BioWorld International Correspondent

MUNICH, Germany - The German state of North Rhine-Westphalia awarded a €4.9 million (US$4.9 million) grant to Paion GmbH, of Aachen, to develop production capabilities for therapeutic proteins. The state grant supplements a federal grant of €7.7 million the company won in 2001 from the Ministry of Education and Research and comes on top of €32.4 million in private venture funding.

The grant is to help the company develop disposable and high-performance protein production systems that will enable large-scale manufacturing of the compounds in its pipeline. Paion's leading product, Desmoteplase, is in worldwide Phase II tests for effectiveness against stroke.

"The additional funding will help transform Paion into a fully integrated biopharmaceutical company," said Wolfgang Soehngen, Paion's CEO.

Paion has other therapeutic proteins for acute ischemic stroke in preclinical testing. The company specializes in the related areas of stroke, acute neuron damage and thrombotic diseases.

Soehngen said that while the company's growth strategy was based on private investment rather than public support, "additional investment is always welcome." The grant from the state government, together with the previous federal grant, would allow the company to investigate expression of proteins in plants. That research is technologically riskier and has a time horizon of five or six years. Paion might not have undertaken the research with private funds, which could have looked askance at the inquiry's level of uncertainty.

Paraphrasing a German soccer aphorism, he added, "After fund raising is before fund raising." As a company grows, he said, it must always be aware of market conditions as well as its own needs. Soehngen said that consolidation within the German biotechnology sector was likely to be an issue for companies that, unlike Paion, had built public support into their business plans. While a merger or an acquisition could never be categorically ruled out, Paion said it is pleased with its capitalization and will concentrate on its core business.

Paion also intends to generate novel protein drug candidates from its "mechanism-based comparative genomics" discovery platform. With that approach in mind, the company needs an established and cost-effective production infrastructure to retain its independence, particularly if the German biotechnology industry consolidates further in 2002.

Paion was founded in 2002 as a spin-off of Schering AG, based in Berlin, with which it retains close relations, including technological licenses and marketing agreements. Schering traces its corporate roots to the origins of the German pharmaceutical industry in the middle of the 19th century. Paion's first round of funding closed in November 2000, with 3i as the lead investor. Other investors included WestLB, the German bank; Vertex Management Fund, of Singapore; and Genevest, a Swiss venture fund.

State support from North Rhine-Westphalia is part of a broad strategy in Germany of public support for small and medium-sized biotechnology companies. Federal initiatives include the BioChance program, which has awarded more than €52 million in grants since its inception in 1999, and the BioRegio competition, which has invested more than €75 million in developing biotechnology clusters around the country. (See BioWorld International, June 19, 2002.)

In addition to North Rhine-Westphalia, states such as Bavaria and Baden-Wuerttemburg actively support the development of the biotech industry in their regions.