PHARMA IRELAND

Developing and Delivering Medicines

INDUSTRY REPORT

2721192

CONTENTS

MOVING IRELAND UP THE VALUE CHAIN2 An overview of recent achievements and the

future for the industry

COMPETITIVENESS REMAINS THE KEY10 The business challenge that determines the

sector’s future here

THE VOICE OF BUSINESS13 The views of Ireland’s medicine providers

NAVIGATING THE ROAD AHEAD 16 Interview with IPHA president, Conn Clissman

THE VALUE OF MEDICINES19 What the industry’s output contributes to

health

BRINGING WORK HOME21 An interview with the IDA’s Barry O’Leary on

pharma’s evolution

BIOTECH TAKES ROOT 27 How Ireland’s indigenous companies are faring

in the next big thing

FOREWORD

This year Ireland’s pharmaceutical industry became theworld’s biggest net exporter of pharmaceuticalsworldwide. The research-based pharmaceutical sector ismaking an impressive and important contribution toIreland today – and not just economically.

The contribution new medicines make to the nation’shealth and well-being by improving longevity, bycombating illness and by reducing the length of hospitalstays, has an impact on all our lives. The fact that so manyof these medicines are being manufactured in Ireland and,as the IDA point out in this booklet, that a growingnumber will be researched and developed here in thefuture, should be a source of pride for all of us.

This publication brings together some of theseachievements, to show how Ireland is building from itsbase of pharmaceutical manufacturing to provide morevalue in research and developing medicines, therebycontributing to the health and quality of people’s liveshere and worldwide.

We hope you find this publication a useful referencesource and a means of appreciating the contributionresearch-based medicines are making to the health andwealth of the nation.

Anne NolanChief ExecutiveIrish PharmaceuticalHealthcare Association

The Irish Pharmaceutical Healthcare Association represents the research based pharmaceutical sector in Ireland.Produced by The IPHA and Business & Finance Client Publishing Division 2005. Editor Brian O’Grady.

CONTENTS

IPHA Review 1

Published by Business & Finance Client Publishing Division (Moranna Limited), part of the Cloughmore Media Group.For further information on this service contact Ian Hyland, Brenda Mc Padden or Ken LaniganTel: +353 1 4167800 Fax: +353 1 4167899 E-mail: brenda.mcpadden@bandf.netBUSINESS & FINANCE HOUSE, 1-4 SWIFT’S ALLEY, DUBLIN 8, IRELANDWhile every effort has been made to ensure the accuracy of this publication,Moranna Limited accepts no liability for any errors or omissions.

SUBJECT

PHARMA SECTOR

Ireland’s huge pharmaceutical presence is changingfocus for the competitive challenges ahead. TheIPHA’s Brian O’Grady provides an industry overview

MOVING IRELANDUP THE VALUE CHAIN

2 IPHA Review

For an industry that is already generating44% of Ireland’s annual exports, anadditional spend of €36 million may not

seem of great significance, but according toMinister for Trade and Employment MicheálMartin TD, the news announcement in July2005 was: "Groundbreaking. The fact that five ofthe world’s leading multinational corporationshave chosen Ireland over global competition fortheir cutting edge research activities is a majorachievement," he said, and one which was:"hugely significant for Ireland’s futurecompetitiveness. "

The July announcement included investmentsfrom Pfizer, Bristol-Meyers Squibb and GenzymeCorporation, which, together with two ITdevelopments, were heralded as being a majorcoup for Ireland’s longer term competitivestrategy. The IDA had combined the fiveinvestments into a single news event toillustrate the sectors it was now targeting inorder to speed Ireland’s much heralded movetowards a ‘knowledge-led economy’. "TheIreland of the future will be one whereeducation and skills are the defining advantagesin an increasingly competitive world", claimedMinister Martin at the press launch.

These latest investments however,represented just part of an ongoing momentumin Ireland’s pharmaceutical expansion. Previous

months had seen Wyeth announce a €4million plus research venture with DCU andSFI for its €1.8 billion biotech campusinvestment here, (in addition to €7.7 millioninvestment with UCD the previous year).Johnson & Johnson group, which employs1400 in Ireland, invested €750 million in itssubsidiary, Centocor Biologics, in addition to€100 million in Janssen Pharmaceuticals;GlaxoSmithkline spent €35 million on R&Dfacilities in its Cork site making it thespecialist site for ‘nano milling’ in theworldwide group; Altana announced a €70million plant in Cork and Fujisawa invested€17 million expanding its finishing plant inCo Kerry. The list of pharmaceuticalinvestments here is an ongoing one, whichhas been generating 1200 new jobs annuallyfor each of the last five years.

Minister Martin’s July announcementfocused on investments in research thatwould see Pfizer spend €20 million to makeits Cork plant a worldwide centre for processdevelopment; Bristol Myers Squibb invested€9.65 million in a collaborative researchprogramme with DCU and NUI Galway(which would effectively see the formation ofa new faculty in bio research), while Genzymeinvested €6.1 million to expand its biotechprocess R&D facility in Waterford.

‘The list ofpharmaceuticalinvestmentshere is anongoing one,which has beengenerating1200 new jobsannually foreach of thelast five years.’

‘Groundbreaking’ - The IDA’s July announcement: Sean Dorgan, CEO IDA Ireland; Paul McCambridge, Corporate Vice-President and Managing Director, Xilinx Ireland; Aidan Brady, Country Corporate Officer Citigroup; Minister forEnterprise, Trade & Employment, Micheal Martin TD; Prof. Terry Smith, NUI Galway/Bristol-Myers Squibb Companycollaboration; Dr. Paul Duffy, Site Leader Pfizer Ringaskiddy, and Dominic Carolan, General Manager Genzyme.'

FROM MANUFACTURING TOINNOVATIONIf any sector encapsulates the Irisheconomy’s ambitions of moving frommanufacturing to knowledge-led activities,then the research-based pharmaceuticalindustry is probably the one. Thepharmaceutical sector has been one of thefew areas to meet the goals of the LisbonAgenda, the economic strategy signed byall EU member countries in 2000, with thedeclared aim of building a ‘knowledge-led’economy through spending 3% of GDP inR&D activities. According to DTI figures,five of ten Europe’s biggest researchspenders and four of the US’s are pharmacompanies. As a research-driven industry,pharmaceutical companies typically re-invest 15-20% of their sales in R&D, whichin 2003 amounted to €21 billion in Europealone, making it a truly knowledge-ledindustry that is tying ever-closer linkswith Ireland’s educational institutions, asdemonstrated in the IDA’s Julyannouncement.

For thirty years Ireland has maintainedongoing success in attractingpharmaceutical manufacturing that hasbeen little short of spectacular. From anear standing start, the country hascreated an industry with a capital worthnow estimated to exceed €40 billion.Years of ongoing investment andexpansion have made the country a majorworld centre and the biggest net exporterof pharmaceuticals in the world, with 12of the world’s top 25 selling ‘blockbuster’drugs now manufactured here.

ON THE WORLD STAGEIreland’s pharmaceutical sector now hosts14 of the world’s top 15 pharmaceuticalcompanies. In total this amounts to 83foreign owned companies, with 24 FDAapproved sites (the US Food and DrugAdministration is the industry standardfor production worldwide), in addition to agrowing indigenous biotech industry nowcoming online (see page 27). Thismeteoric rise has now made Ireland one ofthe top global locations for production,alongside, and in competition with,Singapore, Puerto Rico, and Switzerland.

Having built such a strongmanufacturing base here however, thenext challenge is to attract the innovationactivities that drive manufacturingactivity.

The IDA began targeting US pharmacompanies in the 1960s, with offers ofzero export tax and green field sites.Though Danish-owned Leo Laboratorieshad been here since the 1950s, the arrivalof US-owned Bristol-Myers Squibb in 1964,followed by Pfizer, sparked a momentumof new investments that saw Eli Lilly,

Schering Plough, Merck Sharp & Dohme,Smithkline-Beecham and Jannssen, allestablish manufacturing facilities here.Favourable tax, access to Europeanmarkets and to the country’s third leveleducational institutions, helped the IDAbuild a critical mass that has maintainedmomentum to this day. "There would havebeen a couple of factors: the early 1970swas the time of EC entry and there was a[business] model that now doesn’t existanymore, which was the dominance of UScorporations coming to Ireland to servicethe European market. Today every plant isglobal and that’s the big difference," saysBarry O’Leary of the IDA. Sustaining thisrate of activity through a growingemphasis on innovation, is now seen ascritical in such a truly globalised andcompetitive industry, wheremanufacturing sites compete internallywith their sister sites for investment andnew product.

