Concern over European biotech: the window for change is narrow – and closing fast

The situation is critical. Seventy percent of the founders, investors, pharmaceutical industry experts, scientists, and policymakers interviewed for the report described the current situation as urgent. Concern about the sector is particularly pronounced among investors, business angels, and pharmaceutical industry experts. The analysis of all interviews reinforces this assessment: 74 percent of coded sentiment statements were negative. According to the respondents, the need for action does not result from a single shortcoming, but from multiple structural bottlenecks across the entire innovation chain. 

Drawing on the concept of “valleys of death”, the report distinguishes two critical phases in which promising scientific ideas and young companies do not make it to market. In the first valley of death, translation, the process of turning scientific discoveries into viable, financeable companies, often breaks down. Although the report describes German and European biotechnology research as world-class, it identifies significant problems in technology transfer. Only 17 percent of respondents expressed a positive view of technology transfer offices (TTOs). 

The second valley of death begins when companies require substantially more capital for further development and scaling. This is where the European biotechnology sector’s disadvantage is particularly apparent. European venture capital funds account for only around seven percent of the global life sciences venture capital market, compared with 63 percent for US funds. Several founders reported that US investors made the establishment of a US entity or subsidiary a condition for later financing rounds. Six of the eight founders interviewed on this issue had therefore already considered moving part of their operations to the United States. 

Nevertheless, there is a limited window of opportunity for Europe. The report cites market data showing that some areas of early-stage financing in the US biotechnology sector declined by 38 percent between the first quarters of 2025 and 2026. Several of the experts interviewed see this as a temporary opportunity for Europe, provided that the necessary reforms are implemented now. Almost half of those interviewed are optimistic that Europe can close the gap. 

“The window is closing rapidly. If we do not act now, we will not only lose individual companies to the United States. We risk permanently losing our ability to build internationally competitive biotech companies from our own research. In the long term, this would also weaken our ability to pursue fundamental research,” says Francis de Véricourt, professor of management science, Joachim Faber Chair in Business and Technology at ESMT, and coauthor of the report.  

The report’s diagnosis is clear: The issue is not primarily a lack of research, funding programs, or institutions. What matters is whether existing resources are deployed in the right form, at the right time, and with a clear focus on successful company formation and growth. “More of the same will not be enough. The underlying structures and incentives must change,” de Véricourt adds. 

The findings point to several priorities for financing and scaling: mobilizing institutional capital from pension funds, insurers, and other pools of long-term capital; creating more reliable tax incentives for private venture capital; and establishing a pan-European biotech listing segment. The latter could enable European companies to secure later-stage growth financing and complete initial public offerings in Europe, rather than relying on a sale to a large pharmaceutical company or a listing in the United States. 

To accelerate the path from scientific discovery to company formation, findings also point to the need to open public funding programs to companies that do not originate from universities and giving founders faster access to initial financing. Interviewees also call for faster company formation through digital procedures and fewer notarial and administrative hurdles. They further emphasize the need to connect founders more systematically with investors, experienced entrepreneurs, and the pharmaceutical industry. 

Independent, professionally run translation institutes should complement existing university technology transfer structures and support research teams at an early stage with validation, team building, and financing. Technology transfer offices should also evolve from gatekeepers to facilitators through standardized licensing terms, faster procedures, and stronger commercial expertise. 

The report “How Germany and Europe can kickstart biotech innovation to achieve strategic sovereignty” was written by Francis de Véricourt and Beatriz Faria. It is based on 29 expert interviews and insights from management research. On this basis, it presents 26 concrete reform proposals to reduce the structural disadvantage facing biotechnology in Germany and Europe. 

In 2025, the previous report, “Assessing Deep-Tech Innovation Hubs in Germany: The Case of Biotechnology,” assessed Germany’s biotechnology innovation performance using a comprehensive index.