Following the chosen path

The Swiss pharmaceutical industry is continuing to follow its traditional vein of innovation, although increases in r&d costs and validation requirements could threaten future projects, writes Ian Shine.

Since its beginnings 150 years ago, the Swiss pharmaceutical industry, with its small domestic market and lack of chemical raw materials, has focused its attentions on the production of pioneering and specialised chemicals.While this has always proven to be profitable, changes in global climate and the biotechnology revolution are creating a new international economic environment that may affect the Swiss industry; existing manufacturing locations across the world are being reassessed with the sudden arrival of the Eastern European and South East Asian markets, making new corporate objectives and restructuring a necessity for continued successful operation.

Although innovation will still be accentuated, this will not be solely in the field of drug development; administrative processes and organisational structures that can provide more efficient and cost-effective ways of translating ideas into products could be an important distinguishing factor, and the Swiss government will be required to keep overly-restrictive or complicated and preventative legislation to a minimum to aid this cause. In a world where all production factors, with the exception of labour, have become mobile, Switzerland must create internationally outstanding economic conditions in order to protect its industries.

The industry still works to the structure that it has traditionally followed, with companies focusing on their core competencies and sub-contracting out for other specific elements of the production process. This type of outsourcing fosters niche markets and enables numerous SMEs to maintain financial viability.

Specialities account for 90% of the Swiss chemical industry's overall product portfolio, which is a remarkably high percentage compared with the international average. It is through such specialisation, which requires continuous and significant investment in r&d, that many Swiss companies have become market leaders; however, with rising costs (up to US$800m per product), an economically usable patent period on market introduction that lasts no longer than eight years, the inherent risks of failure (only five in every 10,000 substances that go into pre-clinical trials reach the stage of testing on humans, while it can take from 10-15 years for a product to reach the shelves and thus become profitable) and increasing testing for safety evidence required by the authorities, the impetus towards innovation and r&d is under threat.

'Strengthening the protection of intellectual property cannot safeguard the self-financing of research if authorities simultaneously introduce measures to control cost increases that in turn lead to massive price cuts for medical drugs,' says the SGCI (the Swiss Society of Chemical Industries). 'Countries that have practised this policy for several years no longer have a pharmaceutical industry that is active in research.'

european trends

In recent years the top 10 pharmaceutical companies have come to be more US-centric, and while two of the 10 are still Swiss (Novartis and Roche), this does not mask the fact that over the last 20 years the European market has gone from being of an equal size to being half the size of that of the US.

Dr Franz Humer, chairman of the board of directors and ceo of Roche, cites price differences between the US and Europe and 'years of misguided and short-sighted policies in Europe' as the reasons for this shift, and points out that: '20 years ago Europe accounted for two thirds of global research; now European companies are channelling more than half their research spending into North America. This gives the US a clear edge in terms of input and output, with US$20bn being spent on drug development there every year.'

costs and expenditure

The Swiss chemical and pharmaceutical industry remains committed to r&d and is the leading country in the research stakes, accounting for at least 8% of worldwide activity, which is almost double the share of the US.

However, as is the case with specialities, this level of r&d investment can be maintained only if products continue to be successfully introduced and maintained; something which can never be 100% guaranteed.

Expenditure on r&d by the chemical and pharmaceutical industries in 2000 amounted to CHF3.4bn ($2.9bn) and accounted for 36% of the country's total private research spending. With rising costs, the 10 major companies in the sector spent CHF4.3bn ($3.6bn) in 2003, while turnover amounted to only CHF2bn within Switzerland, accounting for a mere 5% of total sales.

This illustrates the massive importance of exports to the industry, with 60% going to Europe and 12% to North America. The financing gap within Switzerland is able to be closed only through the repatriation of some of these profits made abroad. With exports totalling CHF45bn and imports reaching only CHF27.3bn, the industry contributed CHF17.7bn to the trade surplus, which is the largest of any of the country's trade sectors.

