At the start of 2021, the German city of Mainz was budgeting for a deficit of around €36 million. By the end of the year, as Fortune reported in early 2022, it expected a surplus of more than €1 billion, enough for the city to talk about clearing its debts. The reason was a company founded in the city in 2008 by Uğur Şahin, Özlem Türeci and Christoph Huber: BioNTech, whose mRNA COVID-19 vaccine, developed with Pfizer, had turned into one of the most lucrative products in pharmaceutical history.
Mainz is a regional capital of about a quarter of a million people, not Berlin, not Munich. It is the kind of city that economic development agencies everywhere point to when they argue that health innovation does not have to cluster in a country’s biggest metropolis.
They are right about that. They usually draw the wrong lesson. The thesis here: health innovation hubs outside the usual capitals are not built by hub strategies. They grow around a research institution that was already excellent, they tend to depend on one or two breakout companies, and that dependence makes them far more fragile than the ribbon-cutting suggests.
Hubs grow from a hospital, not a building
BioNTech’s founders were academic physician-scientists with deep roots at the university medical centre in Mainz. The company did not arrive because the city built an incubator and advertised cheap office space. It emerged from years of immunology research carried out locally, then found investors willing to back it for more than a decade before its first product.
That pattern repeats. Durable health innovation clusters outside capital cities tend to sit near an academic medical centre with serious research output, a steady flow of trained people and patients who can be enrolled in studies. The incubator, the science park and the tax incentive come later and help. They rarely cause.
For regional governments, this has an uncomfortable implication. The most effective hub investment may be the least visible: sustained funding for a university hospital’s research capacity, over twenty years, with no guarantee of a company at the end. That is hard to announce and harder to defend at budget time.
Why the incentives favour the wrong investments
It helps to ask why regions keep building buildings when the evidence points to people and research. The answer is mostly about political time.
A science park can be opened within one electoral term. It has a ribbon, a photograph and a count of square metres. Research capacity pays off, if it pays off at all, over a period longer than most careers in local government. A regional minister who funds a professorship in immunology today will almost certainly be out of office before anyone can tell whether it produced a company. The minister who opens an incubator gets the credit now, and nobody will ever be able to prove the incubator made no difference.
Development agencies face a related problem. They are often judged on jobs announced and firms attracted, which rewards relocation deals and grants to companies that might have come anyway. Measuring the slow accumulation of scientific talent is harder, so it gets less money. None of this is cynical. It is what happens when the reward cycle is shorter than the thing being rewarded.
A back-of-envelope look at concentration risk
The Mainz windfall also shows the other side. A city whose finances swing by a billion euros on one company’s product has concentration risk that no portfolio manager would accept.
Take the reported figures at face value. A swing from a deficit of about €36 million to a surplus above €1 billion is a change of roughly €1.04 billion in a single year. Spread across a population of around a quarter of a million, that is on the order of €4,000 per resident, from one company, in one year. Hardly any regional economy could absorb a shift of that scale in either direction without noticing. When most of it rests on one product, the next swing is just as likely to go the other way.
Vaccine demand fell as the pandemic receded, and with it the extraordinary revenues. Regions that build their hub story around a single champion face a predictable cycle: a surge of tax revenue, jobs and pride, then exposure when the product cycle turns, the company is acquired, or headquarters functions move to where the investors and executives prefer to live.
Healthy clusters show diversity: several mid-sized companies, suppliers, contract research and manufacturing firms, and people who can move between employers without leaving the region. That labour mobility is the real asset. It is what keeps talent in place when any single company stumbles.
Why capitals keep winning anyway
It is worth being honest about the gravitational pull of the big cities. Capital and financial centres concentrate the things a growing health company needs after its first success: late-stage investors, regulatory lawyers, experienced commercial executives, international flights and, often, the regulator itself.
A common trajectory for a promising regional start-up is to keep its laboratory near the university and move its leadership, and eventually its growth, to the capital. The region gets the discovery and loses the scale-up. Local policies that only fund early-stage research can end up subsidising the pipeline of companies that will leave.
The countervailing argument is cost and focus. Regional hubs offer cheaper space, lower staff turnover and the attention of local government in a way a capital cannot. For some kinds of work, such as clinical trial networks, manufacturing and digital health tools tested in regional health systems, those advantages are decisive.
