate twice in 1 year. From Ingenium, Constien moved to Dresden to take up a position at Cenix Bioscience GmbH, but after 7 months Cenix closed the entire pharma development division where he was working. He will soon take up a new appointment at Ribopharma AG near Bayreuth.

Constien highlights that having an established social network in the first place "was so important when I had to face such huge professional changes." He frequently commutes back to Munich at the weekends to see his partner and friends. It's not only tiring, it's expensive too, although tax breaks (the so-called "doppelte Haushaltsführung") for those forced to finance a second home alleviate some of this financial strain. Nonetheless, Constien does not have any regrets about entering the biotech sector and sums up that "one of the beauties is that you learn a lot of things beyond pure science."

Negotiate Everything; Don't Rely on Promises

Bioinformaticist Mark van der Linden had been working at Europroteome AG just outside Berlin for a little over a year when he and more than a quarter of the 40-person staff were made redundant. Despite this he says he would still join another young biotech company, albeit exercising heightened caution. Van der Linden stresses that rigorous negotiation of an employment contract is essential--"bargain out everything you want in the contract" and "don't just rely on promises," he warns from personal experience. He believes that scientists coming from an academic setting "need to harden up and pitch their stakes higher." Constien likewise feels that employees of biotech start-ups should be paid in accordance with the inherent risk and the flexibility demanded by the sector.

Before joining a company Van der Linden highly recommends talking to both management and people working at the technical level to see if the combined picture holds together. His faith in biotech remains and he feels that a start-up firm offers a unique and dynamic environment where, as he puts it frankly, "you learn about the real world."

Meeting Investor Expectations

A common complaint from employees is that, although the biotech companies often had both an excellent scientific profile and a sound business plan, the investors had unrealistic expectations and, without warning, suddenly demanded a rapid exit from their investment. The direct consequence is frequently a sudden shift in the business model of a company from, for example, drug development towards a service model with near-term cash-generating capability. It's a situation to which biotech start-ups companies are currently very vulnerable because public markets have closed their doors to new biotech offerings and nearly 90% of costs are being financed by venture capital (Ernst &Young, 2003).

Klaus Düring, former CEO of the molecular farming firm MPB Cologne GmbH, has had firsthand experience of investor impatience. The company was largely focussed on the generation of proteins, including therapeutic antibodies, in potato plants. But just as it was arriving at a critical technological milestone, it was forced into insolvency. Düring describes his mentality as "untypical" for a German, and speaks very openly about the huge problems generated by insolvency. The difficulties that many biotech companies are facing at present have to be dealt with in a professional manner, he stresses, and points out that most biotech companies in Germany receive neither support nor guidance in tricky times.

So does biotech face a cultural problem in Germany? Gábor Lamm, managing director of EMBL Enterprise Management Technology Transfer GmbH, a subsidiary and the commercial arm of the European Molecular Biology Laboratory (EMBL) in Heidelberg, sees contrasting attitudes between Europe and the U.S. For example, in the U.S., when somebody works in a company that becomes insolvent it is not necessarily viewed as a negative, and frequently quite the opposite, he believes. In the U.S., ex-employees of biotech companies that have folded emphasise "the positive, i.e., what they have learned in the process, especially from mistakes."

Energetic, Flexible Risk-Takers Needed

Lamm believes that the German biotech scene needs "people with energy and flexibility and who are not risk-adverse." Unfortunately, according to Lamm, the lengthy German educational process can mean that many people enter biotech companies at a stage of their lives when risk-taking is not ideal, he comments. Nonetheless, some people do feel it is worth it. For example, Düring takes pride that none of the scientists at MPB Cologne went to academia "but instead remained in the biotech sector."

Düring, who readily admits to having learned a lot from his mistakes, strongly believes that people like himself who have real experience and a "practical view" of the industry will be invaluable for future biotech firms. He has established a consulting company, Axara Consulting, offering such strategic expertise. He proposes that a state-funded company or organisation, such as the biotech service provider BIOPRO Baden-Württemberg GmbH, could support entrepreneurs and offer them legal and financial advice if they face bankruptcy.

Despite the recent stalling in market growth, Lamm still has great confidence in the sector. "Two to 3 years ago, there were very high expectations of the biotech industry and in some cases too much was promised," he admits. However, he sees the intermediate trend of increased insolvency and company rationalisation "as a natural process" and stresses that this should been seen in context--"the U.S. experienced the same phenomenon 10 years ago."

In Lamm's opinion the commercial world "certainly doesn't suit every scientist," but the opportunity to work in a business environment can be extremely advantageous and offers people the possibility to develop multidisciplinary talents that may have previously been untapped. Düring believes that biotech scientists acquire the skills to combine "the freedom and spirit of innovative research with the straightforward and goal-oriented approach of industry."

Thus, the resounding echo heard from the German "biotech valley" is that opportunities both to conduct world-class research and to develop excellent professional skills are still there for all who have talent, drive, and a bit of nerve thrown in.