ADDING VALUE TO EXPORTS The emphasis since ‘Export Profits SalesRelief’ in the 1970s, has been to attractactivities that generate and deliver highervalue – by moving ‘up the value chain’(the stages from concept to manufacturingthat enable viable products to bedeveloped). Increasing the number andvalue of services by improving workforceskills, research capabilities andinfrastructure have become increasinglyimportant when competing with countrieswith vastly reduced labour costs and zerocorporate tax rates. Singapore, forexample, offers zero per cent taxcompared with Ireland’s 12.5% and PuertoRico’s 3%, while boasting far lower labourcosts. Switzerland, as a non-EU member,can waive tax rates on specific industryactivities, enabling it to become aResearch and Development powerhousefor the industry.

For Ireland’s pharma sector, suchcompetitive challenges have meantevolving from bulk manufacturing ofactive agents, to adding complimentaryactivities, to ‘finishing’ completed product,and through to R&D. All of which hasbeen made possible by the ever-expanding skills set of Irish workers andcloser tie-ins with academia. In the early1970s the pharma sector employed just2000 and contributed little over €100million in exports. Now pharmaceuticalexports are worth €37.4 billion, makingIreland the largest net exporter ofmedicines in the world and resulting in acontribution of over $3 billion in taxes.

RESEARCH-DRIVEN EMPLOYMENTThe pharmachemical industry now

4 IPHA Review

‘If any sectorencapsulatesthe Irisheconomy’sambitions ofmoving frommanufacturingto knowledge-led activities,then theresearch-basedpharmaceuticalindustry isprobably theone.’

IPHA Review 5

Next year the pharmaceuticalindustry will invest an estimated€45.2bn in R&D, according to TheEconomist. Research is the enginethat drives the pharmaceuticalindustry worldwide, and there is anongoing and urgent demand for newmedicines as lifespans increase, andwith 75% of medical conditions stillwithout an adequate therapy,according to the World HealthOrganisation. Though overcomingillnesses provides the impetus fordeveloping new product, the shortproduct lifecycle before patentslapse means the industry requires aconstant ‘pipeline’ of newmedicines, which can only befulfilled through ongoing research(see page 8).

ADDING INNOVATIONResearch in pharmaceuticalsextends from developing newmolecules for medical use, to clinicaltrials, to discovering how to producesafe and viable products. "In amultinational environment, everysite is trying to convince seniormanagement that it should be thesite for investment," says JohnCondon, EMEA Director of PublicAffairs at Merck Sharp & Dohme’sManufacturing Division. "Byincluding research into your

employs 24,000 here, more than halfof them graduates, in some of thebest paid manufacturing jobs in thecountry. For job creation, thepharma sector has been averaging1200 new jobs annually over the lastfive years, with each new jobrequiring close to one million eurocapital investment according to theIDA. But the future for the industrynow lies in combining this immensemanufacturing capability andexpertise with the innovation thatwill drive new productdevelopment. This move ‘up thevalue chain’ is what theGovernment’s Enterprise StrategyReview Group termed in its 2004report as ‘High Value AddedManufacturing’, and though itapplies to every industrial sector,pharmaceuticals offer some of thegreatest potential rewards. "Movinginto activities that generate a highervalue and which are less easy toreplicate elsewhere, will provecritical if Ireland’s pharmaceuticalsector is to continue competingsuccessfully with plants overseas, inwhat is now one of the mostglobalised industries in the world."according to Matt Moran of IBEC’sPharmachemical Ireland, "Innovationand R&D capability will become thedrivers of this."

manufacturing activities you’refamiliar with the process at a muchearlier stage, so if the drug getsmarket approval later then you’re ina much better position to justifybeing able to produce it. It’s allabout internal competition."

The Government’s EnterpriseStrategy Group 2004 report inPharmaceutical/Biotech suggestsIreland’s strong existingmanufacturing base could "act as amagnet for future developmentactivity", something that is alreadyproving to be the case. In businessterminology, this means growing‘horizontally’ – by encompassingmore business functions, and‘vertically’ – by including activitiesfurther up the ‘stream’ of activitiesthat add value to a medicine’sdevelopment, such as R&D. Ireland’spharmaceutical businesses arecurrently expanding in bothdirections, and integrating researchactivities further up the value chainis seen as being vital to theindustry’s future here.

The IDA’s strategy focus is now toencourage companies "to startearlier” and "finish later” by addingactivities from the pre-clinicalstages on to launch. As TheEnterprise Strategy Group pointsout, because so many of the global

Such a fragmented approach toresearch could suit the scale of theIrish market, and seems a likelyscenario for the industry. Accordingto Ian Hunter, industry analyst atGoodbody Stockbrokers, maintainingthe entrepreneurial edge of biotechand research companies, by keepingthem smaller and independentrather than absorb them in amultinational culture, is nowespecially attractive to the industryfollowing a period of intenseconsolidation and acquisitions.

The IDA is also aiming at earlystage development in its existingand future client companies:" Yes,that’s the eventual game and I knowthat’s going to be difficult, but wewould be encouraged by the flow ofcompanies we’ve had in to date."says the IDA’s Barry O’Reilly.

NURTURING FUTURE GROWTHBut what makes such diversificationinto any new activities possible, stilldepends on maintaining Ireland’sextraordinary pharmaceuticalmanufacturing base. Everyone in theindustry warns against complacencyas the business worldwide becomesever more conscious of expandingoverheads in increasingly crowdedand competitive markets. Whilerising operating costs are a hugeconcern for the industry, so too is

players are already in Ireland;"further growth in the FDI sectormust come primarily from anexpansion in the range of activitiesin Ireland by the installed base ofmultinational corporations."

Whether innovation and R&D canextend to the development of newmedicines here is the subject ofdebate, but the IDA and many in theindustry feel very strongly that thisis well within Ireland’s capabilities.Though the Strategy Review Groupmaintained that early stagedevelopment for new medicines islikely "to remain in US head offices",John Condon is among those whostrongly disagrees; "I think that wastraditional thinking but what’shappening in Ireland now is that amomentum has started where weare beginning to build up economiesof scale in R&D and that means wecan offer a lot more than we couldfive years ago. Companies arebeginning to realise that not allvaluable research comes out of asingle research centre, and that'swhy companies have donecollaborations with small biotechcompanies and they’re prepared toinvest in these areas. Largecompanies are beginning to lookexternally as much as internally forresearch opportunities, probablyeven more so."

the environment in which itoperates. A recent article in TheFinancial Times (21/07/05) on thesuccess of Swiss companies, Rocheand Novartis (both of which boastconsiderable presences in Ireland),referred to the decline of theGerman pharmaceutical industrywhere German patented medicines"have all but disappeared", despitebeing a pharmaceutical powerhouseuntil very recently. "The success ofthe Swiss companies has lessons forothers. One is that not all Europeancountries need to be hostileenvironments for research-baseddrug companies. Switzerland is astartling contrast with Germany,where drug companies have beenhobbled by price controls and healthreforms favouring low price drugand generics."

The ESRG recommends that: "thecentral role of Government strategyshould be the development of aknowledge based competitiveeconomy," with an emphasis oninnovation, echoing the opinionsexpressed in The Lisbon Agendaand, seemingly, everyone in theindustry. Maintaining a businessclimate where such innovation canflourish involves many factors,foremost of which must surely beacknowledging the extraordinaryasset the country has already built.

IPHA Review 7

BIG PHARMA’S BIG INVESTMENTWyeth’s Biopharma Campus at GrangeCastle is one of the biggest one-off inwardinvestments in the history of the State.Costing almost $2 billion, and occupying1.2 million square feet, this is one of thebiggest integrated biopharma sites in theworld, which will employ over 1000 on a 90acre site in South County Dublin. Thecampus model integrates research withmanufacturing, bringing togetheroperations, research, finished product andVaccine and Conjugation facilities onto onesite. Comprising three units: adevelopment, substance site and productfacility, the site, which opened onSeptember 8, will come into phasedproduction over the next four years,producing the rheumatoid arthritis drug,Enbrel; a new vaccine, Prevenar and a newantiobiotic, Tygacill.

Sixty five per cent of those employed onthe site are university graduates, with 95%having a third level cert or diploma,according to Peter O'Brien, Director ofExternal Relations and Communications.Having research capability close tomanufacturing is critically important incompeting at world level, in his view.

Like other ‘Big Pharma’ companies inIreland, Wyeth grew from an earlypresence, employing 500 in Askeaton in CoLimerick in 1974 to adding an additionalanimal healthcare investment in Sligo in the1980s, which was followed by WyethMedica’s 1400 strong in Newbridge, thelargest of its type (secondary dosage) inEurope.

Wyeth’s positive experience in Ireland, theproven capability and availability of staff,and the positive attitude of Governmentinstitutions here were crucial to Wyeth’snew investment, according to O’Brien."Support from Government and localauthorities is vital and that support is veryimportant to US companies, it’s no longermoney. The availability of the site, thepeople and our experience here have allcontributed."

