dutch life sciences outlook 2014€¦ · misinterpretations of the reported results. the authors...

1see also www.lifesciencesoutlook.com

Dutch Life Sciences Outlook 2014

The Dutch Life Sciences Outlook is created under the supervision of Prof. dr. Fred van Eenennaam and Ir. Maarten Koomans. It is supported by the International Academic Advisory Council

-Academic partners--Developer-

-Since 2009-

-Partners-

-The Fifth Edition-

Monitoring & Advising

The cluster is at a crossroads.

http://www.grenoble-em.com/accueil.aspx?lg=en





Dear readers and friends,

In this Dutch Life Sciences Outlook 2014, The Decision Group has taken a deep dive into investigating the Dutch Life Sciences cluster, from both,

national and international perspectives. A thorough analysis of a large database (at company level) built over the last 5 years and involvement of

international cluster experts enable this Outlook to identify the successful achievements of the Dutch cluster and to point out its options towards

excellence.

The Dutch Life Sciences Outlook 2014 is intended to be a strong collection of facts and serve as a basis for a high level dialogue with all stakeholders.

“What kind of cluster does the Dutch LS cluster want to be?” is the central question of the Outlook 2014. Looking from a company perspective, amongst

other, three strategic options for the Dutch LS cluster are formulated. Cluster theories, extensive research, strategic reports and input from international

experts and institutions such as CEBR and HBS Microeconomics of Competitiveness are considered when formulating these options.

The Decision Group very much views its work as work in progress in a rapidly transforming life sciences cluster. Therefore, we encourage you to

participate in next year’s Outlook and welcome your help in realizing research ideas.

Foreword - Dutch Life Sciences Outlook 2014

On behalf of the team of The Decision Group; Kim Brüheim MSc, Bogdan Toma MSc, and business analysts.

With warmest regards,

Prof. dr. Fred van Eenennaam - Partner The Decision Group, Institute & Ventures.

- Affiliated professor of Microeconomics of Competitiveness, Harvard Business School

Ir. Maarten Koomans - Partner The Decision Group, Institute & Ventures




Contents of the Dutch Life Sciences Outlook 2014

Since 2009, the performance and progress of the Dutch Life Sciences cluster is presented annually, in the Dutch Life Sciences Outlook.

Executive summary 4

The Outlook 2014 has been compiled with the utmost care based upon available data in 2012. The authors are well aware of the fact that the data position on the Dutch LS cluster needs to be

improved by the cluster to allow for adequate monitoring of the effects of proposed strategic policy actions. Readers are advised to contact the authors of the report to avoid potential

misinterpretations of the reported results. The authors welcome suggestions for improvement on the Outlook 2015 (please contact: [email protected]).

Data on Cluster Size, Output and Input

Size: Number of companies & Employment 30

Output: Number of products & Revenue 36

Input: Public investments & Private investments 40

2

3

4

Contents

Cluster Bridges & Cluster Organizations

A gap analysis 45

Appendices:6

Not included in this version but available for download at www.lifesciencesoutlook.nl

1

The Dutch Life Sciences Cluster – The cluster is at a crossroads.

The Netherlands 10

International 15

Advice 20

A. Monitoring methodology 71

B. Bibliography 95

C. Glossary of terms 99

D. Consulted experts and organizations 105

5 A trend analysis

Trends 56

Possible explanations 59




BlueRidgeKitties

Executive summary1



http://www.flickr.com/photos/blueridgekitties/


The Dutch Life Sciences cluster is stabilizing

82

94

107

95

96

2008

2009

2010

2011

2012

18,2

18,7

17,7

17,8

19

2008

2009

2010

2011

2012

- 84%**

167

622

280

1887

304

2008

2009

2010

2011

2012

248

248

297

291

250

2008

2009

2010

2011

2012

298

314

329

344

361

2008

2009

2010

2011

2012

Listed and non-listed companies (KPI 1) Total products (KPI 3)

Total revenue in b€ (KPI 4)

PPPs*** and subsidies in m€ (KPI 5)

Milestone capital, Venture

capital, IPO’s… in m€ (KPI 6)

- 14%

+ 7%

+ 1%

- 0 %

+ 5%

24095

24255

24385

22732

22623

2008

2009

2010

2011

2012

Output (revenue and products) is slightly increasing. Size (employees and companies) is constant, whilst Input (public)¹ and (private)²are decreasing.

Total jobs (KPI* 2)

* Throughout this paper the acronym KPI stands for (Key) Performance Indicator

** Including the effect of the acquisition of Crucell by J&J in 2011 amounting m1687€

*** Public Private Partnerships

¹ For detailed explanations see page 39 and 61

² For detailed explanations see page 41 - 43

Hereinafter the words Dutch Life Sciences cluster,

Dutch LS cluster or the Dutch cluster are used

interchangeably unless other ways mentioned.




However, the Dutch LS cluster is growing less rapidly compared to the leading clusters

Over the years (2008-2012), the Dutch LS cluster has been growing at a slower pace compared to the key international clusters.

Primarily on Innovation, Input and Competitiveness.

Progress

(2008-2012)

The Dutch Life Sciences cluster 2008 - 2012

Is growing at a slower pace on:

1 A more detailed account of this data is given in Chapter 2

2 The scale is adjusted to make a practical comparison possible

Innovation, in terms of number of products

in development.

Input, in terms of private investments.

Competitiveness, mainly, in terms of

perceived impact of macro policies and

lack of innovation. (for details see page 18)

2

1

3

And according to the Global Competitiveness report 2013-2014 :

Leading Clusters:

Boston Area, San Diego area,

RTP area, Munich area, Medicon

Valley, Switzerland, UK.




What does it mean for the Dutch LS cluster?

The current situation of the Dutch LS cluster evokes questions about possible consequences and explanations, resulting in one key

decision: What kind of cluster does the Dutch LS cluster want to become?

A Stabilized Dutch LS cluster?

• Recovery after downsizing of companies?

After a few years of downsizing, the large increase in lay offs in the

Dutch LS cluster has slowed down. The employment rate shows signs

of stabilization – even a slight increase in employees.

• Financial crisis stabilizes?

The Dutch GDP has increased since 2010 onwards.

• (Public) investments are paying off?

Large investments were made in 2008 and 2009, and it may be

possible that the effect of earlier investments is stabilizing the current

performance of the cluster.

Growing less rapidly compared to international peers?

• Will we be running out of steam?

With an impeding growth in input (private investments) and stagnation of

development of new products, compared to the top clusters, the future

will be uncertain.

• Can the cluster accelerate to keep the growth track of its peers?

How strong is the resilience of the Dutch LS cluster? Are we able to go a

step further and align with the top LS clusters?

• The international cluster experts* and academic literature studies*

indicate that a dialogue with all stakeholders should be started to

answer the question:

“What kind of cluster does the Dutch LS cluster want to become?”

See for more info: page 28

*See Appendix D (www.lifesciencesoutlook.com for an overview of international cluster and academic experts.




What are the Dutch Life Sciences cluster options?

International cluster experts** were asked for their opinion on the current situation. They stated that the Dutch LS cluster is at a

crossroads, with several options.

Options*: Organization of clusters: Company Role: Actions:

Fragmented hub approach

In line with the current strategy/policy.

Business parks pop up, functioning as

individual hubs. This option will most

likely result in downsizing of the

cluster in the long run.

Create a cluster based on

smart specialization

Boost innovation by enabling the

cluster to focus on its strengths.

Smart specialization understands that

spreading investment too thinly

across several frontier technology

fields risks limiting the impact in any

one area.

Next generation convergence

Co-creation with adjacent clusters or

industries may open doors to develop

new possibilities and products, create

value by combining expertise and

technology of adjacent clusters such

as the Food or Agriculture industry .

2

1

3

1.Stimulate a favorable tax climate

(accounts for all three options).

2.Focus on attracting and retaining

talent (p. 22, 23)


3.Dialogue on assets, technologies

and potential partners. What do

we have? Identify points with

high strategic impact on the

cluster.

4.Optimize the internal cluster

bridges, and improve

communication (p.24)

5.Start testing co-creation hypo-

theses by short projects with

adjacent clusters or industries –

Scrum method (p.25).

5

*Account always a 20% free experimental space.

**See Appendix D (www.lifesciencesoutlook.com for an overview of international cluster experts.

Explore new strategic options and

new ways of working such as new

R&D Business models (p.26, 27)


Connect with international hubs.