The strongest counterargument
A sceptic could push back hard on the whole thesis. Mainz, they might say, is not a lesson in patient research investment; it is a lottery ticket. A pandemic arrived, one company happened to have the right platform, and the windfall followed. Plenty of cities have excellent university hospitals and no BioNTech. If the outcome is that random, why should any region invest decades of money on the hope of a breakout?
This partly holds. The size of the Mainz windfall was driven by a once-in-a-century event, and no region should plan on that. Excellent research is a necessary condition for a durable cluster, not a sufficient one.
But the sceptic’s conclusion does not follow. The pandemic determined how large the payoff was. It did not determine that a company capable of producing a vaccine at speed existed in Mainz at all. That depended on years of locally rooted science and on investors who stayed patient. A strong research base is the thing that gives a region tickets in the lottery; a region without one does not get to play. And the value of that base is not only in the rare breakout. It shows up in better-trained clinicians, more clinical trials for local patients and a steady trickle of smaller firms, which are worth having even if no champion ever emerges.
Second-order effects of a breakout
A single big success changes a region in ways that outlast the revenues.
It raises local costs. Salaries for scientists, rents near the campus and the price of lab space all move up, which can squeeze the very start-ups the region hoped to attract. It changes expectations. Politicians and residents come to see the windfall as normal, and budgets can quietly absorb it. It pulls talent. A fast-growing champion hires aggressively from the university and from smaller firms, which can hollow out the ecosystem even as it looks like the ecosystem is booming. And it creates a powerful local voice. A company that pays a large share of a city’s taxes gains influence over planning, transport and education decisions, sometimes for the better, sometimes not.
There is a quieter effect on ambition. Once a region has a champion, every new spin-out is measured against it, and investors, officials and founders themselves can start to treat anything short of a global breakout as a disappointment. That is corrosive. The firms that make a cluster durable are mostly unglamorous: a contract manufacturer, a diagnostics company with steady hospital customers, a software firm selling to regional health authorities. A region that only celebrates moonshots will under-invest in exactly the businesses that carry it through the lean years.
None of these is a reason to fear success. They are reasons to plan for it before it arrives.
What specific actors should do
Regional governments and ministries should fund the academic base for decades, not project cycles, and protect that funding from being traded away for more visible announcements. The hub’s seed is research excellence. Nothing replaces it. When a windfall arrives, treat it as a one-off: pay down debt, build endowments or fund long-lived infrastructure, rather than baking it into recurring spending. Mainz’s surplus was a gift, and treating a pandemic-era surge as the new baseline would have been a mistake.
University hospital leaders should treat translational research and spin-out support as part of the core mission rather than a side activity. That means clear, fast rules on intellectual property, protected time for clinician-scientists and a technology transfer office judged on companies that survive, not patents filed.
Regional health authorities should offer themselves as a testbed. A manageable, cooperative health system where a new tool can be piloted and evaluated with real patients is something capitals often struggle to provide, and it is a genuine reason for a young company to stay.
Investors and funders should plan for the scale-up stage. The gap that drives companies away is later-stage capital, manufacturing space and experienced executives, and regional funds that can follow on, or co-invest with larger backers, keep more of the growth local.
Founders should be clear-eyed about what a region offers and what it lacks. Staying close to the hospital where the science was born is a real advantage for clinical development. Recruiting a commercial team may still mean opening an office elsewhere, and that need not mean abandoning the base.
Encourage diversity deliberately, too. Suppliers, service firms and several independent companies give a cluster a chance of surviving any one exit.
What to watch over the next two years
Watch how regions that enjoyed pandemic-era biotech windfalls handle the comedown: whether they preserved the gains as long-term assets or spent them as recurring income. Watch whether regional hubs attract later-stage financing and manufacturing, or keep losing companies at the scale-up stage. Watch whether national research budgets protect university hospital research capacity under fiscal pressure, since that is where the next generation of clusters is quietly being decided. And watch whether any region manages to grow a second and third anchor company, which is the clearest test of whether a hub has become a cluster.
The takeaway
Health innovation can and does flourish outside capital cities. But it flourishes on foundations that were laid long before anyone called it a hub, and it stays only when the region builds enough depth to survive its first big success. The question for regional leaders is not how to attract the next BioNTech. It is whether their university hospital is strong enough to produce one, and whether the region is diverse enough to keep going when it leaves or fades.
Which health innovation cluster outside a capital city do you think has built real staying power, and why? Share your view below.