The Growing Footprint of PharmaManufacturingThis ever expanding foot print of the pharmaindustry in Ireland has led to the expansionof related and complementary activities, withmany companies co-locating other businessfunctions here such as customer support,shared services and supply chainmanagement.

Pfizer’s ongoing expansionPfizer is one of Ireland’s biggestpharmaceutical multinationals, and wasamong the first to arrive here, opening itsmain Ringaskiddy plant in Cork in 1972. Thesubsequent expansion of the company’sactivities here demonstrates the sector’sdiversity and potential for expansion intorelated activities. In addition to its fourmanufacturing sites in Cork delivering activeingredients and drug production, Pfizer nowoperates a sterile manufacturing andresearch operation in Dun Laoghaire(currently undergoing a €240 millionexpansion), a Treasury Centre and EuropeanShared Services Centre from Dublin’s IFSC,an Operations Support Group in CorkAirport, a corporate head office in City West,plus its new process research centre. Intotal, Pfizer employs 2,200 in Ireland,generating an annual wage bill of €160million and capital expenditure in excess of€200 million.

The supportive legislative environment hasbeen crucial in attracting such ongoingforeign direct investment, according to DaveShanahan, MD of Pfizer Healthcare Ireland."Government policy has strongly encouragedthe location and expansion of multinationalshere and Ireland’s position as the globalleader in pharmaceutical exports is a successstory we should all be proud of. At a timewhen competitiveness is a major concern,the industry is now hoping that theGovernment continues to demonstrate theforesight it showed in the 60’s and 70’s."

Similarly Abbott Ireland beganmanufacturing operations here in 1974 thatnow extend across the entire healthcarespectrum, incorporating pharmaceuticals,medical devices, diagnostics and nutritionalin six sites. The 2,100 employed make Irelandamong the biggest Abbott Laboratoriesoverseas presences.

Bristol-Myers Squibb – ‘the road tohigher value’Bristol-Myers Squibb was one of the industrypioneers in Ireland, setting up operations in1964. "We have some people celebrating 41years here," explains John Nason, VicePresident and General Manager, TechnicalOperations BMS Ireland. Describing thefirm’s subsequent expansion, he adds, "InIreland we have been developing productsresearched abroad on a pilot plant scale here,

‘This everexpanding footprint of thepharmaindustry inIreland hasled to theexpansion ofrelated andcomplementaryactivities, withmanycompaniesco-locatingother businessfunctions heresuch ascustomersupport, sharedservices andsupply chainmanagement.’

8 IPHA Review

Wyeth’s growing presence

IPHA Review 9

RESEARCH - THE DRIVINGFORCE AND COST OFMEDICINES Though at the heart of thepharmaceutical industry, researchis both risky and expensive.According to The Economist: "Forevery 10,000 molecules screened,an average of 250 enter clinicaltesting, ten make it through toclinical trials and only one makesit to the regulator." Even then ithas to compete with otherproducts, and has, in 8 years, toreturn its R&D investment. Thecosts of bringing a drug to marketis put at $1.5 billion by StevenPaul, head of science andtechnology at Eli Lilly, and someestimates go higher. The fate ofElan’s share price recently,following questions over Tysabri,offers an unfortunate example ofthe risks facing the industrythrough the entire developmentprocess.

THE PRODUCT CYCLE(see graph above)Medicines are developed in themost regulated market in theworld, demanding a uniquebusiness model for thecompanies involved. Theproduct lifecycle for medicinestypically takes products 10-12years to get to market, ofwhich:• 5 are spent in pre-clinical trialsand pharmacological research • 5 years of clinical trials toassess the safety of the compound

and then bulk manufacturing them. We’recontinuing within the bulk manufacturingactivities but going down the road to highervalue products focusing on ten diseaseareas, and we’re going up the value chainwith respect to complex products. We’recertainly investing significant money yearon year to bring us up to date with the newtechnologies."

BMS’ ongoing investments have beensecured through the consistently highperformance of its sites here. "Ourregulatory record is second to none, andwe’ve consistently performed well withFDA, IMB etc. Our technical people are firstclass, and we have always been able tomeet the challenges with any of the newproducts that come to our site. The dangeris cost competitiveness, and we haveserious problems with Ireland Inc – on basecosts and project costs."

BMS’ two sites in Swords and Cruiserath,were recently augmented by its R&D facultywith DCU, and NUIG, and Ireland is nowcompeting with other sites worldwide forsome major forthcoming projects. Accordingto Nason however, the ongoing momentumbehind Ireland’s foreign direct investment isnow facing its toughest challenge yet in theform of rising costs and questions overprofitability. "To apply these newtechnologies means significant investmentand to attract these capabilities, and thenew products coming out of the pipelinerelated to them, we need to upgrade ourfacilities or build new sites. The costs ofthese are very expensive compared withother sites [abroad]. We certainly have asignificant challenge on our plate, and Iknow this extends to my colleagues in othercompanies as well. This issue is not goingaway and we had better address it."

• 2 years administrativeprocedures to obtain marketauthorisation.

Between 5,000 and 10,000drugs will be screened for everydrug that successfully gainsmarket authorisation. Theresulting development coststypically in excess of $800m andmany companies claim costs ofup to $2 billion, with twelveyears spent in the developmentstages, leaving eight years torecoup development costsbefore patent protectionexpires.

EUROPE V USEurope is losing its edge to theUS when it comes topharmaceutical R&D, and areverse in earlier trends hasseen a sudden drop inEuropean-developed newproduct. From 1998 to ‘02, therewere 85 new product launchesin the US compared with 44 inEurope. From 1993 to ‘98however, 81 products werelaunched in Europe and 48 inthe US. According to theEuropean Federation ofPharmaceuticals Industries andAssociations, 40% of scientistsworking in the US areEuropean. Europe’s brain drain,especially in research fields, is abig concern and a majorimpetus for the EU’s LisbonAgenda, which plans foreconomic growth based oninnovation.

Lifecycle new medicine

SUBJECT

SUSTAINING GROWTH

Matt Moran, director PharmaChemical Ireland, the IBECtrade body, offers the industry’s perspective on thecompetitive challenges ahead

COMPETITIVENESS REMAINS KEY FOR IRELAND’S PHARMACHEM

With exports valued at over €37.4billion in 2004, there is no doubtingthe role the pharmachemical sector

plays in driving the Irish economy forward(see attached table 1). The latest figurespublished by the Central Statistics Office inAugust 2005, indicate that the sector isbucking a trend of slowing exports from thecountry, with pharma exports from January-May up 7.3% to €17.02 billion, while theoverall figure was up by just 1.9% with OfficeMachinery and Data Processing (dominatedby the ICT sector) showing a fall of 5%.

Ireland’s pharmaceutical industry hascontinued to attract new investment over thelast decade, while established companieshave continued to re-invest in new capacity(see tables 2 & 3). All of this is good news for‘Ireland inc.’ as the sector continues tocontribute significantly to the exchequerthrough corporation and employment taxes.The pharma sector is a steady and stableemployer, providing secure employmentoptions in this country.

Despite these investments and pharma’sundoubted success to date, Ireland inc. woulddo well to nurture the sector, as its futurecould be a lot less certain should the countrytake it for granted. As with most industrialsectors in Ireland, pharma is finding the costof doing business here increasingly high,while Singapore and Puerto Rico continue topresent a significant competitive threat to thefuture development of the sector here. Irelandhas always been able to compete successfullywith these locations despite their lower ratesof corporation tax because of the very highoperational standards that are maintained inall Irish operations.

The emergence of the new Asianeconomies, especially those of China andIndia, is presenting a whole new set ofchallenges. Most of these are based on their

EXPORTS1973 €100.31 million1995 €6.40 billion1998 €18.03 billion1999 €21.08 billion2000 €27.22 billion 2001 €32.25 billion 2002 €39.4 billion2003 €35.7 billion2004 €37.4 billion**44% of total exports for Ireland. Source: CSO

EXPANSIONS (1999-2005)EXPANSIONS EURO MILLIONS EMPLOYMENTPfizer Ireland 432 250Merck Sharp & Dohme 171.41 50Organon Ireland 25.39 170GlaxoSmithKline Beecham 317.43 100Wyeth Medica 57.14 170Elan 35 120Janssen Pharmaceuticals 100 60+Amersham Healthcare 34.15 150Servier 52 100Fujisawa 17 n/a

GREENFIELD (NEW INVESTMENTS)(1999-2005)NEW INVESTMENTS EURO MILLIONS EMPLOYMENTWyeth BioPharma 1269.74 1300Bristol-Myers Squibb 380.92 250Genzyme 317.43 480Alza 152.37 80Abbot 406.32 200Gerard Laboratories 40 380Altana Pharma 70 150Taro Pharma N/a 300Recordati 28 60Centocor 650 330Takeda 80 60

10 IPHA Review

1

2

3

measures. This cannot continuehowever, and the time has come forGovernment to take a long hard lookat how it regulates and manages thecost drivers within the economy thatare permitting this level of inexorableincreases to persist.