Continuous dialogue with other

companies to make use of the best

technology and to avoid unneces-

sary duplication.

Being open to other initiatives.

Regions (hubs) are on their own,

stimulated by regional subsidies or

policies. Weak linkages with other

Dutch hubs, no cluster on a national

level. A need for linkages between

international hubs to create

competitive advantage.

Cooperation of firms, actors, and

corresponding bridges in a strong

network on a national level. Avoid

unnecessary duplication.

*** The Decision Group acknowledges that there are more options that could be

identified for the Dutch LS cluster and would like to invite you for a dialogue.

.




www.generalatronics.com

The Dutch Life Science Cluster – The cluster is at a crossroads2

The Netherlands 10

International 15

Advice 20




361

companies

The Dutch LS cluster - performance

The Dutch LS cluster aims at delivering value for health & wealth. An annual Outlook measures the performance and progress of the

core value chain of the Dutch LS cluster by six Key Performance Indicators* (KPIs).

304 m€

250 m€

19 b€

96 products

22623 jobs

361

companies

International

The Netherlands

Advice

KPI 1

KPI 2

KPI 3

KPI 4

KPI 5

KPI 6

Dutch Life Sciences

cluster 2012

* See the Appendix A on www.lifesciencesoutlook.com for the methodology and the exact definitions for all KPIs.

** The Health is also part of the core value chain of the Dutch LS cluster and will be addressed in the Health Outlook 2014

**




The Dutch LS cluster - progress

In 2012 compared to 2011, the Dutch LS cluster shows progress on 3 out of 6 performance indicators: Number of companies (5%),

Number of products (1%) and Revenue (7%). SMEs* have a large impact on the progress of the cluster.

361

companies

-84%

-14%

+7%

+1%

-0%

+5%

1. Stabilizing signs of the Dutch LS cluster

On a national level the Dutch LS cluster seems to

become healthier.

2. SMEs are growing

• Number of companies

• Number of employees

3. Revenue is increasing

Especially for the SMEs in relative terms.

International

The Netherlands

Advice

Dutch Life Sciences

cluster 2012

KPI 1

KPI 2

KPI 3

KPI 4

KPI 5

KPI 6

Overall data observations on a national level:

* Throughout this paper the acronym SME stands for small and medium sized enterprises as defied by EU recommendation 2003/361 unless otherwise mentioned.




The stabilizing signs of the Dutch LS cluster

On a national level the Dutch LS cluster seems to stabilize: new initiatives pop up, the number of bioparks is increasing and SMEs

have successful financial rounds.

The number of offices supporting the patenting process has increased.

The Netherlands has consistently been above the EU28 average when considering

the number of patents registered: only 4 countries (Germany, France, U.K and

Italy) have registered more patents than the Netherlands.

The number of Life Sciences & Health events and congresses has increased.

Amongst the main event organizers are Innovation for Health Netherlands Genomic

Initiative and Dutch Masters of Life Sciences and Health**.

The number of BioParks has increased from 44 to 63.

Recently new parks arose in Nijmegen (NovioTech), Delft (Science Park Technopolis) and Lelystad (Bio Science Park Lelystad).

There are more regional initiatives such as the RedMedTech partnership.

RedMedTech Highway is an ecosystem where knowledge is transformed into products and services for the healthcare industry. It covers the areas

of Noord-Brabant, Overijssel and Gelderland and its stakeholders envision that this ecosystem should lead the European Life Sciences & Health

cluster and substantially contribute to sustainable healthcare in the East of the Netherlands.

* For a detailed definition of the Dutch cluster please check Appendix A on Monitoring Methodology.

** www.innovationforhealth.nl,www.lifesciences.com; www.genomics.nl,

*** http://ir.prosensa.eu/releasedetail.cfm?ReleaseID=775476

Successful financial rounds

Successful financial rounds were completed in the Netherlands such as: Lanthio

Pharma, Cross Beta Biosciences and Prosensa. The latter announced at the

beginning of July 2013 the closing of its IPO offering 6,900,000 shares at a price of

$13.00 per share***.

1

0

500

1000

1500

2000

2500

2007 2008 2009 2010 2011 2012

Nu

mb

er o

f p

aten

ts

Patents awarded by EPO

Average EU 28 Netherlands

Source: EPO, http://www.epo.org/about-us/annual-reports-

statistics/statistics/granted-patents.html, Accessed on Dec 2013

International

The Netherlands

Advice




Small and medium sized companies are growing

Since 2008, the number of companies has increased: those of 1-5 employees grew from 155 in 2011 to 205 companies in 2012 and

those of 6-50 employees from 100 to 106 companies. The employment with SMEs* outperformed the Dutch economy by 5.69% (growth

rate).

* The acronym SME is used here to refer to companies with 1 to 500 employees.

** See the Appendix A on www.lifesciencesoutlook.com for the exact definitions of No of companies.

155166

178190

205

100 105 107 105 106

0

50

100

150

200

250

2008 2009 2010 2011 2012

Nu

mb

er o

f co

mp

anie

s

Number of companies Dutch LS clusterListed and non-listed companies

1-5 employees 6-50 employees

-10,00%

-5,00%

0,00%

5,00%

10,00%

2008/2009 2009/2010 2010/2011 2011/2012

Emp

loym

ent

gro

wth

rat

e

Employment growth in the Netherlands and in the Dutch LS cluster

Employment in the Netherlands

Employment in the Dutch LS Cluster

Employment with companies <500 employees Dutch Cluster

2 International

The Netherlands

Advice




Revenue is increasing

The total revenue increased from €17.8b in 2011 to €19b in 2012. Especially, the revenue of the SMEs** grew by 20% for small

companies and by 12.5% for medium sized companies.

0

2

4

6

8

10

12

14

16

18

20

2011 2012

Rev

enu

e (b€

)

Total Revenue Dutch LS cluster

Small(1-50 employees)

Medium(51 - 250 employees)

Large(> 250 employees)

6,7%17.819

* See the Appendix A on www.lifesciencesoutlook.com for the exact definitions of Revenue.

**For KPI 4 the acronym SMEs is used to refer to companies with 1-250 employees.

0,5 0,6

0,8

0,9

0

0,2

0,4

0,6

0,8

1

1,2

1,4

1,6

2011 2012

Rev

enu

e (b€

)

Revenue SMEs Dutch LS cluster



20%

12,5%1.3

1.5

3 International

The Netherlands

Advice




International perspective

Based on The Decision Group’s data collection over the past five years, the international cluster experts have observed that the Dutch

LS cluster is growing at a slower pace on Innovation, Input and Competitiveness compared to other countries and key international

clusters.

The Dutch Life Sciences cluster 2008 - 2012

is growing at a slower pace in progress and growth on:

Innovation, in terms of number of products

in development

Input, in terms of private investments.

Competitiveness, mainly, in terms of

perceived impact of macro policies and

lack of innovation. (for details see page 18)

2

1

3

1 A more detailed account of this data is given in Chapter 2

2 The scale is adjusted to make a practical comparison possible

.

Performance (2011-2012)

The Netherlands

Advice

International




-5,00%

0,00%

5,00%

10,00%

15,00%

20,00%

25,00%

30,00%

35,00%

40,00%

No of products CAGR 2008-2012

47 7 7

14

40

45

55 55

48

0

10

20

30

40

50

60

2008 2009 2010 2011 2012N

um

bers

of

pro

ducts

Number of products Dutch LS clusterListed and non-listed companies

Drugs - Clinical phase I Medical Devices in development

Innovation, in terms of number of products in development

Whilst other international clusters grow in terms of number of products by an average CAGR of 9.01%, the Netherlands display a

CAGR of 1.07%. Overall, the number of products in development in the Netherlands is relatively constant.

* See the Appendix A on Monitoring Methodology available at www.lifesciencesoutlook.com for the exact definitions of Products in Development.

1

In 2012, the Dutch LS cluster doubled the number of drugs at phase I (7 to 14

products). The number of medical devices dropped for the first time in the last

three years from 55 to 48 products.

Average CAGR 2008-2012 9.01%

The Netherlands

Advice

International




0,00%

10,00%

20,00%

30,00%

40,00%

50,00%

60,00%

70,00%

80,00%

90,00%

Private Investments CAGR 2008-2012

Input in terms of private investments

Compared to the other key clusters, which have grown by an average CAGR of 32.83%, the Dutch LS cluster has attracted private investments by a CAGR of 12.49%. One exception is notable: the acquisition of Crucell by J&J for €1.687m in 2011.

