Harvard Square Draws Deal-Seeking Drugmakers From Europe

Martin Heidecker has traded the broad Rhine River for the banks of the Charles.

Heidecker is a venture-capital fund manager for Boehringer Ingelheim GmbH, the latest major European pharmaceutical company to set up shop across the river from Boston in Cambridge, home of Harvard University and the Massachusetts Institute of Technology. Like its competitors, Boehringer wanted to get a piece of the local biotechnology boom that by last July had generated more than 11 percent of the U.S. drug-development pipeline.

Until late last year, Heidecker worked from an office that looked out on the rolling farmland around Ingelheim am Rhein, Germany. Now, he shares space with technology startups a short walk from MIT, Harvard Square and venture-capital funds Atlas and Flagship. Heidecker is part of an exodus of Europeans moving their money and brains to Boston’s critical mass of universities, entrepreneurs and investors.

“Here in Cambridge, everything is so condensed,” said Heidecker, who is German. “It’s a very open community of innovative science.”

That environment has helped bring billions of dollars into the Boston-Cambridge area in the past decade, making it the envy of such European biotech hubs as London, Berlin and Geneva, cities that have tried with varying success to emulate Boston’s allure. Venture capital invested about $510 million in Cambridge-based biotechnology and pharmaceutical companies in 2013, according to MassBio, a trade association.

Stamp of Approval

Stroll less than a mile from Boehringer’s foothold at the Cambridge Innovation Center, and there is Novartis AG, the Basel, Switzerland-based company that helped start the rush. Novartis, Europe’s biggest pharmaceutical maker, bought an old candy factory -- where Necco wafers were once made -- in 2002 and set about turning it into a research outpost.

Before Novartis arrived, biotechnology companies such as Biogen Idec Inc. and Genzyme Corp. gave the area a reputation for developing biological drugs, which are derived from living cells. Novartis wanted to develop the chemically-synthesized medicines known as small molecules that until recently were the industry’s biggest sellers.

That move “put the stamp of approval on the area” for other big pharmaceutical companies, said Derek Lowe, a Cambridge drug-discovery researcher who writes the widely read blog In the Pipeline.

Cambridge Labs

Novartis now employs about 2,500 people in Cambridge, the headquarters for the Novartis Institutes for BioMedical Research, a nine-campus network that spans three continents.

“You can stand on the roof of this building and throw a rock and you’ll either hit a tech company or a biotech company,” said Jeff Lockwood, a Novartis spokesman who was the site’s 125th employee.

Novartis is spending more than $600 million on two new buildings across the street to consolidate its roughly 1 million square feet of Cambridge labs and offices.

The company started a new neuroscience research team at the existing site last year, after shutting down a Basel-based project in that field. Ricardo Dolmetsch, the scientist Novartis hired from Stanford University in August to run the program, said that in Cambridge he can hold weekly meetings with researchers at the Broad Institute next door.

Sanofi’s Buy-In

“I’ve never seen anything like this,” he said.

Some companies buy their way into Cambridge. In 2011, shortly after Sanofi spent $20.1 billion to acquire Genzyme, Chief Executive Officer Chris Viehbacher said the city would be one of the French company’s four global research hubs.

The Boston region is sprouting more potential acquisition targets. It has 37 biotechnology companies with at least $100 million in cash and investments to back their science, triple the number it had a decade ago and the most in the U.S., Xconomy reported in October. Massachusetts saw nine biotech companies make initial share sales last year, according to data compiled by Bloomberg.

Meanwhile, the state government had spent $470 million to support life sciences in the past five years and attracted about $1.3 billion in third-party investment in return, said Angus McQuilken, a spokesman for the state’s investment agency, Massachusetts Life Sciences Center.

Europe’s Cambridge

European cities are trying to compete. Cambridge, England, will be the new home of AstraZeneca Plc, the U.K.’s second-biggest drugmaker, in 2016. Berlin, where drugmaker Bayer AG is based, has more than 200 biotech companies employing more than 4,000 people. In Geneva, the former home of what was Europe’s biggest biotech company, Serono SA, billionaires Ernesto Bertarelli and Hansjoerg Wyss are building a life-science incubator.

For Boehringer’s Heidecker, the missing piece in the Rhine Valley was what he calls “founding spirit.” Almost half the companies that have sent business plans to the German drugmaker’s $130 million venture fund were based in the U.S., he said. Yet only one of its 10 investments so far has been in America. Setting up in Boston and at another satellite office near San Francisco may help Boehringer seize more opportunities, Heidecker said.

“We felt like the time is right, now, to come over the ocean,” he said.

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