When it comes to agriculture, the people of Austria are among the most dead-set against so-called “genetically modified organisms” of any population in Europe (1). But as is so often the case elsewhere, their attitude toward biotechnology used in medicine is much more friendly. This may have to do with the country’s traditional strength in environmental biotech (ranging from wastewater treatment and organic waste composting to anaerobic digestion for biogas generation) and also food biotechnology. That is the suggestion of Dr. Heribert Insam, who is a professor at the University of Innsbruck’s microbiology institute and editor in chief of the Applied Soil Ecology journal.
“Austrian agriculture is based on small family farms,” he explained. “Many have decided to produce according to the regulation of bioorganic agriculture (nearly half of all such farmers in Europe are Austrian). Both from a scientific and marketing perspective, GMO crops do not make any sense here. But Austria has a long tradition in environmental biotechnology.” Insam cited the Strass wastewater treatment plant, which boasts a net energy surplus, using technology developed by Bernhard Wett at the University of Innsbruck.
BioProcess International’s European Conference and Exhibition will be in Austria this spring, and it brings many representatives of the medical biotechnology industry and vendors that serve biopharmaceutical companies to Reed Messe Wien Congress Centre in Vienna (pictured). The conference is focused on the latest developments in bioprocessing and the biologics business. The event is certain to attract delegates from some of Austria’s own biopharmaceutical, vaccine, and diagnostics companies.
According to the European Molecular Biology Organization, Austria ranks among the top ten countries worldwide for biology and biochemistry. In 2004, the United States and Foreign Commercial Service and the US Department of State reported that “very quietly and without much ado, a bustling biotech scene has developed in Austria over the recent decade…. Research in this country adheres to an important principle: the only goal of such work must be the well-being of humankind. Manipulating human DNA — a topic under discussion in other countries — is out of the question in Austria” (2).
Even though the country is known for its excellent research and educational institutions, industry deserves much of the credit for the burgeoning scene in Austria. Multinationals including Baxter, Sandoz, and Boehringer-Ingelheim have invested heavily in Austrian biotech, both by locating facilities in the country and by working with its researchers. Biochemie, the company that in 1951 produced the first oral penicillin drug, was bought by Sandoz years ago. As a result of a merger, Sandoz was brought into Novartis, and Biochemie remained as a 100% subsidiary. Recently, it was integrated into a newly founded division of Novartis set up under the old name Sandoz.
Vienna’s Institute for Molecular Biology was built in conjunction with Boehringer-Ingelheim’s Institute for Molecular Pathology (a joint venture with Genentech). They are located in the Vienna Bio Center, one of several successful bio-clusters in the country. It’s becoming an incubator for new innovative companies such as Intercell AG (www.intercell.co.at), Axon Neuroscience GmbH (www.axon-neuroscience.at), VBC Genomics (www.vbc-genomics.com), and Haemosan (www.haemosan.com).
Having joined the European Union in 1995, Austria is closely linked economically to other EU member states (particularly Germany) — and increasingly to central and eastern Europe. Early in 2007, the country had a change of government that gave it a coalition of the Social Democratic and Christian Democratic parties. This coalition soon announced its intention to increase Austria’s attractiveness as an investment location. Already attractive corporate tax rates would stay the same, and the new government would focus on innovation, research, and more flexible labor laws. The governmnent also plans to invest more than €10 billion in expanding the country’s highways and railways by 2010.
The Austrian Chamber of Commerce estimates the country’s total pharmaceuticals market at €1.9 billion, with pharmaceutical production at €1.325 billion in 2004. Some 65 industrial pharmaceutical companies are active in Austria and benefiting from its highly qualified workforce and proximity to Eastern European markets. More than a thousand global companies coordinate their Eastern European activities from Austria. As the European Community expands eastward, Austria has become centralized on the map (bordering four eastern-European countries and four western-European countries). Many economic experts are predicting that this country will profit more than any other EU member from the expansion and up to 6% economic growth in Eastern Europe over the next few years (3).Regulations and Business Climate
Because Austria is an EU member state, the European centralized procedure applies to most regulatory applications for its market. As of 2 January 2006, the government of Austria moved responsibility for authorization and registration of medical products, devices, and pharmaceuticals from its Federal Ministry for Health and Women’s Affairs to the newly established Austrian Federal Agency for Safety and Health Care. The AGES PharmMed (Oesterreichische Agentur fur Gesundheit und Ernährungssicherheit, www.ages.at), which reports to that agency, performs operational procedures within the pharmaceutical sector. One Baxter official recently commented, “I have been living in Austria for more than five years now, and I can tell you that I have been very impressed by the support and cooperation Baxter has received. Government officials and agencies have been very open, straightforward, fast and flexible” (3).