*See the Appendix A on Monitoring Methodology available at www.lifesciencesoutlook.com for the exact definitions of Private investments.

2

Venture Capital (VC) has constantly grown over the years: in 2012, VC grew

by 13% compared to 2011 (from 161 to 182 m€).

25175 65 39 90

142 131 145161 182

2915

503302

201687

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2008 2009 2010 2011 2012In

vest

men

ts (

m E

uro

s )

Private investments raised Dutch LS cluster

1887

167 280 304623

Average CAGR 2008-2012 32.83%

The Netherlands

Advice

International

Average private investments (2008-2012) €652.2m




Declining competitiveness compared to 2011

According to Global Competitiveness Report 2013-2014, the Netherlands’ competitiveness declined from the 5th position in 2011 to the

8th position in 2012.

The first 4 factors that are perceived to have a negative impact on competitiveness are access to financing,

restrictive labor regulations, insufficient capacity to innovate and inefficient government bureaucracy

* Figure adapted after the “Global Competitiveness report” 2012-2013 and 2013-2014, World Economic Forum

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

Access to financing

Restrictive labour regulations

Insufficient capacity to innovate

Inefficient government bureaucracy

Policy instability

Inadequately educated workforce

Tax rates

Poor work ethic in national labour force

Inflation

Tax regulation

Inadequate supply of infrastructure

Government instability/coups

Foreign currency regulations

Crime and theft

Corruption

Poor public health

Percent of respondents

Most Problematic Factors for Doing Business in the Netherlands

2012

2011

3The Netherlands

Advice

International




Impeding factors may have impact on cluster growth

National Level Impediments

A. Historical International Differences.

The European clusters may lag because of legislations that inhibit innovation, immobile labor markets, less

interaction between universities and the private sector and to a certain extend the availability of venture capital.

B. Gaps in Cluster Bridges.

In particular the Dutch cluster displays gaps on the bridges between both life sciences companies and capital

providers as well as between the companies and the government.

C. Public Investments Pressures.

The level of public investments is expected to decrease and from 2014 onwards the public investments will be

regulated, amongst other, via new TKI regulations.

D. Patent Cliff & Generics.

In 2012 patent expiration, at global level, amounted $27 billion in value and in 63% of the drugs sold in the

Netherlands were generic drugs.

E. Pricing Pressures.

The penetration of low cost generic producers, governmental regulations and managed care providers, among

others, may put pressure on prices.

F. Costing Pressures.

Increasing scrutiny of regulators and lawsuits on allegation of breaching patents, amongst others, may

increase the costs.

Possible explanations* to impeding factors are the historical international differences, the worldwide patent cliff, the current gaps in

the Dutch LS cluster and/or the actual pressures on public investments, pricing and costing.

World Level Impediments

* For detailed explanation and analysis see chapter 5.

The Netherlands

Advice

International

for details see p.60









How to address the current situation of the cluster?

International cluster experts were asked for their opinion on the current situation. Furthermore, extensive research is performed on

cluster theories.

Literature Study – extensive research International Advice on Clusters Cluster Theories

Strategic reports Database Analysis Input from institutions

The Netherlands

International

Advice






What are the Dutch Life Sciences cluster options?

International cluster experts were asked for their opinion on the current situation. They stated that the Dutch LS cluster is at a

crossroads, with several options.

Options*: Organization of clusters: Company Role: Actions:


In line with the current strategy/policy.

Business parks pop up, functioning as

individual hubs. This option will most

likely result in downsizing of the

cluster in the long run.

Create a cluster based on

smart specialization

Boost innovation by enabling the

cluster to focus on its strengths.

Smart specialization understands that

spreading investment too thinly

across several frontier technology

fields risks limiting the impact in any

one area.


Co-creation with adjacent clusters or

industries may open doors to develop

new possibilities and products, create

value by combining expertise and

technology of adjacent clusters such

as the Food or Agriculture industry .

2

1

3

5

Explore new strategic options and

new ways of working such as new

R&D Business models (p.26, 27)


Connect with international hubs.


Continuous dialogue with other

companies to make use of the best

technology and to avoid


Being open to other initiatives.

Regions (hubs) are on their own,

stimulated by regional subsidies or

policies. Weak linkages with other

Dutch hubs, no cluster on a national

level. A need for linkages between

international hubs to create

competitive advantage.

Cooperation of firms, actors, and

corresponding bridges in a strong

network on a national level. Avoid


* We acknowledge that there are more options that could be identified

and find suitable for the Dutch LS cluster and would like to invite you to

join us to point them out.

.

In the following pages, some actions have been elaborated on.

1.Stimulate a favorable tax climate


2.Focus on attracting and retaining

talent (p. 22, 23)


3.Dialogue on assets, technologies

and potential partners. What do

we have? Identify points with

high strategic impact on the

cluster.

4.Optimize the internal cluster

bridges, and improve

communication (p.24)

5.Start testing co-creation hypo-

theses by short projects with

adjacent clusters or industries –

Scrum method (p.25).




Action 2 - Focus on attracting and retaining talent (1/2)

Investing in attracting talent, retaining talent and developing education is essential for a successful cluster and its innovativeness.

Invest in a strong Education & Talent Bridge, through contact between cluster representatives and the educational organizations to

improve education.

“Strengthen the curriculum of PhD students and postdocs

with material on the entire drug development. Each

researcher works on his/her own specific part. At some

point they need to understand how their research fits in

and adds value to the context of health and wealth.” -

Jorg Jansen, Managing Director TiPharma

“Next to a good investment climate, attracting AND

keeping talent is essential for a successful cluster” -

Göran Lindqvist, Principal Associate at the Center for Strategy and

Competitiveness (CSC) at the Stockholm School of Economics and

Cluster Observatory project manager

Attracting, investing and retaining talent

Results from the Conjoint analysis*. The companies have indicated that they

would like to be more involved in the curriculum of universities, for example by

way of an internship program or guest lectures. They would also like a special

post-doctoral program for pharmaceutical professionals in the industry.

0

2

4

6

8

10

12

14

16

18

20

Strongly disagree Largely disagree Neutral Largely agree Strongly agree

Education Bridge - Companies should be more involved in curriculum

The Netherlands

International

Advice

2

*See the chapter 4 Cluster Organizations for the data, interviews and results of the conjoint analysis.




Action 2 - Focus on attracting and retaining talent (2/2)

Further increase collaboration with universities, CROs** and Align Incentives Industry & Universities.

42,0% 38,3%46,0% 44,4% 40,7%

58,0% 61,7%54,0% 55,6% 59,3%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2008 2009 2010 2011 2012

% n

o o

f d

rugs

Percent of the number of drugs in development by Dutch Companies and UMCs

Drugs developed by Companies Drugs developed by Universities

Currently, universities are more successful in developing drugs. In 2012,

59,3% of all drugs were developed by UMCs, compared to 40,7% by

Dutch Companies. This is probably due to their access to a large pool of

talented employees (from students to researchers).

Results from the Conjoint analysis*. An obstacle that the cluster

organizations and firms experience is that the incentives for

academic researchers are not aligned with those of the industry.

The main incentive for academic researchers is publications in

scientific journals. This pressure can sometimes be very high. In

the industry the incentive is more focused on the number of

patents.


**Throughout this paper CRO(s) stand(s) for Contract Research Organization(s)

0

2

4

6

8

10

12

14

Stronglydisagree

Largely disagree Neutral Largely agree Strongly agree

Incentives of academic researchers should be better aligned with the industry, to stimulate

collaboration between them

The Netherlands

International

Advice

2




Action 4 - Optimize the internal cluster bridges

Minimizing the gaps between firms and actors can be done primarily through improving communication.


The Netherlands

International

Advice

1. Better communication between actors and bridges

2. Involve firms in the curriculum: Internship programs, guest lectures.

3. The government and policy bridge can help the sector to become a successful cluster

a. Offer a consistent policy.

b. Communicate with companies on regulatory aspects: Companies want ‘seat

at the table’.

c. Provide more seed investments.

d. Risk hedging for start ups and small companies (comparative research with

other countries, e.g. Germany and USA).