• Tax: Perhaps one of the greatestchallenges to the Irish pharmaceuticaland chemical industry is to retain alow competitive rate of corporationtax. There are three worldwidelocations of particular interest topharmaceutical companies – they arecalled ‘The three islands’: Singapore,Puerto Rico and Ireland.

• Costs: Ireland is becoming a veryexpensive place to do business,placing the country at a hugecompetitive disadvantage (see tablebelow). Despite the IDA’s excellentefforts, Ireland is losing projects tolower tax rate countries. The potentialharmonisation of corporation tax rateswithin the European Union (EU) wouldinevitably lead to further investmentleaving not only Ireland, but the EU asa whole.

• R&D Investments: It is criticalthat companies manufacturing inIreland are encouraged to invest inR&D in order to embed existingmanufacturing investment in theeconomy. If Government is to besuccessful in this task, it will need toassure the industry of an even-handed policy right across the supplychain. Currently the Governmentreceives around €3 in taxes from thesector for every €1 that it spends onmedicines.

lower costs, combined with anemerging capacity for innovation. It isincumbent upon the industry, andindeed on the country, to rise to meetthese challenges and to overcomethem. The days are long gone whenthe industry could be expected to meetthese challenges alone through payingfor increasingly costly regulation, whileoperating inspite of the localinfrastructure rather than because of it.

INDUSTRY CHALLENGESIn May last year, the membership ofPharmaChemical Ireland published asecond five year business plan listinga number of key challenges that willhave to be met in the very near future:

• Education: The availability ofqualified employees is under threat asstudent numbers studying sciencehave fallen off. The recommendationsin the Taskforce Report on PhysicalSciences to improve science promotionin the school system must be actedupon to ensure sufficient sciencegraduates emerge. PharmaChemicalIreland recognises the need to activelyencourage interest in science at allschool levels, and is activelyaddressing the issue. An educationalofficer has been appointed to workwith companies and career guidancecouncillors in schools. Additionally, themembership is working at local levelwith creative school programs.

• Infrastructure: The lack of anintegrated waste infrastructure isanother major challenge as it detersnew investment in Ireland, and is amajor threat to the future of theindustry. Local government mustconvince their communities about thebenefits of waste management. Thereis a general lack of environmentalawareness by the public in Irelandthat hinders the development of apractical, realistic approach to thewaste problem. It is vital that thereliance on waste exportation isreduced and Ireland develops acomprehensive, internal solution.

• Energy Costs: Energy costs inIreland remain a severe challenge tocompanies trying to control their costbase. This, combined with the lack ofconsistent supply, is a cause of graveconcern to the industry. To datecompanies have absorbed theseexorbitant increases (still at over 17%last year, according to CSO figures)and attempted to mitigate them by arange of energy management

CONCLUSIONS: The Role ofGovernmentAgainst this backdrop of increasingchallenges, the Government needs tochange the investment model that ithas employed so successfully to date.Not only is it more important than everthat Ireland retains the attractivepackage of incentives that encouragesmajor multinational pharmachemcompanies to locate theirmanufacturing operations here, butthe State also needs to persuadecompanies to leverage this byinvesting in R&D. This will be a farmore difficult task as the country isnow asking major companies to shiftkey investment from other locations,sometimes from their home country,into Ireland, with no guarantee ofearly return on investment.

To be fair, the IDA has recognisedthis fact and is working hard toencourage companies alreadymanufacturing in this country, toinvest in process development tosupport manufacturing. Recentinvestments by Wyeth, Genzyme, GSK,Pfizer, Bristol-Myers Squibb andFournier bode well for the future. Buthave the other organs of Governmentgot the message; how will theindustry fare in the up and comingprice negotiations? Will the industrybe regulated out of existence? (Recentdevelopments in Cork for example,where it would appear that theEnvironmental Protection Agency ispublicising minor events, with noenvironmental impact and reported tothem by companies in a spirit ofcooperation, is a worryingdevelopment). Will therecommendations outlined in TaskForce on Physical Sciences ever findtheir way off the Minister’s shelf?

Much remains to be done if thissuccess story is to continue. In timehonoured manner, it is worthconsidering the oft quoted catchphraseof a certain well known politicalleader: "Much done- much more to do."

COUNTRY CORPORATIONTAX RATE %

SINGAPORE 0%PUERTO RICO 3% TO 4%IRELAND 10% TO 12.5%

PHARMACHEMICAL SECTOR – COST INCREASES 2000 – 2003% INCREASE IN COST

COST FACTOR 2001 2002 2003Electricity 7.08 21.41 13.91Natural Gas 20.48 0.13 23.57Rates 23.38 9.75 11.25Water Charges 6.02 4.80 9.15Other LocalAuthority Charges 13.31 41.75 12.72Insurance Premia 22.69 15.66 22.89* Based on survey of membership of PharmaChemical Ireland

IPHA Review 11

IPHA Review 13

JOHN MCLAUGHLIN BRENDAN MCATAMNEY DR GERALD FARRELL MARK RODGERS

"The PharmaceuticalIndustry is one that isboth complicated andchallenging. In Ireland,we have become animportant player in theglobal market but unlesswe continue to invest, wecould lose out to smaller,more economicallyadvantageous markets.

For this reason,improved educationprogrammes are key toour continued successand growth and thisinvestment needs to beconsistent in all areas -R&D, manufacturing andsales & marketingprogrammes".

John McLaughlin,Managing Director,Sanofi Aventis

“The challenges facingIreland’s research-basedpharma sector are manyand varied. The mostbasic threat is the ongoingrise in the cost ofoperating in Ireland,together with the desire tomove employment alongthe value chain to moreknowledge-basedemployment. Thisrepresents a challenge,not just to the pharmasector, but also to theGovernment.

To attract and retainemployment within thepharma sector that issustainable in the longerterm requires innovationin the partnershipbetween the two sectors.This, in turn, requiresrecognition that theEuropean model ofpharma price erosion willnot facilitate suchpartnership initiatives toflourish."

Brendan McAtamney,Managing Director,Abbott LaboratoriesIreland Limited

"The great challenge forIreland in the 21stcentury as a maturesociety which haseconomically come ofage, is to develop ahealthcare system thatmeets the needs of anincreasingly diversenation.

The Irishpharmaceutical industryhas played an importantpart in the generation ofnew medicines for humandiseases such as heartdisease, cancer andmental illness. We mustcontinue to foster aclimate of innovation andenterprise so that everypatient can share in thebenefits of the healthcaretechnology revolution."

Dr Gerald Farrell,Managing Director,Eli Lilly & Company(Ireland) Ltd

"Innovation in healthcareis about courage, risk andreward. It is also verymuch about patients andtheir right of access tonew treatments andtechnologies. In the fieldof cancer therapy thenew buzzwords are‘survival’ and‘progression freedisease.’

Roche is a worldleading company in thesupply of innovativediagnostics andmedicines for the earlydetection, prevention,diagnosis and treatmentof cancer. I am quite clearin my view of the future.We have some of theworld’s great physiciansand support staff. Wehave a health service thatcares about this emotivedisease area. We haveexciting and promisingnew treatments.

We all have anobligation to ensure thateveryone, especiallypatients and their carers,are in a position tobenefit from theseopportunities."

Mark Rodgers, ManagingDirector, Roche.

OPINIONS

WHAT IN YOUR VIEW ARE THE MAJORCHALLENGES CURRENTLY FACING IRELAND’SRESEARCH-BASED PHARMA SECTOR?

WE ASKED THE SECTOR’S SENIOR MANAGERSFOR THEIR VIEWS

14 IPHA Review

"Medicines are basedon trust, and on thepractitioner’s beliefthat what he or she isprescribing is the bestsolution for theirpatient. It’s importantthat everyone can havefaith in this process, sotransparency is vital.

How products aremarketed, therefore, isvery important for theindustry, and it is ofcritical importance thatthe relationshipbetween the industryand prescribers isabsolutely abovereproach.

Maintaining a clearcode on what isacceptable serveseveryone’s interests,and helps maintain theconfidence of patientsand practitioners alike."

Mai Hanlon, GeneralManager, Tillots Pharma Ltd

"The decliningcompetitiveness of theEuropeanpharmaceuticalindustry, and thegrowing innovationdivide between the EUand the U.S., are ofincreasing concern.Over-regulation inEurope (e.g. restrictingpharmaceuticalcompanies from helpingpatients become betterinformed about theirhealth and relevanttreatment options) andthe absence of acompetition-based,innovation-friendly anddemand-driven singlemarket, constituteserious barriers thatneed to be dealt with toachieve the goals of theLisbon Agenda. Ireland- through example andby directly influencingthe EU agenda - canplay a leading role inthis respect."