Taxes and Incentives: Companies can claim a 25–35% tax exemption for “economically important inventions.” The Austrian Ministry of Economic Affairs is responsible for assessing those values. Inventions already protected by patents are excluded. A 25% tax exemption also applies to specifically defined scientific research. It can be claimed for investments (premises, commercial property, R&D equipment) that serve to further research and experimental development. A specially designed 25% tax exemption has been initiated for small and medium-sized companies that outsource their research (to a maximum of €100,000/year). Such contracts are granted to institutions whose work focuses on research and experimental development and are located within the European Union. Deductions can be claimed only once for specific research expenditures. There are also tax exemptions for employee training and a research–training bonus.
Operating as a private law company, the business promotion agency called Austria Wirtschaftsservice GmbH (www.awsg.at) works with provincial development companies and distributes EU funds for regional development. Cash subsidies of up to 30% are possible, and technology is a top priority. Also, the Austrian Research Promotion Agency can assume up to half of the developmental costs of R&D projects through subsidies, subsidized loans, and liability guarantees for interest-rate–subsidized bank loans. More than 40% of funds provided go to first-time applicants from industrial entities to research institutes, individual researchers, joint ventures, organizations, and so on. A Fund for the Promotion of Scientific Res
earch promotes basic research. For more information, go to www.aba.gv.at/incentives.
Financing and Investment: In 2004, ABA-Invest in Austria reported on a study that predicted positive results from corporate tax reductions that would take effect a year later (4). The ABA was already getting inquiries from potential German investors then. The changes put Austria’s corporate tax rate at about the same level as in the Czech Republic and roughly half that in Germany. Consolidated group taxation would allow foreign and local subsidiary losses to be offset against the results of parent companies located in Austria, making it the only country outside Scandanavia that allows such cross-border loss income statements.
By the middle of 2006, the ABA was reporting a 28% growth in foreign investment, with an investment volume of €153 million creating almost 800 new jobs, all in the first half of that year (5). That was a 13% increase in job growth over the previous year. Germans represented the largest share of incoming investment, and most of the rest came from other European countries. Vienna saw the greatest number of new companies. Life sciences represented a small portion of those projects. At the time these announcements came out, however, ABA was working with some 500 additional interested companies.
That kind of growth continued into 2007 with a further 24% increase in foreign and regional investment up to €230 million (6). Nearly 1,500 jobs were created through ABA’s efforts, up from 1,310 in 2005. Most were in the service sector, fewer in production facilities than in 2005, but more in R&D. As expected, Germany and Italy accounted for the largest share of investment, but the ABA reported more investment coming from eastern Europe than ever before as well. And again, Vienna saw the largest growth.
Austria’s minister of economics and labor said, “We are sticking to our tried and tested approach.” And ABA’s managing director Rene Siegl said, “The 2005 tax-reform package is now having quite a positive impact.” He expressed concern, though, over impending tax reform measures in Germany — and the competition that could represent.Research and Economic Development
More than 100 self-described biotech companies and about 170 associated research institutions call Austria home, employing some 10,000 people (7). Boston Consulting Group has projected those numbers to more than double by 2015, with most new jobs found in medical biotechnology. The country is beginning to take a lead in cancer research, especially through genome studies.
