Why is Switzerland a Life Sciences Hotspot?

From 2019 to 2020, capital investments in Swiss biotech companies nearly tripled, hitting $3.7bn, with R&D spending increasing by 10%, with the health and technology sectors in the country being among the least affected by the pandemic.

What makes Switzerland such a strong life sciences location and why?

Overview

The life sciences industry in Switzerland is made up of a variety of companies, with a large number of biotech, medtech, and pharma companies operating in the region.

In 2021, research-based Swiss biotech companies created 8% additional jobs within the year and employed a total of 16,300 people.

First-class patent applications also contributed to Switzerland’s top ranking in the Global Innovation Index, and R&D investment increased by 10% to 2.2bn Swiss francs.

Beyond being a vital contributor towards Covid-related projects, Swiss life sciences companies also continued to invest considerably to expand their R&D and manufacturing infrastructure, bolstered by investment.

In Greater Zurich, Swiss and international startups are thriving, particularly US businesses looking to accelerate their growth in Europe.

The productivity of the Swiss pharma and biotech sector is seven times higher than that of the global economy – suffice to say that Switzerland’s appeal as a life sciences hotspot is only going to increase.

Legislative benefits

Back in 2020, Switzerland introduced new tax legislation that allows Swiss cantons to offer the beneficial ordinary corporate tax rates and incentives for manufacturing and R&D jobs.

Additionally, this legislation allowed the reasonable taxation of intellectual property income from patents, technology, or trademarks.

Switzerland’s high volume of tax autonomy is undoubtedly attractive to life sciences businesses, who must carefully consider the ongoing changes to international tax and regulations.

Innovation-related tax incentives in the form of R&D tax deductions are a strong element of tax relief measures in Switzerland to boost life sciences innovation in the area.

The level of additional R&D tax deduction does vary from canton to canton but could potentially provide up to an additional 50% deduction against taxable income on qualifying R&D expenses.

Global biotech hub

The Swiss biotech industry generated revenues of $4.92bn in 2020, which was Switzerland’s best year for biotech in relation to financing activities with $3.71bn raised.

Switzerland’s biotech sector has grown by a factor of 4.5 since 2000, with Swiss life science exports valued in 2020 at $108bn and accounting for 44% of total exports (compared to 17% in 2000) making it the strongest single driver of Swiss export growth.

A key contributor to Switzerland’s global biotech status is the diversity of its education landscape – universities, university of applied sciences, Swiss Federal Institutes of Technology – which contribute highly qualified talent and widespread collaboration opportunities.

There has also been an increase in approvals by the FDA in Switzerland, with 57 approvals in 2020 (compared to 48 in 2019), all granted within a review period of less than a year.

Collaboration has also been strong in Swiss biotech.

For example, Moderna and Lonza’s collaboration to manufacture Moderna’s vaccine (mRNA-1273) against coronavirus, or Genedata and the Crohn’s & Colitis Foundation’s collaboration to improve patient care in Crohn’s disease.

The pandemic has shifted the way in which negotiations and cooperation agreements conclude in biotech also, with increased efficiency across collaborations and more productive processes than pre-pandemic.

Switzerland focuses heavily on innovation support for biotech companies, making it an ideal location for biotech companies looking to establish themselves.

Robust pharmaceutical industry

Over a third of Swiss exports come from the pharmaceutical industry, making it integral to the Swiss economy.

From multinational corporations (e.g., Roche and Novartis) to smaller pharmaceuticals, pharma companies benefit from highly skilled employees and excellent infrastructure in Switzerland.

Switzerland is also the country with the largest export surplus of pharmaceutical products worldwide, making it an important production location.

The globally leading universities in Switzerland also contribute towards research-oriented pharmaceutical companies to make it a prime location for research.

In pharmaceutical research, an average of 48 patents per million inhabitants and year were registered from Switzerland between 2014 and 2018.

Interestingly, there is a considerably low staff turnover rate in Swiss pharma companies, particularly lab technicians, in part due to the tendency for permanent employment as opposed to locations such as the US where many researchers are not employed permanently.

Add in the value creation within the Swiss pharmaceutical industry – which has continued to increase more significantly than any country – and it’s no surprise why Switzerland’s pharmaceutical companies have such an excellent reputation.

Medical technology innovation

Medical technology is a global industry, yet Switzerland is often targeted as a key production location due to the specialisation, precision and high quality of Swiss medtech.

The combination of innovative startups, global companies and leading universities make Switzerland a unique medtech location.

With 2.9% growth p.a. (from 2012 – 2019) and 6% sales growth p.a. (2012 – 2019), on average over the last 10 years, medtech has contributed 2% to Swiss GDP and 5.5% total export value.

Many of the numerous medtech companies are world-class, specialising in areas such as implants, hearing aids, lab instruments and non-invasive surgical systems.

Companies located in the prominent medtech clusters – Basel, the Lake Geneva region, the St. Gallen-Lake Constance area, and Bern – are issued around 1,200 patents every year.

With such an impressive workforce and high investment in R&D, Swiss medtech has a reputation for highly engineered technologies for good reason.

This highly skilled workforce is integral to Swiss medtech and the wider life sciences scope in Switzerland, as such a specialised labour pool maintains innovation and continues to share knowledge.

In conclusion

The Swiss life sciences market has continued to thrive despite uncertainty about post-pandemic recovery in the industry.

With such a dedicated and skilled workforce, continued innovation is to be expected across the sectors of life sciences, and when combined with attractive tax autonomy, it can be expected that life sciences companies will continue to find Switzerland to be the ideal life sciences hotspot.

New collaborations and efficiency with processes will undoubtedly only increase productivity and advances in Swiss life sciences.

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