4. The Healthcare system should be more open for innovative remedies

a. Develop a system for conditional admission.

5. There is a role for cluster organizations on the Capital Bridge

a. Review the financing system: process from seed investments to IPO or

acquisitions.

b. Setting up specialized funds in financial industry for investments in the life

sciences cluster.

6. There is a role for cluster organizations on the Global Bridge

a. Focus on a collective story.

4




Action 5 – Test of co-creation hypothesis

Use the scrum method (accepting that the option cannot be fully understood or defined, focusing instead on maximizing the clusters'

ability to deliver quickly) to identify potential co-creation clusters.

5The Netherlands

International

Advice

Source: Ministerie van Economische Zaken, Landbouw en Innovatie

The Dutch Medical Devices sector has increased its participation to world export

market share. In 2010, its size was $15 billion.

The Dutch government wants to make even stronger the top

sectors in which the Netherlands excels worldwide.




Insights in the future

A few options to gain strategic flexibility and boost competitiveness are to break down the wall between R&D and product

development, to develop new decision tools, and/or to personalized medicine and niche products.

Company Role – Strategic options to boost competitiveness

Break down the wall between R&D and product development.

A strategic conversation between the two departments can lead to

better results. Switch from marketing to science and investigate

therapies that make economic as well as medical sense.

Develop new decision tools for new phase zero drugs. This will

determine the winners in the early stage. (Real Option Model to

appraise R&D and new projects with zero or negative NPV,

innovation and managerial flexibility).

Compete on value not on prices. Focusing on a few research

areas and targeted therapies that make economic and medical

sense can help you gain control over your pipeline and increase

the value for your patients and stockholders. Given the increasing

demand for “tailor made” drugs, focus on personalized medicine

and on niche product i.e. orphan drugs.

The Netherlands

International

Advice

COMPETITIVENESS

New R&D models

Focus on niche

products i.e.

orphan drugs

Personalized

medicines

New decision

tools




COMPETITIVENESS

Company Role – New ways of working

A few examples of approaching new ways of working are to enter emerging markets, diversify the risks, obtain financial and R&D

synergies and/or improve operational excellence.

Especially focus on cross border expansion given by the attractiveness of emerging markets and where amongst other it is expected that governments

will increase their health expenditure together with the increase in GDP per capita.

Because the capital is scarce we expect that companies will enter in joint-ventures to diversify the risks and make use of each other’s dynamic

capabilities to tackle the pressure on productivity and profitability. In the same time, try to divest and focus on core activities.

.

Cross-border

expansion

Process

innovation New R&D models

Focused joint-

ventures to

account for R&D

and financial

synergies

Diversify the risk(s)

Enter emerging markets

The Netherlands

International

Advice

Improve operational excellence

By making use of process innovation to release the pressure on costing and decrease time to market.




Start a high level dialog

The international cluster experts indicate that a dialogue with all stakeholders should be started to answer the question: “What kind of

cluster does the Dutch LS cluster want to be?”. Based on this discussion, actions and a strategic agenda can be defined.

Join us: Options:


Create a cluster based on smart

specialization


Dialogue with all stakeholders:

Interested in a session (Dialogue with

all stakeholders) to discuss the

options and performance of the Dutch

Life Sciences Outlook?

Please contact The Decision Group:

[email protected]

2

1

3




Data on Cluster Output, Input and Size

Size: Number of companies & Employment…………………29

Output: Number of products & Revenue………………………..35

Input: Public investments & Private investments…………….39

www.genengnews.com

3




155 166 178 190 205

100105

107105

106

0

50

100

150

200

250

300

350

2008 2009 2010 2011 2012

Nu

mb

er o

f co

mp

anie

s


1-5 employees 102 118 135 6-50 employees 126 131 141

Performance indicator #1: Number of companies

The number of companies has consistently increased over the years. These grew by 5%, from 344 in 2011 to 361 in 2012.

298314

329344

361

International

Forecast

The Netherlands

Companies that have 1 – 5 employees have had a significant contribution to the amount of growth

in companies by 7,9% from 190 in 2011 to 205 in 2012.

* See the Appendix A on Monitoring Methodology available at www.lifesciencesoutlook.com for the exact definitions of Number of companies.





The Boston and San Diego areas have been preferential for starting new companies. The Boston area grew from 1277 in 2011 to 1367

companies in 2012 and San Diego from 683 in 2011 to 854 companies in 2012.

0

5

10

15

20

25

30

35

40

45

50

0

200

400

600

800

1000

1200

1400

1600

Nu

mb

er o

f co

mp

anie

s (p

er c

apit

a/1

00

00

0)

Nu

mb

er o

f co

mp

anie

s

Number of companies key clustersListed and non-listed companies

2011 2012 Number of companies per capita/100000

Forecast

The Netherlands

International

* See Appendix A on Monitoring Methodology available at www.lifesciencesoutlook.com for the exact definitions of Number of companies.

** RTP stands hereinafter for Research Triangle Park (region in North Carolina- the U.S)





In 2013 compared to 2012, companies with 1-5 employees are expected to make a significant contribution to the size of the cluster, with

a 5% increase (from 205 to 215). Companies of 25-50 employees are predicted to grow by 4.4% (from 45 to 47).

0

50

100

150

200

250

300

350

400

2012 2013

Nu

mb

er o

f co

mp

anie

s


>50 employees

26-50 employees

11-25 employees

6-10 employees

1-5 employees

361 377

The Netherlands

International

Forecast

* See the Appendix A on Monitoring Methodology available at www.lifesciencesoutlook.com for the exact definitions of Number of companies.




Performance indicator #2: Employment

Employment by large companies decreased by 6.6%, from 11352 in 2011 to 10596 employees in 2012. Employment by companies with

less than 500 employees increased by 5.7% from 11380 in 2011 to 12027 in 2012.

462 365 1018

1273

8262

11352

Employment Dutch LS cluster (2011)

1-5 employees 6-10 employees 11-25 employees

26-50 employees 51-500 employees >500 employees

475 356 1099

1325

8772

10596

Employment Dutch LS cluster (2012)

1-5 employees 6-10 employees 11-25 employees

26-50 employees 51-500 employees >500 employees

International

Forecast

The Netherlands

1138012027

* See the Appendix A on Monitoring Methodology available at www.lifesciencesoutlook.com for the exact definitions of Employment.




In 2012 the Dutch cluster displayed a small decrease in employment. The Munich area displayed the highest increase in employment,

from 42.545 in 2011 to 43.790 employees in 2012.


0

2

4

6

8

10

12

14

0

10000

20000

30000

40000

50000

60000

Emp

loym

ent

rate

(p

er c

apit

a/1

00

0)

Emp

loym

ent

Employment key clustersListed and non-listed companies

2011 2012 2012 (Capita/1000)

Forecast

The Netherlands

International





1044 1031 1016 1273 1325 1414

5296 5322 5244

8262 8772 9635

16456 16617 1678911352 10596

10596

0

5000

10000

15000

20000

25000

2008 2009 2010 2011 2012 2013

Emp

loym

ent

Employment Dutch LS clusterListed and non-listed companies

>500 employees

51-500 employees

26-50 employees


The employment by large companies (>500 employees) is expected to slow down whilst the employment by companies with 26-50

employees is expected to increase by 6,7% (from 1325 to 1414). The employment by companies with 51-500 employees is also expected

to increase, by 9,8% from 8772 to 9635.

The Netherlands

International

Forecast





4 7 7 7 1418

21 2513

13

2021 20

2021

40

4555

5548

0

20

40

60

80

100

120

2008 2009 2010 2011 2012

Nu

mb

ers

of

pro

du

cts

Number of products Dutch LS clusterListed and non-listed companies

Drugs - Clinical phase I Drugs - Clinical phase II

Drugs - Clinical phase III Medical Devices in development

Performance indicator #3: Number of products

The number of drugs in phase I increased by 100% from 7 in 2011 to 14 in 2012. The total number of products in 2012 increased by 1

product (from 95 to 96), compared to 2011.

- Source: The Decision Group database -

International

Forecast

The Netherlands

9695

107

94

82

* See the Appendix A on Monitoring Methodology available at www.lifesciencesoutlook.com for the exact definitions of Number of Products.




Performance indicator #3: Number of products

From 2011 to 2012, the RTP area and Switzerland displayed the largest increase in the total number of products with 255 to 274 and

220 to 270, respectively. The Boston area showed a large decrease (-77 products).

