A chemical industry lineage, weak biotech links, and neglect of the U.S. market have led to the German pharmaceutical industry’s slide, according to an article published by Reuters corresponent Shankar.

“The seeds of this decline were sown long ago,” says former Novartis pharmaceutical head Jerry Karabelas. “Hoechst and Bayer pharma were the stepchildren of chemicals companies and lacked the understanding of molecular biology that produced drugs in the 1980s and 1990s,” he said. Analysts say the drug makers often treated their pharmaceutical operations as secondary businesses to which they banished executives. They also looked at Europe as a major driver for growth and understood the U.S. market poorly. “Competition is a great breeder of innovation and if you’re insular the danger is that you tend to assume the competition is the company next to you,” says Karabelas. The lack of big drugs could also be put down to the fact that German drug makers have not been able to draw on university research as well as their U.S. counterparts. “Germany did not have a big biotech industry, and the cross-fertilisation between universities and companies was lacking,” says Merrill Lynch analyst Andreas Schmidt. The shortage of foreign talent at the top of German companies has not helped, either. “Language is certainly an issue - you can’t be inclusive to global talent unless you embrace English,” says Karabelas.

Note added August 2005: Article is not available anymore online.