Soren TulstrupManaging DirectorMerck Sharp & DohmeIreland (Human Health)Ltd

"We still need to workat promoting thebenefits our productsbring to their ultimateconsumers - patients.Our products cost hugesums to develop andoffer improved qualityof life to people withdebilitating diseaseslike diabetes, asthma,and cancer. Yetsomehow, theseproducts aresometimes perceivedas overly expensive,even in a world of €20CDs and €40 haircuts.We need to helpsociety understand thevalue of our products,and not just to knowthe cost."

Steve A Ross, GeneralManagerPharmaceuticals GSK

"The pharmaceutical industryestimates that it takes about €900mto develop a new medicine andbring it to the market. Remember,the development process can take15 years and in the end only threeout of 10 medicines recover theircosts when brought to market. Ireland is attractive for manyreasons includingcommitment to a low tax model,excellent education andinfrastructure, and access to askilled workforce. We musthowever, be cognisant of a rapidlyrising cost base and the need toengage politicians and the public inunderstanding the hugecontribution that pharma makes toeradicating major health challenges.

It is essential to recognise andreward innovation in medicinediscovery. If cost containmentmeasures are such, so as todiscourage investment in Ireland,then there will be a social andeconomic impact.

A recent EU commission reporton biomedical innovation foundthat 70% of world biomedicalresearch now originates in the US,with only 25% coming fromEurope.

We will not succeed in tacklinghealthcare if we constantly view itas a burden. I pray that today’spoliticians have the courage tomake the right decisions to investwisely for our future generations. Moving forward, we need toreward innovation, research andvalue for patients.”

Michael Dempsey, GeneralManager, Bristol-Myers SquibbPharmaceuticals, Ireland.

OPINIONS

MAI HANLON SOREN TULSTRUP STEVE A ROSS MICHAEL DEMPSEY

THE MAJOR CHALLENGES CURRENTLYFACING IRELAND’S RESEARCH-BASEDPHARMA SECTOR

SUBJECT

IPHA INTERVIEW

Colin Leopold talks to Conn Clissmann, president of theIrish Pharmaceutical Healthcare Association (IPHA), aboutthe European race for competitiveness and the worldwidereputation of the pharmaceutical industry

NAVIGATING THE ROAD AHEAD

HOW IMPORTANT IS THEPHARMACEUTICAL SECTOR TO THEIRISH ECONOMY AND HOW HAS ITSROLE CHANGED OVER THE LAST FIVEYEARS?The pharmaceutical sector has become a veryimportant part of the Irish economy and itscontinued development has contributedsignificantly to our recent economic prosperity.The sector has grown from a small constituentof the economy in the early 1970s to the pointtoday where over 120 pharmaceuticalcompanies operate in Ireland, and 13 of thetop 15 companies worldwide have substantialoperations here. The figures give an indicationof how important the sector has become; thepharmaceutical sector employs 24,000, andgenerates annual exports of €15 billion (€37.5billion using the broader pharmachemmeasure). Further to this, the industry makesannual tax payments to the Irish Exchequer ofover €3 billion and has attracted totalinvestment of over €13 billion, €4.3 billion ofwhich has been in the last five years

The role of the industry in Ireland is nowbecoming even more important as turbulentglobal conditions make attracting additionalforeign direct investment here more difficult.Whilst competition from centres such asSingapore and Puerto Rico is now quiteintense, Ireland is continuing to attract newinvestment in pharmaceuticals.

One of the key elements that has facilitatedthe development of the industry here hasbeen the partnership between the IrishGovernment and the pharmaceutical sector,for instance in relation to the supply ofmedicines to the Irish health services. Wehave seen in other countries, such asGermany, Spain and Australia, that anantagonistic relationship between the Stateand the sector has lead to a fall off ininvestment as the industry has chosen tolocate new investments in countries that aremore open to rewarding research andinnovation.

DO YOU SEE RESEARCH &DEVELOPMENT EVENTUALLY TAKINGTHE PLACE OF DRUG MANUFACTURINGIN THE IRISH SECTOR?The pharmaceutical sector is a dynamic one,and to remain a significant player, Irelandmust seek to attract additional elements ofthe business' value chain such as clinicaltrials, process development and optimisationand activities like shared services centres.

There have been a number of positivedevelopments in recent years that will helpin the achievement of this objective. €2.5billion Government support has beenearmarked for research and development,for example, through the NationalDevelopment Plan, to help Ireland become aworld centre of excellence for research. Also,the establishment of Science FoundationIreland has resulted in significantlyincreased support for basic scientific andtechnological research. Finally, the recentEnterprise Strategy Group's emphasis ondeveloping a strategy to deliver the goal of aknowledge based competitive economy,clarifies the important long term role thesector has to play

Overall the State's policy shift towardsresearch and innovation, and the ongoingsupport of the Government and its agencies,plays a key role in increasing Ireland'sattractiveness as an investment location forthe international research-basedpharmaceutical industry.

IN TERMS OF EMPLOYMENT ANDSKILLS, HOW IS IRELAND COPING WITHA FAST GROWING SECTOR?The pharmaceutical sector is constantlydeveloping and Ireland has been highlysuccessful in attracting new investment,resulting in job growth of more than 1,200 foreach of the last five years.

Looking to the future however, there areconcerns about the decline in take-up ofscience among second-level students, which

In spite ofoverseascompetitionIreland iscontinuing toattractinvestment.

‘I passionatelybelieve that theindustry has apositive storyto tell, both ona worldwidebasis as thedeveloper ofnew treatmentsthat enablepeople tolive longer,healthier livesand on a local,national basis,as a keycontributer tothe success ofthe Irisheconomy.’

16 IPHA Review

IPHA Review 17

We have seen in some quarters areaction against the globalisation of theworld economy in recent years. It is notsurprising that the pharmaceuticalsector, as a prominent player in thatglobal economy, has been a target.Also, in the past the industry has madesome mistakes in terms ofunwillingness to engage with themedia and over the access to themedicines issue in the third world.

I passionately believe that theindustry has a positive story to tell,both on a worldwide basis as thedeveloper of new treatments thatenable people to live longer, healthierlives and on a local, national basis, as akey contributor to the success of theIrish economy.

The industry internationally andlocally is actively seeking to counterthe negative perceptions by presentingthe facts in an open way. For example,the international industry recentlylaunched a new internet search portalto provide patients and physicians withfull information about ongoing andcompleted clinical trials. The industryhas volunteered to publicly disclosesummary results of all industry-sponsored clinical trials of medicinesthat have been approved for marketingvia free, publicly accessible databases,regardless of trial outcome. In addition,the industry will now publicly registernew clinical trials being performed todetermine a medicine's therapeuticbenefit, including information on howpatients and clinicians can enrol insuch studies.

The portal will ensure that those inneed and the medical community, caneasily find the data that can helpfacilitate medical decisions abouttherapies and future potentialtreatments.

An example of this approach is thework the industry is doing withGovernments and NGOs to help tacklethe crippling health crisis in thedeveloping world.

PATENT PROTECTION LAWS HAVEBEEN CRITICISED FORRESTRICTING DEVELOPINGCOUNTRIES' ACCESS TO NEWMEDICINES. DO YOU THINK THATTHE INDUSTRY SHOULD HAVEMORE RESPONSIBILITY ON THEGLOBAL STAGE?

is feeding through to third level whererecruitment of students to science,engineering and technology (SET)courses, is in many instances, belowcapacity.

If Ireland is to realise its ambitions asa knowledge-based society, then thelevel of student demand for science,engineering and technology courses inhigher education must be addressed.

The six point action strategy outlinedin the Report of the Task Force on thePhysical Sciences needs to beimplemented urgently if Ireland is not tobe at a serious disadvantage as it seeksto move up the value chain by attractingnew pharmaceutical investments in theyears ahead.

DO YOU THINK THE STAGGERINGGROWTH OF THE IRISHPHARMACEUTICAL INDUSTRYWOULD HAVE BEEN POSSIBLEWITHOUT THE STRONG EXPORTMARKET SUPPORTING IT?Ireland is a key location for thepharmaceutical industry. The country isthe biggest net exporter ofpharmaceuticals in the world. Exportsfrom the sector totalled over €15 billionin 2004, nearly €1 in €5 of all Irishexports. Using the broader pharmachemmeasure, and including organic chemicalexports, the contribution of the sectoramounted to over €37.5 billion in 2004.

The industry here has a strongreputation for quality and reliability with29 Irish pharmaceutical plants approvedby the Food and Drugs Administration(FDA) in the United States.

The pharmaceutical sector looks toIreland as a model of what can happenwhen a constructive relationshipbetween the State, State agencies andthe industry is allowed to develop. Thecountry's emphasis on supportinginnovation is warmly welcomed, incontrast with the position in a numberof other European markets where short-term State policies are leading to asituation where the industry isreassessing its future engagement withthose locations.