0

5

10

15

20

25

0

100

200

300

400

500

600

Nu

mb

er o

f p

rod

uct

s (p

er c

apit

a/1

00

00

0)

Nu

mb

er o

f p

rod

uct

s

Number of products key clusters(clinical phase I,II,III and medical devices in development)

Number of products in 2011 Number of products in 2012 2012 product per capita/100000

Forecast

The Netherlands

International

* See the Appendix A on Monitoring Methodology available at www.lifesciencesoutlook.com for the exact definitions of Number of Products.




0,5 0,6 0,4 0,5 0,62,6 2,6

1,4 0,8 0,9

15,1 15,515,9 16,5

17,5

0

2

4

6

8

10

12

14

16

18

20

2008 2009 2010 2011 2012

Rev

enu

e (b€

)

Revenue Dutch LS clusterListed and non-listed companies

Large(> 250 employees)



Performance indicator #4: Revenue

In 2012 large, medium sized and small companies in the Dutch LS cluster showed an increase in revenue. In total, the revenue increased by 6.7%, from €17.8b in 2011 to €19b in 2012.

18.2 18.717.7 17.8

19

* The increase in revenue for large companies is mostly due to Philips Healthcare.

International

Forecast

The Netherlands

* See Appendix on A Monitoring Methodology available at www.lifesciencesoutlook.com for the exact definitions of Number of Products.





Performance indicator #4: Revenue

Almost all clusters displayed an increase in revenue. The Dutch cluster managed to enter the top 3 highest cluster revenue together

with Medicon Valley.

0,0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0

5

10

15

20

25

30

35

Rev

enu

e (p

er c

apit

a/1

00

00

0)

Rev

enu

e (b€

)

Revenue key clusters

Revenue 2011 (b€) Revenue 2012 (b€) 2012 Revenue (per capita/100000)

Forecast

The Netherlands

International

* See Appendix A on Monitoring Methodology available at www.lifesciencesoutlook.com for the exact definitions of Revenue.




Performance indicator #5: Public investments

The level of public investments decreased by 14.7%, from €456m in 2011 to €389m in 2012. The largest decrease, in absolute amount, is

displayed by Public investments in PPPs by €36m from €146m in 2011 to €110m in 2012 (24.6%).

65 65 79 78 77

123 123150 146

110

61 60

68 67

46

96 107

166 165

153

0

50

100

150

200

250

300

350

400

450

500

2008 2009 2010 2011 2012

Inve

stm

ents

(m€

)

Public investments Dutch LS clusterPPPs and subsidies

Matching investments by private partnersin PPPs and subsidies

Matching investments in PPPs byknowledge institutes

Public investments in PPPs

Subsidies

International

Forecast

The Netherlands

* See Appendix A on Monitoring Methodology available at www.lifesciencesoutlook.com for the exact definitions of Public Investments.

345 355

463 456

389




Performance indicator #5: Public investments

In 2012, the public investments decreased in the majority of key clusters. Only the U.K clusters showed a slight increase in

public investments from €215m in 2011 to €226m in 2012.

Forecast

The Netherlands

International

0,00

2,00

4,00

6,00

8,00

10,00

12,00

14,00

16,00

0

200

400

600

800

1000

1200

1400

1600

Pu

blic

inve

stm

ents

(p

er c

apit

a/1

00

00

0)

Pu

blic

inve

stm

ents

(m€

)

Public investments in key clusters

Total Public Investment 2011 (m€) Total Public Investment 2012 (m€)

Public investments (per capita/100000)

* See Appendix A on Monitoring Methodology available at www.lifesciencesoutlook.com for the exact definitions of Public Investments.




25 175 65 39 90

142 131 145161 182

2915

503302

20 1687

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2008 2009 2010 2011 2012

Inve

stm

ents

( m

Eu

ros

)

Private investments raised Dutch LS clusterMilestone Payments, Venture Capital, IPOs, FOPOs, PIPEs

PIPE (Private Investments in Public Equity)

FOPO (Follow-on Public Offering)

IPO (Initial Public Offering)

Venture capital

Strategic alliances (milestone payments)

1887

Performance indicator #6: Private investments raised

Over the years the Dutch LS cluster has constantly attracted private investments through venture capital. These increased by 13%, from €161m in 2011 to €182m in 2012. Noticeably, the amount of milestone payments more than doubled, from €39m in 2011 to €90m in

2012.


International

Forecast

The Netherlands

167280 304

*

* In 2011, €1687m were due to the acquisition of Crucell by J&J.

*

623

** See Appendix A on Monitoring Methodology available at www.lifesciencesoutlook.com for the exact definitions of Private investments raised.





The largest increase in private investments in 2012, compared to 2011 was displayed by Medicon Valley, from €394m in 2011 to

€1787m in 2012.

0,0

10,0

20,0

30,0

40,0

50,0

60,0

0

500

1000

1500

2000

2500

3000

3500

4000

4500

Pri

vate

inve

stm

ents

(p

er c

apit

a/1

00

00

00

)

Pri

vate

inve

stm

ents

(m€

)

Private investments raised key clustersVC, IPO, FOPO, PIPE and milestone payments

2011 2012 Private investment raised (per capita/100000)

Forecast

The Netherlands

International

* See Appendix A on Monitoring Methodology available at www.lifesciencesoutlook.com for the exact definitions of Private investments raised.





In 2013, the Dutch cluster is expected to attract most private investments through milestone payments and FOPO.

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2007 2008 2009 2010 2011 2012 2013

Inve

stm

ents

(m€

)

Private investments raised Dutch LS clusterMilestone payments, Venture capital, IPOs, FOPOs, PIPEs

PIPE (Private Investments in Public Equity)

FOPO (Follow-on Public Offering)

IPO (Initial Public Offering)

Venture capital

Milestone payments

The Netherlands

International

Forecast

*See Appendix A on Monitoring Methodology available at www.lifesciencesoutlook.com for the exact definitions of Private investments raised.

** In 2011, m€ 1687 were due to the acquisition of Crucell by J&J

**




Cluster Bridges & Cluster Organizations

A Gap Analysis………………………………...…………………43

www.genengnews.com

4




Dutch Life Sciences cluster – the Scandinavian model

Dr. Lindqvist and Dr. Sörvell developed a schematic overview of a life sciences cluster. The cluster is built up by firms and several

actors (government, research organizations, healthcare, education organizations and capital providers) which influence the

performance of the cluster.

Lindqvist & Sörvell: Clusnet final report. Organising clusters for innovation: Lessons from city regions in Europe

The grey lines between the actor and firms

display the paths between them.




Cluster organizations in the Netherlands

Cluster organizations construct bridges that allow traffic to flow along the paths. The cluster organizations may have a role on multiple

bridges.

Source: Image adapted from LSH.




Gaps between the actors and the cluster

In reality, between the actors and the cluster, the “7 gaps of innovation” may be present (according to Lindqvist & Sörvell): the

research, education, capital, policy, firm-to-firm, cluster-to-cluster and global gap.

The ideal situation - gaps

Page 46 shows the representation of a cluster in an

ideal situation. In the ideal situation all actors cooperate

perfectly: they are aware of the situation the other

actors are in and of the actions that are demanded by

other actors in the cluster to provide the circumstances

for a successful cluster. In reality, this is not what

clusters look like. There are many obstacles that disturb

this perfect interaction between the actors, causing

clusters in reality to not live up to the potential that is

described in cluster theories.

Examples of these obstacles are different expectations

of each other, unaligned incentives, different norms and

attitudes. To get a better insight in the Dutch life

sciences industry a conjoint analysis was performed

with input of many companies, based on semi-

structured interviews with 7 cluster organizations.




Results of the conjoint analysis - Main conclusions

In general, the Dutch LS cluster shows signs of satisfaction with respect to its bridges, however a few aspects that need attention are

to be pointed out, on 1) the capital bridge, 2) the policy bridge, 3) general communication.

The Capital Bridge performs below average and there are not

enough organizations to cover this bridge.

The Dutch life sciences cluster indicates that the Policy Bridge may

be more proactive in enhancing communication among government

and companies in the cluster.

Companies in the cluster recognize the importance of healthy

communication between companies and actors and between the

bridges themselves.