While chemicals and pharmaceuticals rank as number two in the share of total Swiss exports (33.3% compared with the 40% share of the metals and machinery industry), they rank as number one in terms of net export, bringing in CHF17.7bn in 2003 and exceeding its nearest rival - the watch industry - by CHF8.9bn. Over the period 1980- 2000 exports by the industry have grown by 13%, whereas the total growth of all sectors of the Swiss industry was only 10%.

The current major innovation that the industry is looking to make is in the field of personalised medicine. Many drugs fail to produce the expected effect, and it is suspected that this could be due to differences in individual biological make-up.

r&d examples

A good example is breast cancer: scientists already know that different types occur, and understand why. In one particularly aggressive form of the disease, extremely high concentrations of an abnormal form of the growth factor Her2 are found in the malignant cells. Roche, alongside its partner Genentech, has produced a genetically engineered drug (monoclonal antibody) to block the action of this growth factor, meaning that if this abnormality is detected before treatment, the patient can be given a more specific and personalised form of treatment.

At its centre for Medical Genomics in Basel, Roche is also working on a personalised treatment for rheumatoid arthritis, and has discovered that its MabThera/Rituxan drug for leukaemia 'is something akin to a wonder drug' for many rheumatoid arthritis sufferers. Roche's Dr Humer states that 'optimum treatment could be achieved if it were possible to test patients first to establish whether they will respond to the drug. This is the challenge that is facing us at present.'

In 2004 Roche Diagnostics passed a milestone on the road to personalised medicine with the introduction of its first DNA chip, AmpliChip CYP450. It is the first DNA chip test in the world to have received regulatory approval and represents a pioneering discovery in line with the Swiss tradition. It can be used to show whether people metabolise a drug faster or more slowly as a result of their genetic make-up, and provides information that can aid the selection and dosage of a range of medicines, such as antidepressants, psychopharmaceuticals, painkillers and drugs to treat cardiovascular disease.

genetic factors

'Estimates indicate that systematic use of the AmpliChip test before treatment could improve overall efficacy by 10-20% and avoid 10-15% of all serious side-effects,' said Dr Humer.

'These molecular genetic findings open up scope for new approaches to medical research in the medium- to long-term, and although even complete genetic mapping will never allow us to answer all medical questions - our lives are not simply dependent on genetics, but on environmental factors, lifestyle and our economic situation, all of which can be causal factors of disease - we are still on the brink of a revolution in the diagnosis and treatment of many diseases.'

Other advances include Fuzeon, again developed by Roche, which was approved by the FDA in the US in March 2003 as an HIV proteinase inhibitor. Unlike all currently known drugs, Fuzeon is managing to hinder the virus and prevent its entry into the human immune cells, thus halting its reproduction.

Novartis is continuing research into superior immunosuppressants and therapies for organ transplantation and is at the forefront in examining the possibilities of transplantation from one species to another; while its investigative work into the treatment of the root cause of asthma, the IgE-mediated

allergic cascade, in collaboration with Tanox and Genentech, has resulted in Xolair, which 'mops up' excess IgE, prevents asthma exacerbation and reduces the number of Beta-2 courses needed to control symptoms.

voluntary protection

The Responsible Care (RC) programme is a voluntary initiative of the chemical industry that operates worldwide with the intention of improving health & safety and environmental protection. The SGCI has assumed patronage of the scheme, which has 47 member countries to date and is based on the seven SGCI principles for health & safety and environmental protection published in 1991.

The programme is continually driving for further improvements, and from 1993 to 2003 triggered a 50% drop (from 13.0 to 6.5) in the number of accidents per one million working hours.

Energy consumption, CO2 emissions, VOC emissions and water consumption have all fallen thanks to the programme; by 14.2% (from 23,200 to 19,900 terajoules), 14.9% (from 940,000 to 800,000 tons), 69% (from 3500 to 1080 tons) and 17.4% (down to 256 million m3) respectively.

With some of the targets set for 2010 having already been reached, the industry looks well set to meet the challenges it will face over the next 150 years.