PHARMACEUTICALMULTINATIONALS AREGENERALLY VIEWED QUITESCEPTICALLY IN THE PUBLICDOMAIN. WHY IS THIS AND HOWCOULD IT HARM THE SECTOR?

New products are the life-blood ofthe pharmaceutical industry.Researching and developing newmedicines is an expensive, complex,risky, and lengthy business. Theaverage cost of bringing a newmedicine to the market is over €900million and the process takes 10-15years.

A great deal of work remains to bedone to treat those suffering fromdisease - the World HealthOrganisation, for example, estimatesthat there are still no treatments for75% of known conditions. Thepharmaceutical industry is theengine for such R&D work; it hasbeen responsible for thedevelopment of over 90% ofmedicines used today.

The limited period of marketexclusivity provided by patentprotection allows companies tosustain the vast R&D investmentnecessary to invent new medicinesand therapies.

The industry is very willing to playits part in helping to address thestaggering health crisis in developingcountries. The success of thenegotiations on the implementationof the Doha Declaration and theTRIPS Agreement, as well as therecent G8 decisions, show that withgoodwill on all sides practicalsolutions can be found.

The UN recently estimated thatnearly 50 million people may die ofAIDS alone in developing countriesby 2010. Undoubtedly, all of us -governments, industry and taxpayers- can do more. There has been anunfortunate tendency by somecommentators to simply blamepharmaceutical company patents forthis health crisis. The reality is thatthe reasons for the crisis are manyand varied.

95% of the medicines on the WHOessential medicines list are offpatent. TB, malaria, polio andmeasles are killing millions indeveloping countries, yet themedicines to cure them are mostlyoff patent and cheap. The realbarriers to access include poverty,inadequate health infrastructure,insufficient resources devoted tohealthcare, lack of political will anddiscrimination.

IPHA Review 19

SUBJECT

MEDICINES

Unlike other business sectors, the output of thepharmaceutical industry is very literally amatter of life or death, writes Brian Murphy,Commercial Affairs Manager, IPHA.

THE VALUE OF MEDICINES

Today people in Ireland live longer,healthier and more productive livesthan ever before which is, in part, due

to medical progress and pharmaceuticalinnovation. But how do we calculate the valueof a medicine?

How do you calculate the value of the smileof a child who doesn’t have to feel the pain ofcancer? What is the value of giving agrandfather with congestive heart failure theenergy to go fishing with his grandson?

We can however, in some ways, quantify thevalue of medicines to patients, to society andto the healthcare system. We can count thenumber of years it adds to a person’s life, wecan look at whether the medicine enables theperson to work or live independently, orsimply enjoy life more, we can calculate themoney saved when a medicine helps a patientavoid surgery, hospitalisation or admission toa nursing home.

The fact is that spending on medicinestranslates into overall cost savings forhealthcare systems, keeping employeeshealthy and productive in society. They helppatients avoid disability and surgery, and theybenefit healthcare systems by reducing costlyhospital care.

The ‘cost of treatment’ needs to be balancedagainst the long-term benefits of innovativemedicines that decrease the ‘burden ofdisease’ for society, in both financial andquality of life costs.

HEALTH SAVINGSIn the past 40 years, the use of medicines hashelped diminish the number of hospitaladmissions for 12 major diseases by half,including ulcers, mental illness, and infectiousdisease.

New treatments for Parkinson's, Alzheimer'sand diabetes have helped thousands ofpatients to lead better and more normal lives,easing the burden on care-givers and

delaying or avoiding costly long-term nursingcare, while cholesterol-lowering medicines, ata cost of less than €3 a day, can help avoidcoronary by-pass surgery at a cost of around€75,000.

In the space of a lifetime, vaccines havevirtually wiped out diseases such asdiphtheria, whooping cough, measles andpolio.

By any of these measures, prescriptionmedicines provide some of the best value inhealthcare. Medicines save lives, relieve pain,cure and prevent disease. Medicines helpkeep families together longer and improve thequality of life for patients and care-givers.

The timely use of modern medicines inIreland has:• Helped to improve life expectancy by over athird in the last eighty years from 57 in 1925to 79 today. • Enabled hospitals to treat many morepatients on a day care basis, up from 85,000cases in 1987 to an expected 500,000 in 2005.• Assisted in the reduction of the averagelength of hospital stays from 9.6 days in 1981to 6.3 days today.

The last few years have seen anunprecedented focus in Ireland on the HealthService with expenditure being trebled in theperiod 1997 to 2005, and administrativestructures being overhauled with theintroduction of the Health Service Executive.Despite the increased expenditure, public

concern about the state of the Health Servicesremains high and there are increasingdemands for further improvements to ensurean efficient and effective service. As part ofthis drive to find further efficiencies, somehave pointed to the medicines bill as an arearequiring attention.

It has become fashionable in some quartersto question the value of medicines and toview the medicines bill as part of the problem

‘Prescriptionmedicinesprovide someof the bestvalue inhealthcare.Medicinessave lives,relieve pain,cure andpreventdisease.’

20 IPHA Review

diseases such as asthma, diabetes andobesity; and Government decisions toenhance patient eligibility to medicinesthrough initiatives such as the provisionof medical cards to everyone over 70.

THE COSTLY, RISKY BUSINESS OFPHARMACEUTICAL R&DAnother aspect that needs to befactored in to any discussion weighingthe value and cost of medicines is thatthe discovery, development, testing andgaining of regulatory approval for newmedicines is a highly complex, lengthy,risky and expensive process.

Even after a medicine is developed,teams of engineers, biologists, chemistsand physicists spend many thousandsof man hours trying to mass-producethe results achieved by an individualscientist in their lab. The odds areformidable – between 40 to 50% ofpotential medicine candidates thatenter the third and final phase ofclinical trials fail to make it to market.Often, promising experiments are notreplicable on a large scale. Researchmay fail because it is not possible tomanufacture the medicine safely or tothe proper specifications.

The risks involved in developing anynew medicine are substantial and veryexpensive, with the estimated costs ofbringing new products to market beinganywhere near €900 million. Onaverage, only one of every 10,000promising substances will successfullypass testing in the R&D phase to beeventually approved as a marketableproduct. It takes an average of 10-12years to turn a promising newcompound into a marketable medicinal

rather than appreciating medicines asan essential element in a strategy toimprove healthcare.

In some countries policies have beenintroduced which have discouraged theuse of innovative so called "high price"medicines. Such policies are short-sighted, overlooking the fact that thealternative to using new medicines isoften longer hospital stays; longer, lesseffective treatments, invalidity and apoorer quality of life.

In this time of economic prosperity, wehave the opportunity to develop ahealthcare system which would delivermore efficient and effective care to thepatient. A system designed to interveneat the earlier, more cost effectiveprimary care level rather than waitinguntil the expensive hospital care levelmakes sense, both economically andfrom the point of view of patientwelfare.

Of course there are things that can bedone to help improve the health of thenation – individuals taking greater careof their own health, eating properly,taking regular exercise, going for healthchecks and complying with theirtreatment regimes.

The Irish Pharmaceutical HealthcareAssociation has partnered with theDepartment of Health and Children invarious initiatives to enhance patienteducation through publications such as"Tips for Taking Medicines."

The increasing State bill for medicinesis not the result of inefficiencies in thesystem. It is due to demographicfactors, the availability of newtreatments, the increasing incidence ofchronic and non-communicable

product that is safe and effectiveenough to bring to patients.

Once on the market, the averagemedicine has only about 8 to 10 years ofeffective patent protection left beforethe patent for the medicine runs out,and other companies startmanufacturing the medicine using thesame formula.

Even making it to market is still noguarantee of commercial success –historically, only 3 out of 10 marketedmedicines produce revenues that matchor exceed the costs of R&D before theylose patent protection. Committingresources into researching newmedicines has therefore really becomean act of faith, which requires massiveexpenditure with no guarantee ofreturn.

The cost of developing a medicine isoffset by the enormous value it brings -to patients, to society, to the healthcaresystem, and to the savings it generates.

CONCLUSIONIn conclusion, do medicines really costthat much? Do we not want to seeevery ill child cured and everygrandfather have the opportunity totake his grandson fishing? If the answeris yes, then we must face facts. Thepharmaceutical industry is playing itspart towards building healthiersocieties as they continue to add yearsto life and life to years. The cost ofmedicines must be set against the greatvalue of medicine if the debate is to bebalanced and help achieve the outcomeevery person wants - to improve thehealth of a nation and create a costeffective healthcare system.

IPHA Review 21

SUBJECT

IDA

Ireland’s Industrial Development Authority hasplayed a pivotal role in building up its pharmaindustry. Here, Barry O’Leary, the IDA’s divisionalmanager for the sector, talks to The IPHA aboutachievements to date and the challenges ahead

BRINGING WORK HOME

WHY DID THE RESEARCH BASEDPHARMACEUTICAL SECTOR BECOMEAN IDA PRIORITY ORIGINALLY?The first major pharmaceutical multinationalto come here was Bristol Myers Squibb. Lastyear Peter Dolan, their CEO, was over at thecelebrations for forty years of the Swordsplant in the morning, and at lunchtime hewent to open their new half a billion plant inCruiserath. I suppose that brings you from Ato Z very quickly: it’s a good demonstration ofthe longevity of the industry here.