2

1

3




Capital Bridge

The low number (zero) of organizations that enhance the communication between firms and local capital providers is perceived as the

main obstacle for the capital bridge.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Poor Below average Average Above average Good

Evaluation of the Capital Bridge by the life sciences companies

Banks or pension funds

Life sciences companies indicate that on national level

there are no banks or pension funds investing in the life

sciences sector (a sector with potential high returns).

Seed capital

With more seed capital available, start-ups may have a

higher probability of success. This could lead to mature

companies being created.

1

Some aspects of the capital bridge are:




Policy Bridge

A more proactive role of the cluster organizations on this bridge is desired: open communication networks between government and

companies in the cluster on topics such as risk hedging, continuous policies and stimulating or flexible regulations.

Seat at the table

Companies want a “seat at the table”. The government needs to offer

life sciences companies a seat at the table to discuss the possibilities

of continuous policies with stimulating and flexible regulations.

Risk hedging

Risk hedging of start-ups may lead to “more innovative ideas that can

grow”. For example, the USA and Germany use a system in which the

government hedges more risk of the start-up businesses, which enables

start-ups to further develop their products

0

2

4

6

8

10

12

14

Stronglydisagree

Largely disagree Neutral Largely agree Strongly agree

The government should hedge risks of start-ups

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Strongly disagree

Largely disagree

Neutral

Largely agree

Strongly agree

Policy Bridge - Flexible regulations

SME Large

2

* http://www.medscape.com/viewarticle/405869_4

** http://www.forbes.com/sites/matthewherper/2013/08/11/how-the-staggering-cost-of-inventing-new-drugs-is-shaping-the-future-of-medicine/




Communication between actors and companies

Better communication between actors and companies could help align the incentives of academics and industry, involve companies in

the curriculum, and discover opportunities for large private investors.

0

5

10

15

Stronglydisagree

Largelydisagree

Neutral Largelyagree

Stronglyagree

Incentives of academic researchers should be better aligned with the

industry, to stimulate collaboration between them

0

5

10

15

20

Stronglydisagree

Largelydisagree


Stronglyagree

Education Bridge - Companies should be more involved in curriculum

0

5

10

15

Stronglydisagree

Largelydisagree


Stronglyagree

An expectation mismatch exists between private investors and the life sciences

sector

Expectations mismatch

Whilst investors look for short-term returns,

the life sciences sector looks for long-term

investments.

3

Incentives

Academic researchers have incentives to

publish in academic journals, the industry

has incentives to focus on the number of

patents. Aligning the incentives for both

groups may pose a challenge since it

depends on the assessment criteria

applied by the funding provider(s)

Education

Companies expect to be more involved in

internship programs, be invited to organize

guest lectures and participate in fairs and

“industry days”. Organization of additional

courses and training to align the needs of the

companies such as courses on IP, process

of drug development & clinical trials and

post-doctoral programs for the professionals

in the (bio)pharma industry is recommended.




Gap analysis

Bridge Current situation 1 Desired future state 2 Gap

Life sciences

cluster in

general

- Actors are preoccupied with themselves.- All stakeholders communicate: Conditions highly

adapted to needs of companies

- Not an optimal communication

- Actors and bridges are not aware of each other’s

needs

Research- Collaboration between industry and academic

research, but not at an optimum level

- Cutting-edge knowledge at university research

groups

- Findings are channeled to firms in cluster

- Not enough trust* between industry and

academia

- Different incentives for academic researchers and

industry (publications vs. patents)

Education &

Talent

- They bring graduates into contact with firms

- Additional courses for academics (mainly about

IP)

- Specialized education programs at universities

- Executive programs to attract talent- Firms are not directly involved in curriculum

Policy

- Government and industry may sometimes not be

on the same wave

- Not enough encouraging regulations or public

funding

- Government learns to understand needs of firms

- Make it easy for firms to be competitive and grow

- Policy bridge is not proactive enough, does not

fully know needs

Healthcare- Hard to get innovative remedies approved for

insurance packages (= use by patients)

- Collaborative development of innovative ideas

- Buy many products of Dutch life sciences sector

- Insurers prefer less expensive remedy for whole

patient population

- Industry R&D focusses on targeted therapy for

small groups

Capital

- No cluster organizations

- Investments from large life sciences firms or

venture capitalists

- Capital providers are experts in life sciences

- No banks and pension funds invest (mismatch

business models)

- No cluster organizations

Global- Communication of different stories

- Firms are not properly collaborating for export

- Put cluster on world map, what they can offer

- Results in students, entrepreneurs, technology

and inward investments

- No focus on cluster as a whole by actors and

bridges

1 The current situation is based on interviews and conjoint analyses

2 The desired future state is based on interviews, conjoint analysis and academic literature.

*In the last years, the trust between industry and academia has

improved, however it seems not to be an ideal situation yet.




Recommendations to improve the performance of the Dutch LS cluster

Optimization of the internal cluster bridges can be achieved by minimizing the gaps, primarily with improved communication between

companies and actors.

1. Better communication between actors and bridges

2. Involve firms in curriculum: Internship program, guest lectures.

3. Government and policy bridge can improve and help the sector to become a successful

cluster

a. Offer a consistent policy

b. Communicate with companies on regulatory aspects: Companies want ‘seat

at the table’.

c. Provide more seed investments.

d. Risk hedging for start ups and small companies (comparative research with

other countries, e.g. Germany and USA).

4. Healthcare system should be more open for innovative remedies

a. System for conditional admission.

5. There is a role for cluster organizations on the Capital Bridge

a. Review financing system: process from seed investments to IPO or

acquisitions.

b. Setting up specialized funds in financial industry for investments in the life

sciences cluster.

6. There is a role for cluster organizations on the Global Bridge

a. Focus on a collective story.




A trend analysis

Trends………………………………...…………………56

Possible explanations ……………...…………………59

ww.proskauer.com

5




Population, aging and expenditure

Trends such as increasing world population, aging, and health expenditure have emerged and may be relevant to the life sciences

industry.

The world population is on an upward slope and will increase by 47% until 2050*. A significant portion of

the estimated increasing population can be attributed to the less developed countries (Africa, Asia, Latin

America and the Caribbean). Data shows that a significant percentage of people will look for shelter in

large cities. This conglomeration of people is likely to put pressure on companies to adapt to urbanization

and to display greater mobility. The agglomeration in cities will cause a fertile territory for rapid virus

spreading and increasing their resistance to common medicines (like antibiotics).

* According to UN report “World population to 2300” (United Nations, New York,2004) the population will grown from 6.1 billion in 2000 to 8.9 billion in 2050

** http://www.prb.org/Articles/2011/agingpopulationclocks.aspx

*** http://www.oecd.org/health/healthdata

**** SMEs stands for small and medium sized enterprises

Along with population development, aging** will put

pressure on life sciences companies to address an increase of chronic diseases. Global change

in life style and eating habits may increase chronic diseases.

Increasing expenditure on healthcare

Nowadays, almost 90% of the world’s expenditure*** on healthcare has been made by OECD

countries to cover the needs of 20% of the world population. With the emergence of developing

economies (such Brazil, Russia, India and China) the gap between developed and developing

countries is expected to narrow, which will increase governmental and private spending on

healthcare. Life sciences companies could find the development in these countries fruitful for

their business.

At a global level there is a tendency towards increasing health partnerships to accelerate innovation and enhance patient value. Companies unite to

accelerate development. For example, in February 2013 the European Lead Factory was founded to boost the drug discovery in Europe. Through this

platform, researcher, patient organizations and SMEs have access to half a million compound libraries.

Source: www.ihsglobalinsight.com

World population is on an upswing

Increasing aging and changes in life style

Increasing global Health Partnerships

Source: rightfromyaad.wordpress.com

Possible

explanations

Trends




In the U.S and Europe, both FDA and EMA have started to emphasize the focus on

quality and are demanding comparative effectiveness research concerning the safety,

efficiency and costs of new drugs compared to existing ones. At the same time,

governments increase pressure on regulatory bodies to speed up the drug approval

process in order to allow the newest products on the market. Yet there are fears that

drugs rapidly advanced through the approval process may not be appropriately

assessed. There is an increasing debate that Quality By Design (QBD) by which the

process is managed and controlled, followed by a stable product analysis may lead to

more effective treatments.

Reputation of large companies, rules and compliance

The role of patients and patient organizations has grown visibly in the context of, among others: 1) decreasing reputation of large

companies and 2) increasing rules and regulatory compliance. Companies and regulators have to adapt and listen to them in order to

enhance value.

