Pharma Injects Optimism into the Italian Economy
The next few years will be crucial for the world's pharmaceutical industry. It is a phase characterized by deep structural transformation: key patents will expire for $137 billion worth of annual sales (19% of the total), so that sales of unpatented products will double from 40% to 80% of the market total.
This is a new scenario that will also affect Italy, which will be called to sustain the competitiveness of Italian companies on international markets, while continuing to be attractive for foreign investment.
The analysis conducted by Guido Corbetta, Mario Minoja and Irene Dagnino for Enter, Bocconi's research center on entrepreneurship, with the contribution of Farmindustria, in "The Italian pharmaceutical industry in international markets: current trends and corporate strategies," shows that in the US the productivity of innovation now offsets losses deriving from the expiry of patents, while in Italy not yet. With respect to a loss of around 50% of the value of sales after a patent expires, the contribution of recently-introduced pharmaceuticals is still too low.
In an industry that until recently seemed destined to go toward ever greater concentration in a few international pharma groups, market space is opening for mid-sized firms, as long as they manage to focus on single therapeutic areas on a global scale. The threshold to be competitive in a therapeutic area with 3 or 4 significant projects, is about €2 billion in sales. There is already an Italian company that has passed such mark, and half a dozen more could make it there soon..
In the 11 major pharma groups with Italian capital analyzed by Enter, there are about 200 projects in the pipeline (+13,8% with respect to 2005), showing a significant growth in the propensity toward R&D.
Given the centrality of innovation for the fortunes of the industry, fiscal incentives to R&D could be decisive also for the localization strategies of transnational pharma companies. For a EU G5 (Germany, France, UK, Italy and Spain) average of 100 in terms of R&D, Italy scores a meager 58, as opposed to 210 for France.
Government support is all the more important if we take into account the relative decrease in the profitability of Italian pharma companies with respect to their European counterparts: in 1999 our firms surpassed both Spanish and French competitors, while in 2009 for the first time in 15 years, the Italian trade balance for pharmaceuticals turned negative (- €566 million over the first ten months).