The main push in the 1970s to gettingcompanies into Ireland was because it was ahigh value, global and a very well payingindustry. Because it was health-based, therealso was seen to be a longer-termperspective, as there would be a need totreat disease in a growing population aroundthe world, so it was seen as a long termgrowth industry.

WAS IRELAND’S RELATIVE GREENFIELD STATUS AS AN INDUSTRIALLOCATION AN ADVANTAGE?There would have been a couple of factors:the early 1970s was the time of EC entry andthere was a [business] model that nowdoesn’t exist anymore, which was thedominance of US corporations coming toIreland to service the European market.Today every plant is global and that’sprobably the big difference. So the EUmarket; zero per cent tax on exports at thetime and a good availability of sites, were allcontributing factors.

WAS ACCESS TO UNIVERSITIES APRIORITY AT THAT TIME?Probably not in the very early stages butcertainly over the last 10 to 15 years that’saccelerated. There would have been very,very good collaboration in areas such aschemical engineering going way back, butnow the sophistication of the relationshiprequired with universities is certainlygrowing and getting far more profile.

DOES THE IDA NOW CONSIDER THEPHARMA SECTOR AS ONE OF ITSGREATER SUCCESSES?It’s one of the key areas we go after. Wehave four key areas: ICT (InformationComputer Technology), Life Sciences,Financial Services, and InternationalServices. The pharma side is extremelyimportant in its sheer economic impact.Currently it’s approximately 50:50 betweenbulk and finished pharmaceuticals; itsexports are worth almost €40 billion, it’s abig employer and it is a strong contributor ofcorporate tax. And apart from the directemployment, there are huge spin offbenefits such as the construction industry,the engineering companies, projectmanagement, etc. So it isn’t just about thepeople employed directly in the industry.

PHARMA COMPANIES HAVEEXPANDED THEIR ACTIVITIES AGREAT DEAL HERE, PROBABLY MORETHAN OTHER SECTORS. IS THAT THECASE?

‘Today everyplant is globaland that’s thebig difference’

IPHA Review 23

Well the difference with pharma would bethe sheer capital intensity of the investments– it’s an expensive industry to build. Youwouldn’t be far off a million euro peremployee in investment levels.

AND YET THAT IS NO GUARANTEETHAT THE INVESTMENT WILL STAYHERE? No, because you have no shortage ofopposition particularly Singapore, PuertoRico, Switzerland and other locations.

IN AN INVESTMENT ANNOUNCEMENTIN JULY, THE IDA REFERRED TO‘REALLY GOOD QUALITY JOBS BEINGCREATED IN THE SECTOR. COULD YOUDEFINE THAT TERM?There are a number of criteria we’d use -average salary per employee, the percentageof graduate, third and fourth levelqualifications and that’s anything between40 and 60% and increasing all the time,because you have a greater regulatoryenvironment, and because of the skillsrequirement associated with a pharmafacility.

HAS IT NOT BEEN A CHALLENGE TOPROVIDE SUFFICIENTLY QUALIFIEDWORKERS TO DATE?Well look at the hiring record, and at some ofthe newer investments: Wyeth at theirbiopharma facility, for instance, haverecruited over a 1000 people in the last threeyears; look at Genzyme down in Waterford,

who have hired about 150 people; Fournier,another new arrival from France, have hiredover 100, and there have been manyexpansions as well of course, all around thecountry.

BIOTECH IS PROBABLY ANINTERESTING EXAMPLE AS IT’S SONEW. ARE THE SKILLS IRELAND CANPROVIDE HERE COMPARABLE WITHOTHER EUROPEAN COUNTRIES?We would be better than many in terms ofthe percentage availability – in a pro ratabasis we certainly have far more [of theappropriate skills]. Look at science andengineering graduates per thousand; we’reway ahead there. We are finding thatcompanies are having very, very goodrecruitment experiences here.

THE IDA’s PRIORITY IN ATTRACTINGINWARD INVESTMENT TO DATE HASBEEN IN MANUFACTURING. CAN YOUSUSTAIN THAT?That’s changing. The traditional scope wasaround manufacturing, and if people weredoing process development it was at maybephase three of it, [EDITOR’S NOTE: theindustry has three development phases indeveloping a medicine] and we were talkingto the industry about the need to start muchearlier but also finish much later at eachphase. So there’s a whole range of activitiesnow… there’s the whole area of sharedservices: Pfizer for instance do all theirEuropean accounting now in Dublin, or

‘We arefinding thatcompanies arehaving very,very goodrecruitmentexperienceshere.’

Novartis have 400 in their manufacturingcentre in Cork and have a global supplychain management centre with over 100people nearby.

There’s a number of people managingtheir IP (Intellectual Property) here; plus anumber on the process development side,like BMS, who would have 100 in thatarea. There are also Europeanheadquarters: Nabi Biopharmaceuticals forinstance, from Florida, recently set theirsup in Bray - and they’re not manufacturingat all, it’s just their European HQ andregulatory affairs. Or take Merck forexample; apart from their manufacturingplant in Tipperary - there’s a new centrewe backed last year involving theinitiation and management of clinical trialsacross Europe; plus regulatory affairs andtechnical market support.

So there’s a whole series of activities weare trying to attract to Ireland, not just inmanufacturing, though manufacturing hasdominated to date. But the key now is verymuch the backward integration, andgetting involved much more on thedevelopment side.

DO YOU STILL SEE MUCH SCOPE INATTRACTING MANUFACTURINGHERE? Definitely. But an important point here isthat manufacturing - or the expansion ofmanufacturing facilities - will be closelyallied to the technical competence of thefacility, and unless they have processdevelopment centres going back very earlyin the development cycles they will loseout. Whoever has that technical capabilitywill be working with the discovery peopleand the R&D people a lot earlier. We seethat as being a core strategic imperativefor the industry in Ireland.

IT’S INTERESTING THAT YOU STILLSEE MANUFACTURING MONEYAROUND IN SPITE OF OUR RISINGCOSTS HEREIf you look at investment over the last fewyears, say since 2002: Takeda haveexpanded their formulation facility in Braydramatically and are validating a brandnew facility in Grangecastle at themoment. Servier have just doubled theirfacility; Fournier have built a brand newdevelopment and formulation facility inCork; Janssen and Lilly are spending €100million and €200 million on sterile bulkfacilities; Pfizer have a series ofinvestments going on; Altanta, a Germancompany, is building a new formulationfacility –worth €80 or €90 million for thefirst phase in Cork; Centocor have spenthalf a billion in phase one development …so there’s still a very strong flow inmanufacturing coming in.

THIS IS MUCH MORE THAN JUST US-OWNED ‘BIG PHARMA’ THEN? Well 26 out of the top 50 companies arehere, but a lot of the projects in recentyears have also come from second and thirdlevel players. So there’s a steady flow ofprojects.

DO YOU SEE MOST FUTUREINVESTMENTS AS REMAININGMOSTLY MANUFACTURING LED ORWOULD YOU HOPE TO GET IN ATEARLIER DEVELOPMENT PHASES? It’s both sides really, it’s a dual strategy. Inthe process development side we would bein dialogue and support a number ofpharma companies in setting up processdevelopment facilities [e.g. the Julyannouncement involving Pfizer, BMS andGenzyme] so we’ll be doing more and moreScience Foundation Ireland projects, suchas BMS’ setting up in a new facility in DCU.We’ve had a number of visits fromcompanies looking at the more basicresearch but this is a more medium andlonger-term development plan.

IS IRISH RESEARCH NOW MAKING ANIMPACT INTERNATIONALLY? There’s no doubt about it, the Governmentis putting serious funding into it now, andthere’s no doubt we’re becoming muchmore visible on the international circuit. This year we’ve probably had five to sixlarge size companies looking at the initialstages and at basic research. We wouldn’thave had those visits before now.

ULTIMATELY DO YOU SEE US GOINGRIGHT BACK TO THE STAGES OFEARLY DEVELOPMENT AND FIRSTPHASES OF RESEARCH? Well, yes – that’s the eventual game and Iknow that’s going to be difficult, but wewould be encouraged by the flow ofcompanies we’ve had in to date, giving thisa serious look.

It’s a dual approach: you have to comefrom both sides… moving back in the pilotplant to phase one etc – that’s a must forthe industry. Manufacturing sites need tohave that technical capability to competewhen new drugs are coming down thepipeline, and corporations look to decide onwhere they will locate these facilitiesaround the globe. So you must have moreand more capabilities on site, it’s notenough just to have Ireland’s lower tax rate,because other jurisdictions have lower taxrates. The technical capability and thepeople become a far more critical piece ofthe whole thing.

