Innovation is the key to Swiss pharma success

The Swiss pharmaceutical industry has concentrated heavily on the 'life-science' products and high-value specialty chemicals. The specialised product strategy of the companies based in Switzerland has proved to be extremely successful

The economic conditions in Europe have changed dramatically in the past year. The unexpectedly rapid opening up of many east European and south-east Asian markets has created a new economic environment. This has led to many companies re-evaluating their place in the market-place and Swiss pharmaceutical companies are no exception. Existing production facilities worldwide are subject to scrutiny to assess their competitive advantage in the market. 'New corporate objectives and restructuring are inevitable, if the companies want to compete in the increasingly fierce competitive environment,' says Bent Moser, director of the Swiss Society of Chemical Industries (SGCI).

'A merely defensive corporate strategy geared exclusively to greater efficiency, rationalisation and cost reduction would be inadequate.'

The strength of the Swiss industry has been innovation and the ability to respond quickly to changes in the domestic and foreign environment. The idea of cost-cutting must be supplemented and extended with innovation, to ensure future economic success. This should come from all areas of production, including administrative processes and structures.

The idea that a company can survive in the world market by existing solely in one country has gone. Many Swiss companies have achieved modern management practices and by co-ordinating collaborations with many autonomous firms, large virtual enterprises are created.

This trend towards extremely competitive core companies that control all elements of the total product chain, without owning each step, has resulted in a considerable number of small/medium sized companies, which operate as specialised sub-contractors and service providers. It has also meant that the giant Swiss pharma companies can reduce their costs, yet not damage their productivity and still produce blockbuster drugs.

However, a company's capacity to innovate must be strengthened and the SGCI has urged the Swiss government not to delay or prevent advances in new areas of knowledge and technology. 'Rather, it must contribute towards a climate of openness to innovation,' says Moser.

'Genetic engineering will play a vital role for the future of the industry. It is a key modern technology that is essential in all scientific fields. To apply this technology in Switzerland, the industry needs reliable legal guidelines.'

The Swiss industry shows a clear international orientation, as figures 1 and 2 show. Switzerland is an important location for companies in the pharmaceutical industry. Moser says,'International trade has developed extremely well in the first five months of 2001; nominal pharma exports grew at a rate of 24.7% and imports increased by 26.1% compared with the same period a year ago.

No disadvantage outside the EU

'At the moment, we cannot see any major economic disadvantage of being outside the EU, quite the contrary. Two years ago, the SGCI Board carried out a detailed study on the economic advantages and disadvantages, which shows that the accession of Switzerland to the EU would harm our industry. Major negative elements would be an increase of import duties, increased parallel imports of pharmaceutical products from the EU, higher tax burden and higher interest rates.

'But it would be wrong to perceive our industry as a Swiss one only. Less than 5% of its turnover stems from the indigenous market and only 14% of its worldwide personnel are working in Switzerland (figure 3), whereas 37% are working in the EU.

When asked about the importance of r&d, Moser comments, 'Research and development is obviously an international affair. But at the same time, science is dependent on the regional scientific infrastructures of universities, research institutes and companies. The processes that lead to the creation of such regional centres of excellence are extremely complex and various.

'Today, several centres in scientific disciplines that are of specific relevance to the pharmaceutical industry are located in Europe and Switzerland.

'One of these is the BioValley Oberrhein project, which is a tri-national scientific network to support and coordinate the efforts of companies and research institutes in the field of life sciences.'

He went on to say that recent statistics showed that roughly 40% of worldwide r&d expenditure from Swiss chemical and pharmaceutical companies is still spent in Switzerland, in a market that is smaller than the respective r&d expenditures.

increasingly difficult outlook

The pharma industry is operating worldwide in an increasingly difficult environment. On one side, r&d costs and also marketing costs are increasing and on the other side, governments are exercising pressure on prices because they want to contain their health costs. Moser says, 'In this situation of narrowing margins a further restructuring of the worldwide industry would not surprise me.

'Personally, I believe our Swiss companies to be in good shape to master these futures challenges and to survive as independent companies.'

Lonza ; a source of viable projects

Lonza Group is a Life Sciences driven company headquartered in Switzerland, with sites in Visp (CH), Riverside (US), Slough (UK), Portsmouth (US), Los Angeles (US) and Kourim (CZ), These are ISO 9001/9002 certified. The company had sales of CHF1.7bn (US$1bn) in 2000 and operates 13 facilities in six countries. It employs 4,700 people worldwide and is the leading supplier of active chemical ingredients, intermediates and biotechnology solutions to the pharmaceutical industry. It also offers a broad catalogue of organic intermediates for a wide range of applications For more than 20 years, Lonza Ltd has been developing and producing fine chemicals for the world's leading life sciences companies. The company provides a complete development package, from the laboratory stage to industrial manufacturing. Lonza is able to tackle the largest projects, using both classical chemical and biotechnological processes. n

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