Rules & Regulatory compliance

Confidence in large companies

The reputation of large companies is under pressure. They

have to face their patient reaction to negative media

headlines. For example, GSK was recently involved in a

scandal, being accused to have paid doctors. In reaction the

company declared that they would stop these kind of

practices*. Another example is J&J and Novartis, who were

fined 16 million Euros by the European Commission for

agreeing to postpone the introduction of a cheaper version of

Fentanyl, a painkiller used by cancer patients, in the

Netherlands.**

* http://nos.nl/artikel/587845-gsk-stopt-betalingen-aan-artsen.html

** http://www.skipr.nl/actueel/id16790-farmaceuten-beboet-voor-kartelvorming.html

*** http://www.npcf.nl/index.php?option=com_content&view=article&id=4164&Itemid=31

In the Netherlands patients will have more to say and

participate in shared decision making. The Council for Public

Health and Healthcare (De Raad voor Volksgezondheid en

Zorg), for example, is an independent body that acts as an

advisor to the Dutch government and parliament in matters of

quality, accessibility and affordability of healthcare****.

Furthermore, the increasing importance of patients has been

acknowledged and accepted by the Healthcare Insurance

Board (Het College voor Zorgverzekeringen) and patients are

involved more when ruling out decisions about the

continuation of reimbursement for certain drugs, like was the

case for Pompe and Fabry diseases*****.

Patients and patient organizations

Source: www.medtecheurope.org

**** http://rvz.net/uploads/docs/De_participerende_patient.pdf ( in Dutch)

**** http://rvz.net/uploads/docs/Achtergrondstudie_Shared_DecisionMaking_en_Zelfmanagement.pdf (in Dutch)

***** http://www.geneesmiddelendebat.nl/nieuws/archief-nieuwsbrieven/editie-52-nieuws-augustus-

2013/patientenbelang-eerder-meenemen-bij-besluit-vergoeding (in Dutch).

Possible

explanations

Trends




855

920

991

1037

1107

0 200 400 600 800 1000 1200

2007

2008

2009

2010

2011

$ billion

Global pharma and biotech revenue

Revenue and investor confidence

At global level the life sciences have remained immune to economic crisis when measuring the revenue of (bio)pharma.

At a global level, the revenue of life sciences companies (bio/pharma) has increased at a CAGR 6.67% from 2007 to 2011. The increasing

confidence of investors in the Life Sciences sector can also been seen in the increase in the NASDAQ Biotechnology Index which has increased at a

CAGR 2.64% over the period 14.12.2009 to 23.12.2013.

Source: Figure adapted using DTTL Global Life Science and Health Care Industry Group analysis of “Global

pharmaceuticals, biotechnology & life sciences industry profile” Marketline, May 2012, EIU database

Source: Yahoo Finance, data retrieved on 23.12.2013

Revenue and investor confidence

Possible

explanations

Trends




Impeding factors may have impact on cluster growth

Possible explanations* can be drawn from the perspective of historical international differences, the worldwide patent cliff, the current

gaps in the Dutch LS cluster, the actual pressures on public investments, pricing and costing.

Possible

explanations

Trends

National Level Impediments

A. Historical International Differences.

The European clusters may lag because of legislations that inhibit innovation, immobile labor markets, less

interaction between universities and the private sector and to a certain extend the availability of venture capital.

B. Gaps in Cluster Bridges.

In particular the Dutch cluster displays gaps on the bridges between both life sciences companies and capital

providers as well as between the companies and the government.

C. Public Investments Pressures.

The level of public investments is expected to decrease and from 2014 onwards the public investments will be

regulated, amongst other, via new TKI regulations.

D. Patent Cliff & Generics.

In 2012 patent expiration, at global level, amounted $27 billion in value and in 63% of the drugs sold in the

Netherlands were generic drugs.

E. Pricing Pressures.

The penetration of low cost generic producers, governmental regulations and managed care providers, among

others, may put pressure on prices.

F. Costing Pressures.

Increasing scrutiny of regulators and lawsuits on allegation of breaching patents, amongst others, may

increase the costs.

World Level Impediments










The European clusters are lagging because of “dearth of venture capital, immobile labor markets, legislation that inhibits innovation

and less interaction between universities and the private sector”*.

Equity market

Attraction of financing may be

challenging. Investors on the

European stock markets, in general,

have less appetite for risks,

compared to U.S. exchanges, like

NASDAQ.

Recruiting key talent and collaboration

with universities has not been one of the

cluster’s priorities. Europe lacks the scale

of U.S. “scientific ecosystems”.

Universities Labor legislation

Restrictive labor rules, in favor of the

employee, make the possibility of lay-offs

difficult when the company’s fortune has

changed for the worse.

Insights in the future Historical international differences

*Source: Harvard Business School Case – MorphoSys AG: The evolution of a biothechnology business model

Possible

explanations

Trends

A




Gaps in cluster bridges

The Dutch LS cluster has some gaps on the bridges between firms and actors. In particular, we can identify obstacles on the bridges

between the life sciences companies and capital providers, and between companies and the government.


** In the last years, the trust between industry and academia has improved, however it seems not to be an ideal situation.

In a schematic overview of the Dutch LS cluster, the firms are placed in the middle, with all actors influencing the cluster’s performance around it. Cluster

organizations increase the competitiveness and growth of clusters by bringing different types of actors together, via bridge building.

Bridges Gaps

Research

Not enough trust** between industry and academics.

Different incentives for academic researchers and industry

Not enough translational research calls

Education

& Talent

Firms are not directly involved in curriculum

Policy Not enough communication between government and sector

Little public funding available

Healthcare Not enough innovative remedies to successfully market

Capital

No banks and pension funds investments (mismatch business

models)

No cluster organizations

Global

No cluster organization for whole cluster

Not enough awareness of value of collaboration on Global

Bridge by life sciences companies

Life

sciences

cluster in

general

• Not an optimal communication.

• Actors and bridges are not aware of each other’s needs.

Possible

explanations

Trends

B




Public investments under pressure

The level of public investments is expected to continually decrease¹. With the beginning of 2014 the public investments will be

regulated, amongst others, via new TKI regulations.

65 65 79 78 77 69 74 80

123 123

150 146110

53 499

61 60

68 67

46

23 21

0

0

50

100

150

200

250

300

350

2008 2009 2010 2011 2012 2013 2014 2015 2016

Inve

stm

ents

(m€

)

Public investments Dutch LS clusterPPPs* and subsidies

Matching investments in PPPs byknowledge institutes

Public investments in PPPs

Subsidies

*

*See Appendix A on Monitoring Methodology available at www.lifesciencesoutlook.com for the exact definitions of Public Investments.

**PPP stands for Public-Private Partnerships

¹Based on data available until August 2013

?

Possible

explanations

Trends

C




Patent cliff & generics

Companies need to develop new ways to address the patent cliff, decreasing reputation of large companies, generic penetration of low

cost producers and decreasing reliance on the blockbuster model. These factors may affect competitiveness and need to be dealt with.

Drying pipelines &

patent cliff

Large generic

penetration of low

cost producers

Decreasing reliance on the

blockbuster model

COMPETITIVENESS

Decreasing

reputation of large

companies

The patent cliff translates through expiration of old patents at higher

rates without being replaced by new patents. From 2008 to 2012, drugs

worth $123 billion lost their patent protection at a CAGR of 7.8%.

Moreover, the governmental pressure to reduce prices combined with

the increasing (combined) power of managed care providers will force

the companies to search for new ways of adding value to their

stockholders and patients, triggering a change in the (bio)pharma

industry.

20

20

28

28

27

0 5 10 15 20 25 30

2008

2009

2010

2011

2012

$ billion

Patent expiry by value (Global level)

Source: DTTL Global Life Sciences and Health Care Industry Group analysis of Global Generic, Cygnus

Pressure of government and

management care providers

Patent expiration and pressure to reduce costs

0% 10% 20% 30% 40% 50% 60% 70%

1995

2007

2009

2011

2013

% of generics out of total drugs

Generic penetration in the Dutch market

Source: Figure adapted using SFK reports (Stichting Farmaceutishe Kengetallen) “Facts and

Figures from 2006, 2008, 2010 and 2012.