Biotechnological development in Austria is based on a solid foundation combining the above-mentioned business incentives with bio-cluster formation, centers of excellence, and a strong emphasis on research. Healthcare R&D programs account for more than a fifth of the government’s research budget. The city of Vienna alone has invested about €75 million in genome research. Major clusters outside the Vienna powerhouse (www.wieninternational.at) are located in Graz, Krems, Tulin, Salszburg, and Innsbruck, not surprisingly all home to major research institutions and/or centers of excellence.
In eastern Austria, the central point of contact is Life Science Austria (www.lifescienceaustria.net), which also has a Vienna-focused branch (www.vienna.lifescienceaustria.net). In western Austria, entrepreneurial scientists can get support from the Center for Academic Spin-Offs Tyrol (www.cast-tyrol.com), and European partners can work through the Office for European Programs (www.bep.at). Centers of excellence include those for applied biocatalysis in Graz and biomolecular therapeutics in Vienna; the Austrian Center for Biopharmaceutical Technology and the Center for Health and Information Technology in Tyrol; and the Christian Doppler Laboratory for Specific Adsorption Technology in Medicine (at Danube University in Krems). The latter is a joint business–academic venture with state subsidies. There’s even a center for agrobiotechnology in Tulin.
The Vienna Biocenter is the largest biotechnology center in Austria, housing institutes for biochemistry, molecular cell biology, microbiology, genetics, and molecular pathology, as well as several spin-off companies. Boehringer-Ingelheim owns the Institute of Molecular Pathology, which it founded in 1985. Vienna’s International Research Cooperation Center focuses on applied biomedical research, and the University Clinics of Vienna General Hospital have worked closely with companies such as Novartis on development of new drugs. Vienna is also home to the Antibiotic Research Institute, a Sandoz subsidiary, which spun out Nabriva Therapeutics (www.nabriva.com) in 2005.
In biotechnology, research inevitably leads to business as discoveries become products. In 1997, Baxter International (based in Illinois) bought a company called Immuno AG in Vienna, making Austria one of its largest production sites. Baxter AG became the third-largest American investment in Austria, with 2,400 employees by 2001 (2). In Kundl, the former Biochemie GmbH, which used to be a Novartis subsidiary, has been newly organized under the name Sandoz. And Boehringer-Ingelheim operates a production facility in Vienna. In Graz, Roche (www.roche.at) established a center of excellence for research and production of diagnostics.
One very prominent development took place in Graz in the field of biocatalysis. The center of excellence for applied biocatalysis (www.a-b.tugraz.at) has attracted many national and international industries, including major players in the production of (fine) chemicals, food products, and pharmaceuticals such as BASF, Ciba, DSM, Henkel, and Sandoz. As part of several industry–public cofinanced projects, high-level academia–industry joint research is developing enzyme-based production of fine and bulk chemicals and pharmaceuticals. The Graz center of excellence has become a European leader in this field of industrial biotechnology.
With all that high-level research going on, it’s no surprise that there is no shortage of high-tech talent in Austria, particularly in Vienna. One Baxter official put it best: “For a biotech company involved in sophisticated research and high-tech pharmaceutical production, it is very important to be able to tap into the highly skilled and well-trained workforce in Austria” (7). The country has a world-renowned education system — in business and vocational schools as well as scientific research institutions — and its health-care system was ranked best in Europe for 2007 (8). More than 75% of Austrians go on to higher education, and 89% of adults take part in formal or informal learning programs (the EU average is 42%). Colleges and universities maintain strong relationships with industry, through for example sponsored internships and research partnerships.
Josef Penninger is director of the Institute of Molecular Biotechnology (IMBA) and a former principal investigator at Amgen. He loves the creative fre
edom found in Austrian research. “Brilliant young people can research worms and search for genes for as long as it takes to become the world leaders,” he said (7). True to the value of such work, his group identified the gene for cell death that clarified the genetic background of autoimmune diseases.
Some 55,000 students are enrolled in pharmaceutical and biotechnology-related studies at 10 Austrian universities (7). About 2,000 are graduating every year. The PhD program at the Vienna Biocenter accepts just about 10% of its applicants. Vienna’s School of Clinical Research is seeing an influx of students from Eastern Europe, the Middle East, and Africa. Industry and academia are working together to drive Austrian biotechnology forward (9).