ITALIAN HI-TECH INDUSTRY: THE CASE OF LIFE SCIENCES€¦ · Life sciences: a global industry with a...

0© Aspen Institute Italia | National interest | Italian hi-tech industry: the case of life sciences

Studies conducted by:Intesa SanpaoloIMT Institute for Advanced Studies - Lucca

for Aspen Institute Italia

ITALIAN HI-TECH INDUSTRY:THE CASE OF LIFE SCIENCES

National interestMay 2013


Section guide

Italy’s competitive ranking (study conducted by Intesa Sanpaolo)

Research capability (study conducted by IMT)


Life sciences: a global industry with a key role for the public sector

A wide-ranging sector encompassing pharmaceuticals and the full gamut of medical devices, life sciences is a global industry: the major players are multinational corporations (the incumbents are

few, and mergers and acquisitions are rampant); the target market is global; competition is played out at a supranational level.

At the local level, individual countries differ in the extent of the role played by the public sector, which impacts on supply (regulatory framework governing distribution channels, advertising, testing controls, and patent registration and protection), demand (cost-sharing), and consequently the profitability of firms.

Changes are taking place in the scientific basis and methodology of research (from chemistry to biology, the focus on ethical considerations has increased).

Intellectual property protection laws are becoming increasingly complex (e.g. international scope of patents & exemptions to cover exceptional cases).


An important engine for Italian economic growth

The progressive aging of the population and a growing focus on quality of life are making pharmaceutical and medical technologies and products more and more crucial to facilitating new treatment approaches and increasing the wellbeing of the populace.

Against a backdrop of sweeping public spending cuts, such outcomes can make a vital contribution to improving the efficiency of health systems.

The health industry has a high growth potential in the medium to long term, given rising global demand for healthcare.

The sector can also help keep Italy highly competitive, by contributing to raising the technological content of exports.

There is no shortage of excellence in Italy to draw on: large (Italian- and foreign-owned) multinationals, a dense network of dynamic SMEs capable of maintaining operational flexibility and a high capacity for innovation, and an increasing number of innovative start-ups that are transforming the wealth of knowledge of Italian university and hospital research centers into concrete applications.


Life sciences: making a significant contribution to the Italian economy...

SOURCES: ISTAT, Farmindustria and Assobiomedica

Employees: 175,000Turnover: €43 billionExports: €23 billion

Life sciences share of Italian manufacturing (%)

4.2%5.1%

6.2%


... particularly in terms of innovation

14.2%

SOURCES: ISTAT, Assobiomedica, and OECD

21.5%

Life sciences share of Italian totals (%)


The sector has a high incidence of foreign multinationals...

SOURCES: ISTAT and ASSOBIOMEDICA

Differenza

Foreign-controlled firms (as % of firms resident in Italy)


… and a high level of internationalization through foreign direct investment

* net of purchases of goods and services. SOURCE: ISTATDifferenza

Italian-controlled foreign firms (as % of firms resident in Italy)

18% of firms in the medical devices

industry


The role of “new economies”...

2011

New markets: all the world’s economies excluding the oldest industrialized ones (EU-15, USA, Switzerland, Norway, Canada, Australia and Japan). SOURCE: based on UNCTAD data

Export Import

Differenza

World trade share of new markets (%)


… is expected to grow, both as export markets and competitors The growth in disposable income and the development of public health

systems is driving demand for healthcare in emerging countries, with corollary effects on the global reallocation of production capacity.

Difference between 2011 and 2016 ($bn)

+29.1

+5.3

-13.4

+171.2

+51.8

Emerging countries: BRICs, Mexico, Turkey, Poland, Venezuela, Argentina, Indonesia, South Africa, Thailand, Romania, Egypt, Ukraine, Pakistan, and Vietnam. SOURCES: IMS and GLOBAL INSIGHTS

The global pharma market outlook to 2016(billions of dollars)

Share of new investment in the global pharmaceutical industry (%)


By 2016, China will be the world’s 2nd-largest pharma market. Brazil, India and Russia will be in the top ten

