Will the new investment of Boehringer Ingelheim in Greece succeed?
Introduction
One of the major companies in the pharmaceutical sector is Boehringer Ingelheim [1][2]. An international family owned company established in 1885 with 50.000 employees globally. Company began with less than 30 people employed to manufacture tartaric acid salts. Now, more than 125 years later, the company operates globally with 145 affiliates announcing 18,997 millions in world sales. Since the beginning, this privately-held company has been investing in research and development, manufacturing and marketing novel treatments for human and veterinary medicine.
It is listed in the top 20 [3] in its field and the Greek department represents the 1% of national exports. Its expertise spreads among biopharmaceutical, animal health and of course human pharmaceuticals. The latter have created 72% of total net sales in 2018. The most important medicines are:
· SPIRIVA bronchodilator
· PRADAXA anti clot
· JENTADUETO, TRADJENTA and JARDIANCE are the leading diabetes medications in cooperation with Eli Lilly and Company.
In January 2011[4] Boehringer Ingelheim International and Eli Lilly & Company announced their agreement for the development and marketing of new APIs for the therapy of diabetes. This cooperation aimed to get the US FDA permission for the type 2 diabetes, something that finally happened in June 2019[5]. This venture took place due to a very high demand in the US market.
To cover that demand BI decided to invest 40 million in Greek new production [6][7]plant. 70% of the diabetes production was the goal through this new investment in Greece. This last point will be analyzed through my IA.
Sector overview
Pharmaceutical industry has a broad area of business activities where the main elements are
a. Research and development (R&D),
b. Regulatory submission and launch
c. Sales and marketing (S&M),
d. Investment collection and reinvestment.
To maintain growth, these companies owe to increase income, through a sequence of delivery of new drugs and optimize expenditures (e.g., R&D and S&M expenditures) through increased productivity. This does apply to the majority of industries as well, but there are two significant differences. First the pharmaceutical companies must gain the official approval of the targeted regulatory authorities of each country before a drug is released. This is obtained only after a thorough and very demanding series of clinical trials. As a result, the success rate from drug discovery to drug launch is roughly 14%[8], while the research period takes an average of 14 years. Out of this period, clinical trials take an average of seven years for completion plus an enormous cost of 63% of the overall expenditures. As regulatory requirements to ensure safety and efficiency become more and more demanding, the success rates of clinical trials decline and the R&D costs increase. For that this industry sector is continuously challenged with the delivery of new products.
Secondly there is a strong relation with the governmental lobbies, and health insurers who intervene in the pricing policy. The profitability of the pharmaceutical industry has to be on a positive slope as healthcare budgets and expenditures increase for a rapidly aging society, confront new diseases and mitigate the influence of the well known. Additionally, the price of a drug tends to decline after its patent expires and generic drugs are launched. Meanwhile, when a drug fulfills unmet medical needs there is a very high margin for profits. For that, innovation has to be the first priority. That clearly involves concentrating in two aspects. That of the innovation process in science and another in the innovation capability-building strategy. [10]
But with no arguments each company is developing and “living” in a specific environment and has to follow the policy each government sets. The pharmaceutical sector in Greece seems to stand out amid a poor National Research and Innovation System, with a strong patenting performance and a significant increase in its R&D and has the potential to do even better, with appropriate policies. It seems that Greece is on that truck so reducing the investment risk for this sector.[11]