(Bloomberg) -- Merck KGaA became the latest pharma company to begin construction of a new center in Germany, boosting Chancellor Olaf Scholz’s push to turn the country into Europe’s leader in life sciences.

The German drug-to-semiconductor group is spending €300 million ($320 million) on a research center for its life-science division devoted to manufacturing antibodies and developing messenger-RNA technology, among other things.

It’s the company’s biggest-ever investment in research and development for life sciences, according to Chief Executive Officer Belen Garijo, and part of a larger plan to invest €1.5 billion in its Darmstadt headquarters near Frankfurt through 2025.

Merck follows Eli Lilly & Co., which earlier this month broke ground on a plant also near Frankfurt that will boost the production of its wildly popular weight-loss drugs. The US company’s $2.5 billion investment is the pharma industry’s biggest in Germany since the country’s reunification more than three decades ago.

In 2023, Swiss drug giant Roche Holding AG invested €1.4 billion in German production and development sites.

“Investments of this magnitude are not only promising in economic, medical and scientific terms,” Scholz said in a speech during Thursday’s groundbreaking ceremony at Merck in Darmstadt.

“They show that we are on the right track with the changes we have already made to offer the pharmaceutical and biotech industry good framework conditions,” he added.

Cheaper Power

The Social Democrat politician is keen to demonstrate that Germany can still attract investment at a time when many of its biggest companies have looked overseas for new projects, including in places like Texas that enjoy cheaper electricity.

Scholz’s ruling coalition is also working to make the country a more attractive place for pharma companies to conduct research and development, including by pursuing a strategy designed to streamline bureaucracy and improve digital health-care infrastructure.

Merck’s life-science division has long been a growth engine, serving up raw materials, drug-delivery compounds and services to the world’s growing number of drugmakers and biotechnology companies.

It’s become the largest of Merck’s three business segments, with earnings that are slightly larger than its pharma division and much greater than the electronics unit.

In the coming decade, Merck’s life science unit expects to generate about a fifth of its sales from new products from the Darmstadt operation.

Merck is unaffiliated with the US-based Merck & Co.

--With assistance from Michael Nienaber.

©2024 Bloomberg L.P.