WOULD THAT GIVE US ANADVANTAGE OVER LOCATIONS SUCHAS SINGAPORE AND PUERTO RICO?

24 IPHA Review

‘The fact that,of the top tencompanieshere, nine ofthe CEOs areIrish - that’s avery strongselling point,our trackrecord inexecution is abig attraction.’

with the traditional pharma we wantto ensure we repeat that as well onthe Biotech side. The IDA hasambitious targets in attracting worldbio players over the next few years,but you have to remember we have anumber of them already, so we’re onour way to it.

IN EUROPEAN TERMS, HAS THERISE OF SWITZERLAND ANDDECLINE OF GERMANPHARMACEUTICALS OVER THELAST TEN YEARS HELD LESSONSFOR IRELAND?Well Germany’s pricing environmentfor pharmaceuticals in particular, Ithink, would have annoyed a numberin the industry, though the USenvironment is now a hot spot forresearch. But one can only assumethat the German government did notsupport the industry to the degreethat other areas have.

DO YOU THINK MEDICINEPRICING AND PROMOTINGGENERICS WAS ACONTRIBUTARY FACTOR TOTHAT? I would have thought that the pricingpartly contributed. Certainly you readthings such as certain companieswouldn’t put activities in therebecause of the unfriendlyenvironment towards the industry,but the German economy overall has

To be at the table you have to havethat. It’s not a guarantee but you haveto have that. The more of a lead youhave, the greater the advantage. Andbecause they have lower taxenvironments, we have to havegreater capability.

SO THE FORMULA OFATTRACTING MANUFACTURINGAND ADDING RELATEDACTIVITIES STIILL HOLDS? Yes, but we would very muchencourage and incentivise newarrivals to set up developmentcentres from day one.

WHAT IS THE IDA’S BIGGESTCONCERN NOW? Increasing competition: countrieslike Singapore and Puerto Rico arebecoming more active in looking forbusiness. We need to havedifferentiation over those sites.

AS EVERYONE IS COMPETINGAND BENCHMARKINGINTERNALLY NOW? Yes.

WHAT’S THE IDA’S VISION FORTHE REST OF THE DECADE?We have so many of the bigcompanies here already, thatconstant reinvestment and addingnew facilities is a key area. Andbecause we’ve had so much success

suffered from cost competitivenessand lack of reform. At one stage theywere certainly very strong players.

Like anything there’s no oneparticular item – it’s a combinationof items. Most companies, whenlooking at investing around theworld, will typically look at ten ortwenty areas and will have a scoringsystem – so the availability of skilledworkforce, because of the regulatoryenvironment, is extremelyimportant; lower corporate tax; andhaving competitors there is often aplus.

A track record in FDA complianceis important. The last warning letterfrom the FDA in Ireland for pharmawas 1998 so that’s extremelyfavourable. Financial incentives playa role. A temperate climate can beimportant – for example; ‘are you ina hurricane zone?’. The humiditylevels and cost of air conditioningneed to be taken into account; alsobig bio plants, for instance, will needa million gallons of water a day. Thefact that professionals can liveanywhere and not just in expatriatesites, is an attraction here, as is thegrowing importance of the industry’sacademic collaboration.

The fact that of the top tencompanies here, nine of the CEOsare Irish. That’s a very strong sellingpoint, our track record in executionis a big attraction.

IPHA Review 25

IPHA Review 27

SUBJECT

BIOTECH

Biotech represents an importantpipeline for new medicines andan important strategic asset,writes Matt Moran

BIOTECH TAKES ROOT

Most commentators agree that the IrishBiotech Sector remains broadly ontrack for growth in the coming

decade. Ireland came relatively late to thebiotech table and has had to concentrate muchof its effort in putting the necessaryinfrastructure in place to support thedevelopment of the sector. Given thedependence of the Irish economy on so-calledlife science based industries such aspharmaceuticals, healthcare, chemicals,agriculture and food processing, it is of strategicimportance to the economy as a whole to havesuch a sector in place to ensure that thesesectors keep pace with global developments.

However, by its nature biotechnology is aslow business. The relative complexity of thescience involved, stringent regulationsunderpinned by the significant amounts offinance required, all conspire to make thedevelopment cycle for any biotech productlengthy. Nevertheless the rewards available aresignificant, while the potential threat to Irelandof not enhancing its existing pharmaceutical,healthcare and food sectors by applying biotechis also significant. With some commentatorsforecasting that up to 50% of all pharmaceuticalproducts will incorporate some aspect ofbiotechnology by 2020, it is imperative thatIreland has a seat at the biotech table. Irelandis not the only country or region in the world toarrive at this conclusion, however. A quick tourof the globe will yield myriads of biotechstrategies – from Singapore to California, fromBoston to Helsinki. The competition is tight andthe stakes are high. So how far has Irelandcome since the Technology Foresightdocument, which identified biotechnology andICT, as being the two primary areas that thecountry should invest in?

THE ROLE OF SFIThe establishment of Science FoundationIreland, with its emphasis on The LifeSciences, has provided a major boost tothe research base in this country. InNovember of 2004, the Irish BioIndustryAssociation (IBIA), in collaboration withSFI, co-hosted a networking event whereSFI funded researchers were given theopportunity to present their work to theindustry. A wide array of activity was onshow which was followed up with areturn event in May 2005 where theindustry presented to the researchcommunity. There has been a majorincrease in research activity; theestablishment of a network of PRTLIfunded research institutes hascomplimented this. The SFI fundedCentres for Science Engineering andTechnology have served to attract someserious investment by the private sector.The key challenge that remains will bethe effective commercialisation of thisresearch activity - an increase in patentfilings followed by a boost to start-upactivity needs to take place if the biotechsector is to take root in this country.

Industrial development agencies,Enterprise Ireland and IDA Ireland, haveboth incorporated biotechnology into theirown strategies for industrialdevelopment. The IDA has had somesignificant successes in this regard withWyeth, Genzyme, Genemedix andCentacor all investing inbiomanufacturing facilities in Ireland. TheNational Institute for BiotechnologyResearch and Training (NIBRT) beingproposed by Government will serve to

“With somecommentatorsforecasting thatup to 50% of allpharmaceuticalproducts willincorporatesome aspect ofbiotechnologyby 2020, it isimperative thatIreland has aseat at thebiotech table.”

28 IPHA Review

further embed the burgeoning biopharmasector by supporting process developmentactivities.

On the indigenous side there have been anumber of successes in the medicaldiagnostics sector: Trinity Biotech, Biotrinand Tridelta, being notable examples.Founder and CEO of Biotrin, Dr. Cormac Kiltyled a management buy-out of that company,and it continues to be profitable. Newer tothe scene are Luxcel Biosciences which hasspun out of UCC. Headed by RichardFernandes, it is developing a range offluorescence–based oxygen sensitive tests. InGalway, nEUtek Bio is developing a range ofdiagnostic tests for measuring low levels ofinterferon. Trinity based company, Identigen,have commercialised a DNA labellingtechnology which can be used to provesource of food based products. Known asTraceback, it has been adopted by the retailsector who use the product to guarantee BSEfree meat products. Meanwhile Archport, acontract manufacturing company has beenspun out of Dublin City University.

A number of funding announcements in2004 have given a further boost to thefledgling indigenous sector including MerrionBiopharma, Opsona, Genable, Eirx, AGI andNeurocure. A number of high-tech start-upsare coming to the fore and one could beoptimistic that first round funding is beingachieved. It is now important that thesecompanies grow to the scale that they will beable to attract significant second roundfunding - it is likely that they will need tolook overseas as well as to local finance.

CONCLUSIONSo what can one conclude from all this?Biotechnology certainly is taking root inIreland - for these young, often delicateroots to grow into something more robustand long term, a number of things need tohappen:

1. Government must be patient and retainits commitment to biotech2. SFI should continue funding theresearch infrastructure, applying rigorousstandards - facilitating private sectorinvolvement where possible3. Multi-national companies need to besupported in their efforts to diversify intoprocess development 4. Commercialisation of R&D needs to befacilitated and encouraged5. Strong alliances must be built with otherbiotech centres such as parts of the US andScandinavia6. Start-ups need to be nurtured andsupported, Government needs toincentivise the provision of risk capital

If the items on this shopping list are tickedoff over the coming months and years,biotech will re-pay the country for showingfaith in it. If Ireland is to retain its pharmasector in the long term, it is vital thatbiotechnology is nurtured in this countrywell into the future.

Matt Moran is director of IrishBioIndustry Association (IBIA) andPharmaChemical Ireland

“Biotechnologycertainly istaking root inIreland - forthese young,often delicateroots to growinto somethingmore robustand long term,a number ofthings need tohappen.”