27 Mar Swiss biotech has quality of its big pharma, watch and chocolate industries
I had the good fortune to be in Zurich, Switzerland less than two weeks ago to visit with a number of Swiss biotech companies and the Swiss Biotech Association, as part of a mission of visiting American companies organized by the Swiss Business Hub here in Chicago.
This trip to Zurich was my first in 21 years (although I had been to Basel, Lausanne, and Geneva on many occasions). My first trip to Zurich in 1985 was part of a roadshow to raise $15 million for a new airline I was getting off the ground (yes, I had a brief stint outside of the life science industry) – this would be equivalent to about a $50 million raise-up in today’s market, so not chump change.
Subsequent trips to Switzerland were in the early 1990s to visit Searle operations there, which were in a little city between Geneva and Lausanne. I even considered taking up residence in Geneva at one point to work with a major multinational headhunting firm. Later, I returned once again to Geneva and Lausanne in my Endorex days as we successfully raised money there – first, as part of the $20 million raise-up of 1997, and then once again in the $9 million raise-up of 2000. I found it easier to raise money there than in Chicago at the time.
We also met with Swiss Specialty Pharma companies at that point on potential licensing deals. So I have always been comfortable with Switzerland and enjoyed being back – some incredible natural landscape and the highest mountains in Europe!
Many people probably don’t think of Switzerland as a country heavily involved in this technology, and I have to admit that I wouldn’t have thought of it as a principal pole of biotech in Europe given the well-known and established clusters in Germany, the U.K., Scandinavia and even France.
Switzerland, after all, is smaller than all of the above – about slightly less than double the state of New Jersey, and, of course is a land-locked country (however with plenty of spectacular lakes). It borders France on the west, German on the North, Austria on the east, and Italy on the South. As a result, languages flow into and out of this country rather easily, and most Swiss speak at least 3 languages. Each section takes on some of the characteristics of the major country it borders, so in Geneva and Lausanne French is heavily spoken, in Lugano a lot of Italian, and in Zurich and Basel a lot of German.
For the record, Switzerland is not part of the European Union, and does not use Euros, but continues to use the Swiss franc which trades at about 1.25 SF to US $1.
There are about 7.5 million Swiss people today in 26 cantons. The Swiss Confederation came into being in 1291 as part of a defensive alliance of 3 cantons. In 1499, the Swiss Confederation obtained its independence from the Holy Roman Empire, but neutrality has ruled the day ever since (although note that some lingering connection with the Vatican remains, as the soldiers that guard Vatican City and the Pope are all Swiss guards).
So how does such a small country produce some of the most prodigious multinational companies in the world, such as Nestle, pharmaceuticals giants Novartis (2004 sales of $28.2 billion and ranked number 5 in the pharma world), and Hoffman LaRoche (2004 sales of $25.2 billion and ranked number 6 in the pharma world), and let’s not forget biotech leader Serono (2004 sales of $2.5 billion and ranked number 37 in the pharma world)?
Well, there is clearly a Swiss penchant for research, engineering of course, quality (as seen in its watches, chocolates, trains, machinery, other precision instruments, and of course banking and financial services).
This is a country that early on realized that its internal market was tiny and that it needed to gird its industries with a mentality to go venture outside of the country and grow. Its GDP of $374 billion is a testament to this, and with annual exports of about $149 billion (versus imports of about $135 billion), this is an exporting powerhouse.
But how does this translate into a biotech community? Well, the money is clearly there, and this is a community that has invested in U.S. biotech for some time (my own experience there goes back 10 years to raise money there). It helps that Switzerland is awash in financial institutions and funds. There is, of course, a Swiss Stock Market, which has listed to date about 10 or so biotech companies.
Let’s take a look at what is there and then try to understand why. According to L’Agefi Magazine’s summer 2005 edition, Switzerland has the sixth largest biotech industry in Europe and the ninth largest in the world with about 240 companies.
This does not include medical device companies and key supplier companies to the industry – another 230 companies, totaling more than 500 companies for bio-industry outside of Big Pharma, and providing about 13,000 jobs. One of these supplier companies is Bachem, one of the largest producers of peptides and a contract manufacturing organization for peptide-drug manufacturing in the world, and with several U.S. offices.
Switzerland has four main biotech clusters:
• Bio Valley Basel, which has been the traditional home of Big Pharma companies, has more than 40 biotech companies and 4,000 employees
• Greater Zurich area and has more than 65 biotech companies and 2,000 employees
• Bio Alps – the Lake Geneva/Lake Buechatel area. This last group amalgamates biotech activities in 5 cantons, and the French-speaking part of the country), and has more than 30 biotech companies and 5,500 employees; this doesn’t include a large number of medical device companies in the area
• Bio Polo Ticino in the Lugano area
The Swiss Biotech Association was founded in 1998 and has over 100 companies in its members today, and is based in Zurich.
One of the issues for producing a biotech community is having access to early stage capital. Although Switzerland is awash in money and financial institutions, its venture capital community (for biotech companies) is still emerging. Its biotech venture capital ranks about third in Europe with funding of a little over $155 million (2004), but this pales in comparison to Israel. Still, this funding has doubled in 4 years, so there is an increased appetite for Swiss biotech. Novartis has also launched a venture fund. Today there are at least a dozen Swiss VCs, in addition to another other 13 life science funds for later stage companies.
Biotech, by its very nature, has to start with great research, and Switzerland does not lack in great research institutions, including:
• Swiss Institute for Cancer Research (ISREC) near Lausanne
• University of Geneva
• University of Lausanne
• Ludwig Institute
• University of Basel
• Swiss Federal Institute of Technology (Lausanne)
• Swiss Electronics and Microtechnology Center (Neuchatel)
• University of Bern
• University of Zurich
• Center for Micro and Nanotechnology
• Institute for Applied Optics
• Institute for Production and Robotics
• Nuechatel University
• Swiss Institute for Bioinformatics (Geneva)
• University of Applied Sciences (Valais)
Although Switzerland is not as productive as the University of Chicago and University of Illinois in generating Nobel Prize winners in life science fields, it has continuously had numerous Swiss scientists recognized by this institution.
The precision found in Swiss watchmakers (Rolex, Audemars Piguet, Vacheron Constantin, Patek Phillipe, Bulgari, Jaeger-Le Coultre) has wound its way into a Swiss medical device industry and companies such as Medtronic, Baxter, Johnson & Johnson have made important investments in this region for medical instrumentation and equipment.
According to L’Agefi Magazine, Midwest medical device giant Medtronic in 1997 invested $37 million to build a state-of the art facility off of Lake Geneva as the company’s international headquarters. This was followed up another $31 million investment to build additional manufacturing facilities and capability.
The Swiss equivalent of Silicon Valley is called Carbon Valley which is located in the Geneva-Lausanne corridor. It is estimated that carbon will soon rival silicon. Carbon is starting to permeate materials science.
I encourage anyone interested in learning more about Swiss biotech to visit the Swiss Biotech Pavillion at the BIO 2006 meeting. Additionally, Chicago is fortunate enough to have its own Swiss Trade Commissioner for the Midwest region right here in Chicago, who can provide further information. In fact, this group organized our trip to Switzerland where a group of American companies presented entry strategy into the U.S. market (which will be replicated again at BIO 2006) to Swiss biotech companies.
Only 13 days to BIO-2006 Chicago. See you there!
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