2006

SOURCE: IMS

1 United States

2 Japan

3 France

4 Germany

5 China

6 Italy

7 Spain

8 United Kingdom

9 Canada

10 Brazil

1 United States

2 Japan

3 China

4 Germany

5 France

6 Brazil

7 Italy

8 Spain

9 Canada

10 United Kingdom

2011 2016

1 United States

2 China

3 Japan

4 Brazil

5 Germany

6 France

7 Italy

8 India

9 Russia

10 Canada

The top 10 global pharmaceutical markets


0,0 5,0 10,0 15,0

SveziaAustria

SingaporeIndia

SpagnaCina

Paesi BassiItalia

FranciaRegno Unito

IrlandaStati Uniti

BelgioSvizzera

Germania

8th

SOURCE: UNCTAD Comtrade

12°

% share of world exports (2011, current dollars)

0,0 5,0 10,0 15,0 20,0 25,0

SveziaSingapore

Rep. of KoreaItalia

MessicoIrlanda

Regno UnitoSvizzera

BelgioFrancia

CinaGiappone

OlandaGermania

Usa

Pharmaceuticals Medical devices

Italy’s world ranking in the sector: exports

Germany

SwitzerlandBelgium

United StatesIreland

United KingdomFrance

Italy

NetherlandsChinaSpainIndia

SingaporeAustria

Sweden

United States

GermanyNetherlands

JapanChina

FranceBelgium

Switzerland

United KingdomIrelandMexico

ItalyRep. of Korea

Singapore

Sweden


Italy’s world ranking in the sector: patents

SOURCE: OECD

12°

% share of patents (1999-2009, PCT patents)

Pharmaceuticals Medical devices

0,0 10,0 20,0 30,0 40,0

IsraeleFinlandiaAustralia

ItaliaCanada

CinaSvezia

SvizzeraCorea

OlandaRegno Unito

FranciaGermaniaGiapponeStati Uniti

0,0 10,0 20,0 30,0 40,0 50,0

DanimarcaItaliaCina

AustraliaIsraeleCorea

CanadaSvezia

SvizzeraOlandaFrancia

Regno UnitoGermaniaGiapponeStati Uniti

14th

United States

JapanGermany

United KingdomFrance

NetherlandsSwitzerland

Sweden

CanadaRep. of Korea

IsraelAustralia

ChinaItaly

Denmark

United States

JapanGermany

FranceUnited Kingdom

NetherlandsRep. of Korea

Switzerland

SwedenChina

CanadaItaly

AustraliaFinland

Israel


A healthy trend in terms of turnover growth…

2011

% change between 2008 and 2011. Based on figures in 969 corporate financial statements. Source: Intesa Sanpaolo from ISID data

-16,2

7,34,6

-6,7

0,6

5,43,4

6,7

-20

-15

-10

-5

0

5

10

2009 2010 2011 2008-2011*

Manifatturiero Scienze della vita

Turnover trends compared (% change, median values)

% change in turnover

2008-2011*: Pharmaceuticals:

+12.1%Medical devices:

+4.1%

Manufacturing Life sciences


... owing mainly to a surge in exports

SOURCE: based on ISTAT data

Trend in exports (% change between 2008 and 2012)

)

% change in exports in the 1st

quarter of 2013: Pharmaceuticals:

+16.5% Manufacturing: -

0.8%


Foreign trade deficit only partly reduced

SOURCE: based on ISTAT data

Balance of trade (millions of euro)


Profitability slightly down…

2011

7,9

9,710,8

9,6

7

9,0

10,6

8,6

0

2

4

6

8

10

12

Manifatturiero Scienze della vita Farmaceutica Dispositivi medici

2008 2011

EBITDA margin (median values)

-0.9Difference between

2008 and 2011 -0.7 -0.2 -1.0Based on 969 corporate financial statements. Source: Intesa Sanpaolo from ISID data

Life sciencesManufacturing Pharmaceuticals Medical devices


... due in part to healthcare cost-containment policies

SOURCES: FARMINDUSTRIA, ISTAT, IMS, and AIFA

Trend in health expenditure (%)

6

9

12

15

18

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Spesa sanitaria/PIL Spesa farmaceutica convenzionata netta/Spesa sanitaria