Possible

explanations

Trends

D




The penetration of generics has

increased by CAGR=3.5%* (in NL)

as a reaction to expiring of patents.

Pricing pressure

For example, in the Netherlands, the

Medicines Pricing Act** allows the

government to fix maximum prices

based on the average official list price

of comparable medical products in

Germany, France, the U.K and

Belgium. A maximum price can be set

if a product is marketed in two or more

reference countries and if the product

is eligible for reimbursement.

Healthcare insurances’ preference

policies that state when a number of

medicines contain the same active

agent only the cheapest one will be

reimbursed, pushing the prices as

low as possible ***.

There are several branded drugs

produced by several companies that

address the same disease. For

example the arthritis drug market

includes several players such as

Abbott, J&J, Amgen, Roche and

Pfizer.

On one hand, the life sciences companies need to adapt to pricing pressure, e.g. the potential to affect one’s competitiveness.

Generics Competition

Consolidation

Source: SFK reports (Stichting Farmaceutishe Kengetallen) “Facts and Figures from 2006, 2008, 2010 and 2012.

** www.practicallaw.com/0-383-9411

*** http://www.gabionline.net/Policies-Legislation/The-preference-policy-in-The-Netherlands

Government and managed

care providers

Low cost generic producers

Competitors product

Consolidation

Government and managed care

providers

Possible

explanations

Trends

E




Costing pressure

Increasing scrutiny of EMA and

FDA determines an increase in

associated compliance cost.

Failure of one’s own R&D department to

innovate and progress drugs through

pipeline increases the R&D costs.

Costs associated with lawsuits on allegation

of breaching patents.

Decreasing reputation,

associated with payment

of doctors who participate

in medical congresses and

accept bonuses given for

prescription of medicines.

Externalization of research and M&As

Buying successful R&D products come at

a higher premium and mergers and

acquisitions come with higher integration

and fitting costs.

On the other hand life sciences companies need to adapt to costing pressure, which alike pricing pressure, has the potential to affect

competitiveness.

Regulatory related

Reputation of large

companies *

R&D and IP related

*http://nos.nl/artikel/587845-gsk-stopt-betalingen-aan-artsen.html

*http://www.skipr.nl/actueel/id16790-farmaceuten-beboet-voor-kartelvorming.html

Reputation of large

companies

Regulatory related

R&D / IP related

Externalization of research

and M&A’s

Possible

explanations

Trends

F




In 2011, next to the industry partner represented by the Ministry of Economic Affairs through the “Life Sciences & Health” innovation program, three

world prestigious business schools, Grenoble School of Management, The George Washington University and Stockholm School of Economics,

cooperated with The Decision Group to present the Dutch Life Sciences Outlook 2011. Three main conclusions were drawn:

1. The Dutch life sciences cluster has grown in size and output and despite the economic downturn showed a high increase in private

investments raised.

2. The Dutch life sciences & health cluster showed above average performance for revenue and private investments raised compared

to international key clusters.

3. The Dutch life sciences & health cluster had been making progress compared to the key clusters.

After a successful first Outlook, industry commissioned The Decision Group to produce the second Dutch Life Sciences Outlook in 2010 through the

“Life Sciences & Health” innovation program. Driven by the cluster and empowered by the Ministry of Economic Affairs, the Life Sciences & Health

program had the objective to improve the life sciences innovation and investment climate in the Netherlands. The Outlook was part of a four-year work

plan. Three main conclusions were drawn:

1. The Dutch red biotech cluster showed the largest increase on public investments.

2. The performance of the Dutch red biotech cluster is improving, but low compared to key international biotech clusters.

3. The Dutch red biotech cluster scores about average on its number of companies when compared to key international clusters.

Five years of history – an overview (1/2)

In 2009 Prof. dr. Fred van Eenennaam and Ir. Maarten Koomans were asked to produce the first Dutch Life Sciences Outlook. This pioneering work

has developed definitions, methodology and key performance indicators. An International Academic Advisory Council has helped produce a cutting

edge Dutch Life Sciences Outlook with a unique approach to the Dutch cluster.




With the 2014’s Outlook edition, The Decision Group celebrates the fifth anniversary of the Dutch Life Sciences & Health Outlook. Based on our data

the international cluster experts have noticed that the Dutch cluster is at a crossroads and a dialogue should be started about the future direction of the

Dutch cluster. The main options identified in the 2014 Outlook are:

1. Fragmented hub approach

2. Create a cluster based on smart specialization

3. Next generation convergence

The Dutch Life Sciences Outlook 2013 was extended with the Dutch Health Outlook 2013 and with two new partners: Samenwerkende Topklinische

opleidings Ziekenhuizen (STZ) and Value Based Healthcare Center Europe. In the fourth edition of the Outlook, focus laid on the ability to attract, retain

and develop talent at all levels. This was a major point of competition between the life sciences and health clusters and also a major focus of the

Regiegroep LSH and its Human Capital Agenda. The three main findings were:

1. Small and medium sized companies compensated the restructuring of large companies.

2. The revenue of small and medium companies declined.

3. The cluster attracted public investments, with public investments being under pressure.

As a natural course of events the Dutch Life Sciences Outlook 2012 followed, in cooperation with the same industry and academic partners. For 2012,

a survey was sent to gain insight into the cluster expectations concerning the cluster building, investment climate, public investments and business

knowledge. The three main conclusions drawn were:

1. Growth and outperformance

2. Positive expectations

3. Partnering

Five years of history – an overview (2/2)




The Decision Group is a strategy consulting firm, focussing on: ‘helping our clients make better business decisions’. Our advice is pragmatic and

involved. As an innovative, high end strategy consulting firm we have strong academic links with international renowned universities as the Harvard

Business School, Erasmus Universiteit Rotterdam, The George Washington University and Universitat St Gallen.

The Decision Group offers different approaches to help making better decisions. A few examples: cluster and association management, strategic

agenda setting, developing scenarios and scenario planning, creating strategic dialogues between stakeholders, policy studies and monitors, conjoint

analysis and other analytical tools.

The Decision Group annually studies the position of the Duch life sciences & health cluster in comparison to the international elite. It examines the

cluster’s performance and progress in six different areas: number of products, revenue, number of companies, employment, public investments, and

private investments. The basis for this Outlook is a comprehensive database of information collected at company level. The seven clusters that the

Netherlands is compared with are: Boston area, San Diego area, Research Triangle Park area (USA), United Kingdom, Switzerland, Medicon Valley

(Sweden and Denmark) and the Munich area.

With help from our academic colleagues, the Netherlands Center for Competitiveness has been founded. It is the logical consequence of our past

experiences. The center combines the international network of cluster organizations with academic and pragmatic expertise on international business.

We call this combination of an academic and pragmatic approach, the pracademic approach. The aim of the Netherlands Center for Competitiveness is

to provide expertise, access and knowledge to companies that wish to build their international business and academic institutes that wish to increase

their knowledge. Visit www.centerforcompetitiveness.nl for more information.

.

Interested in hearing more?

Contacts:

Prof. Fred van Eenennaam

ir. Maarten Koomans

Kim Bruheim, MSc.

Bogdan Toma, MSc.

+31(0346-574942)

[email protected]

www.thedecisiongroup.nl

Helping clients make better business decisions




Colophon

Developer

The Decision Group

Postbus 54

3620 AB Breukelen - the Netherlands

+31(0)346-574942

www.thedecisiongroup.nl

www.lifesciencesoutlook.com

Partners

The Netherlands Center for Competitiveness

Postbus 54

3620 AB Breukelen - the Netherlands

+31(0)346-574942

www.centerforcompetitiveness.nl

Innovation for Health through Hyphen Projects

Postbus 1858

1200 BW Hilversum - the Netherlands

+31(0)356-286659

www.hyphenprojects.nl

© 2014 The Decision Group

Disclaimer

This report and other written reports and oral statements made from time to

time by The Decision Group may contain so-called “forward-looking

statements,” all of which are based on The Decision Group’s current

expectations, which are subject to risks and uncertainties which may cause

results to differ materially from those set forth in the statements or reports.

Please carefully consider any such statement and understand that many

factors could cause actual results to differ materially from the The Decision

Group’s forward-looking statements.




Appendices (available at www.lifesciencesoutlook.com)

www.stevensworldwide.com

5

A. Monitoring methodology 71

B. Bibliography 95

C. Glossary of terms 99

D. Consulted experts and organizations 105



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