In its search to become a “next-generation” pharma, drugmaker Shire says it hopes some of the business magic of Swiss biotechs and firms like Yahoo! can rub off on it.This content was published on March 28, 2011 - 14:29
Shire, which makes drugs for hyperactivity, gastrointestinal problems and rare diseases, recently established a European hub in Eysins in western Switzerland from where it aims to expand its activities outside the United States.
“This is just a temporary building,” Ross Murdoch, Shire’s vice president, told swissinfo.ch. “By the middle of next year we plan to move into a larger space with a capacity of 240 people; we are halfway there right now.”
Marketing, legal, human resources and logistical experts are among the new staff at the Businesspark Terre Bonne on the edge of Nyon, alongside medical experts investigating rare human genetic therapies.
The opening of a Swiss office is part of the group’s long-term international expansion strategy. Shire is looking to reduce its heavy reliance on the US market, which accounted for about 85 per cent of its business in 2009, and secure 50 per cent from other parts of the world by 2015.
The new commercial operation in Eysins mirrors recent growth. Over the past 18 months the firm has extended its reach, opening new offices in Latin America, Europe and Japan. In six years it has expanded from eight to 28 countries and now has 4,100 staff worldwide.
The group, which was established in 1986, has grown via a strategy of acquisitions – nine in the past 15 years – while avoiding taking on large research and development units.
“Our intention is not to become big pharma,” said Murdoch. “Big pharma relies on large research machines which are meant to pump out drugs but which have been relatively inefficient.”
Its core business is drugs for attention deficit and hyperactivity disorder (ADHD), which account for 45 per cent of its income. But since 2003 drugs like former blockbuster Adderall XR have been facing rising generic competition in this area.
A large part of the rest of its money is made on gastrointestinal and renal medicines. And since 2005 the firm has specialised on a dozen drugs for treating rare children’s diseases such as Gaucher’s disease, an enzyme deficiency estimated to affect less than 6,000 patients worldwide.
While Gaucher’s disease represents only a tiny market, it is one of dozens of similar orphan diseases that have become attractive to drug companies because those developing effective therapies are guaranteed exclusivity and high prices.
While extending its global reach, Shire has a complicated business set-up. Founded in Britain, it expanded mainly in the United States, where it still has bases and a manufacturing site.
“The US is a great place for building up a pharma company as there’s lots of expertise in markets and regulatory issues, but it’s been a double-edged sword as you tend to ignore other places,” said Murdoch.
Since 2008 Shire has been registered in Jersey in the Channel Islands, with its tax domicile in Dublin, Ireland in order to optimise tax. This was reportedly in reaction to new taxation measures announced by the British Labour government over the treatment of royalties on patents.
“It’s always controversial when a company moves. Part of the reason we moved to Ireland was to have a stable tax situation and not chase the tax dollar. It’s all about stable relations with governments to be able to predictably determine long-term plans,” said the vice president.
Tax also came into the equation when deciding on a site for our new European operation between Belgium, the Netherlands and Switzerland, admitted Sylvie Grégoire, president of Shire’s human genetic therapies division.
“Switzerland quickly distinguished itself as a historically important place in the pharmaceutical industry, both at the research and commercial levels. We also took into consideration its benefits in the fiscal area,” Grégoire told the Tribune de Genève newspaper.
Outside the box
With the help of tax relief from canton Vaud on its corporate rate of 23.5 per cent, Shire was reportedly persuaded to set up in Eysins, rather than Lucerne, Basel or Zurich.
“But we didn’t select Eysins as it gave a better tax deal, as there were places that could’ve done better,” said Murdoch.
Location, the quality of life and the ability to find and retain talented workers also made Vaud attractive, he noted, adding that one quarter of Shire’s Swiss workforce will come from employees relocating from the US and Britain.
Basel, which is the home to pharma giants Novartis and Roche, would have been an obvious choice, but Shire wants to be seen as a “next-generation” company that thinks outside the box, said the vice president.
“There are lots of biotechs and a range of new companies here, like Yahoo!, that allow us to get a different thinking,” said Murdoch. “Our CEO Angus Russell relates more to the [computer giant] Apples of this world than the Novartis or Sanofi-Aventis.”
Shire, the third largest pharma on Britain’s FTSE 100 index, has doubled its turnover in four years from SFr1.5 billion to SFr3.4 billion at the end of 2010.
Shire hopes to sustain the strong sales growth of 2010, when its rare disease business reaped a windfall from production problems at US rival Genzyme.
Sales are expected to again rise by about 16 per cent in 2011. Analysts say the company is faring better than its big pharma rivals, which are facing a bigger hit from loss of exclusivity on blockbuster drugs and pricing pressures from European governments.End of insertion
New European biotechs
A new wave of successful European biotechs, many of them in the Benelux countries and Scandinavia are stepping over a past generation of biotech failures and starting to win interest from investors.
Last year saw the emergence of a new group of well-financed European biotechs worth $500 million or more, including ThromboGenics, Sweden's Medivir, Denmark's Bavarian Nordic, Sweden's Diamyd Medical and Norway's Algeta.
After various high-profile setbacks, times are tough in Switzerland, say analysts. Historically a centre of excellence, the talk these days among biotech executives is of survival.
Sander Slootweg, managing partner at venture capital firm Forbion, told Reuters that in the past, some over-priced Swiss biotechs had raised cash at "valuations that we would never invest in".
Tim Dyer, Chief Financial Officer of Swiss biotech Addex, said a shortage of capital may mean some companies either have to close or merge to create critical mass.End of insertion
Why foreign companies came to Switzerland
1) political stability and legal security
2) quality of life
3) social climate
4) purchasing power
5) transport and logistics
6) R&D resources available
7) quality of education system
9) importance as a financial centre
10) entrepreneurial spirit
11) tax advantage
(source: survey commissioned by Osec, 2010)
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