Between 2001 and 2012, the prices of refundable drugs dropped by 40%

Net expenditure on drugs dispensed by the national heath service/Health expenditure

Health expenditure/GDP


Delays in payments by public authorities hamper firms’ capacity to manage working capital

SOURCE: Intesa Sanpaolo-Prometeia

Differences between Italy and Germany

+49

+72

+58

+61

Customer payment days in pharmaceutical firms, 2011

Total

Large firms

Medium-sized firms

Small firms


Greater growth and profitability for more innovative firms

2011

4,6

10,9

2,3

10,6

13,2

7,2

0

2

4

6

8

10

12

14

Scienze dellavita

Farmaceutica Dispositivimedici

Imprese SENZA domande di brevetto

Imprese CON domande di brevetto

9,7

8,7

10,3 10,2

8

9

10

11

12

2008 2011

Imprese SENZA domande di brevettoImprese CON domande di brevetto

Trend in turnover between 2008 and 2011(% change, median values)

EBITDA margin in the life sciences industry (%, median values)

Based on figures in 969 corporate financial statements. SOURCE: Intesa Sanpaolo from ISID data

Firms WITHOUT patent applications

Firms WITH patent applications

Firms WITHOUT patent applications

Firms WITH patent applications


More can be done, including with more proactive support from the state: to quickly resolve the problem of delays in payments by public

authorities; to put in place a more stable and enabling regulatory framework for

investment in research and development, for the promotion of centers of excellence in pre-clinical and clinical testing of new drugs, and so on;

to learn from the example of other countries (such as Germany), which have developed healthcare reforms aimed at keeping spending under control and supporting the most innovative products.

Creating an improved enabling environment for investment in research is essential as the R&D costs for developing new products tend to increase over time: between the 1990s and the first decade of the 21st century, these costs have more than doubled in the US and nearly tripled in Europe.

More proactive state support is required, especially to create an improved enabling environment for research


Section guide

Italy’s competitive ranking (study conducted by Intesa Sanpaolo)

Research capability (study conducted by IMT)


The wider European context

Europe as IT WAS, or a hotchpotch of national innovation systems?Italy: a diffuse network, with Milan as its main hub.

Other main clusters:Verona-PaduaFlorence-Sienaand the hubs of Naples, Turin, Genoa and Bologna

RomeMilan


What policies should the EU adopt?

PATENTS

PUBLICATIONS

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50

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20

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1986 1990 1995 2000 2005 2009

Base year Stalled period


Italy’s position

Medical publications (Pubmed) > Biopharmaceutical publications (ISI)> Patents devised > Patents held.

Ranked 4th after the US, the UK and Germany for medical publications; 9th in the biopharmaceuticals field (it was 7th

in 1990). A low relative specialization index (RSI) in life sciences

patenting.


Regional clusters

The most innovative regions are central to all networks. Networks are becoming more global (with an increasing number of nodes) and hierarchical (with an increasing degree of asymmetry).

The top 10 NUTS2 regions hold more than 38% of EPO patents in life sciences.

7 of the top 10 innovative regions are American (California, New Jersey, Massachusetts, Pennsylvania, New York, Maryland, and Connecticut); 3 are European: Ile-de-France (FR), Darmstadt (DE) and Hovedstaden (DK).

Lombardy is ranked 18th, with Milan dropping out of the top 10 in the 1990s.

The USA’s lead is even stronger according to USPTO data (with only Paris featuring in the top 10 clusters).


What it all means for the Italian research sphere

Rome and Milan are almost on par with each other, but way behind the core group of leading US regional clusters.

The leading regions specialize in biotechnology and post-genomics (sequencing, recombinant proteins, algorithms and simulations, and so on).

Rome and Milan are specialized in medicine, with RSI values lower than 1 in biotech.


The scientific collaboration network


The co-inventor network


Topics for discussion

Regional growth: openness, specialization, infrastructure and services.

Enabling technologies: diagnostics, molecular modeling, high-resolution imaging, and nanostructures.

Vaccines and orphan diseases. Organization of clinical research. Industrial involvement: what complementarities should be

sought? Regulating the supply side and demand side.

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