Why the Italian pharmaceutical sector is worth your attention: the liaison amid financial solidity and sustainable innovation
Authors: Alessia Caputo and Ludovico Gandolfi
The outburst of the Covid-19 pandemic has led to unexpected changes both in the social life and the shared perception of health. The need for a vaccine capable of dismantling the dreadlock, alleviating the consequences of the widespread lockdowns, and allowing for a full economic restart through the creation of an immune pool has immediately taken on a key role in the pandemic. Under this scenario, the pharmaceutical industry didn’t hesitate and reached unheralded results, with the production of different vaccine formulas in record-breaking times.
However, these astonishing results have been attainable because the economy of the most developed countries -during the past decades- has been increasingly characterized by a focus on research and development-intensive sectors with the enhancement of highly qualified human capital.
For instance, since 2008, while the Italian economy has struggled to recover and emerge on the international scene, the pharmaceutical industry and supply chain represented a flagship for our country, an example to be taken as a role model for the future development of the Made in Italy (Fondazione Astrid, 2015).
The disruptive potential of the Italian pharmaceutical industry
Over the last 50 years, Italy has experienced a decreasing mortality rate, a common feature in the majority of the HIC. The quality of the public health care system (SSN — Servizio Sanitario Nazionale) is a driver of the better life expectancy in the country. However, it is not the sole responsible.
The Italian pharmaceutical sector managed to thrive and prosper, and in 70% of the cases, better life quality is due to drugs and vaccines (Farmindustria, 2018).
The Euro area always played a key role in this industry as it accounts for 50% of the worldwide share of pharmaceutical products.
However, while Italy stands in the 6th position among exporters, the 2009–2019 evolution of the sector yielded +180% in the country, thus doubling the EU28 average, which stopped at a +90% threshold (Farmindustria, 2018). Investments in R&D enforced the positive trend, in fact since 2013, while the EU28 investments increased by 20%, the Italian ones increased by 30%, with 40% of the capital implied coming from domestic investors (Farmindustria, 2020).
The performances of this Italian industry do not apply only to the financial side. Indeed, the solidity is also displayed through a high youth employment rate.
As a matter of fact, the number of employees under the age of 35 increased by 20% since 2013. Furthermore, the industry seems to be succeeding in one of its main achievements: reduce the gender gap, as half of the employees appear to be females (Farmindustria, 2020).
Checking the industry reports and various firms’ balance sheets gives a clear idea of how solid and healthy this productive sector is. Moreover, in comparison to other manufacturing or industrial realities in the country, the pharmaceutical sector plays a pivotal role in stimulating modernization throughout the Italian economic scenario.
An overlook of the key players
At this point, it is appropriate to look in more detail at some of the companies that make the Italian pharmaceutical sector a global excellence. The industry consists of 60% multinational companies and 40% domestically owned companies. But which Italian companies are the protagonists of the national scenario?
Particular attention should be paid to Menarini, the Italian company with by far the highest turnover, amounting to 3.8 billion euros in 2019, with an increase of 3.2% compared to 2018, and EBITDA of €492 million (Menarini, 2015). Founded in 1886, Menarini operates in 140 countries (Menarini, 2015), with Italy, Germany, and Russia topping the list by turnover.
Yet clear signs of growth come from the Asia Pacific area: in China (58 million euros invoiced + 42%) and Thailand (65 million made, +26%). Another “family jewel” is Central America, on which Menarini is focusing with growing results (Quotidiano Sanità, 2019). The company offers a full portfolio of products in the cardiovascular, gastroenterology, metabolic, infectious diseases, and anti-inflammatory/analgesic therapeutic areas (Cision PR Newswire, 2020). Menarini is also committed to oncology, with several new investigational drugs in development for the treatment of a variety of tumors (Cision PR Newswire, 2020).
In 2018, Chiesi Farmaceutici ranked second with sales of €1.791 billion, which grew to €1,992 billion in 20197. Group revenues in 2019 increased by 12.7% compared to 2018 and EBIT increased from €362. 7 million in 2018 to €424.7 million in 2019 . Among the therapeutic areas, the respiratory products portfolio remains the most relevant for Chiesi, with revenues of €1,213.5 million in 2019 (Chiesi, 2017). The pharmaceutical company was founded in 1935 when Giacomo Chiesi, a chemist, opened his small laboratory in Parma. Today, 29 subsidiaries operate worldwide, with 3 production sites and 5 research centers (Chiesi, 2017). A characteristic aspect of the company is its strong focus on sustainable business, to the point that, in 2018, the company decided to adopt the legal form of a Benefit Company (Chiesi, 2017). An example of the pharmaceutical company’s engagement to the environmental cause is its commitment to become carbon neutral by the end of 2035 (Chiesi, 2017).
The attention to social issues reflects maximum levels among its competitors. Furthermore, the company ranks first among pharmaceutical companies in Italy and thirteenth in Europe for investments in research and development (Chiesi, 2017).
The Italian economic fabric is historically composed of small and medium-sized enterprises. The Italian pharmaceutical sector also boasts world-class excellences which, however, cannot compete in terms of turnover with the large multinationals, but whose specific and sectorial expertise makes them one of the jewels in the industry’s crown.
This is the case of Kedrion Biopharma, a company founded in 2001 by Guelfo Marcucci following the restructuring of the Sclavo company. Kedrion Biopharma is a biopharmaceutical company that collects and fractionates plasma with the aim of producing and distributing worldwide plasma-derived drugs for the prevention and treatment of rare and debilitating diseases and conditions such as Hemophilia, Primary Immunodeficiencies, and Rh sensitization8.
Although the headquarter has not been moved from its original location in Tuscany, Kedrion has been able to gain a foothold in the global market and today it is the fifth-largest supplier of plasma-derived products in the world, contributing to meeting the therapeutic needs in about 100 countries (Kedrion Pharma, 2018).
Kedrion closed the fiscal year 2019 with record sales of €808.2 million, up 17.5% year-on-year (Kedrion Pharma, 2018). The U.S. market represents the group’s top market with 43.5% of turnover followed by Europe with 31.5% and the rest of the world (Kedrion Pharma, 2018). In line with the progressive internationalization process aimed at strengthening the presence of the company in the main international markets, the export share achieved in the fiscal year 2019 is 80.2% (Kedrion Pharma, 2018).
Effectively Creating Shared Value: the Chiesi Farmaceutici example
The sensitive role played by the pharmaceutical industry worldwide forces its players to invest considerable resources toward the social impact of the firm. Indeed, since the beginning of the shift driven by Porter&Kramer theories -which pushed toward a more significant corporate responsibility- the pharmaceutical industry embraced more tangible measures. The aim is not merely to impact reputation, but to create value which can be shared among the non-market stakeholders (HBR, 2011).
An analysis of the firms’ relative social impact thus cannot be avoided and all the aforementioned firms, in pursuing their own tailored forward-looking strategies, do not forget to incorporate factual investments on this issue. Among the aforementioned firms, Chiesi Farmaceutici stands out positively for its monumental sustainability campaign, steered by the “WeACT — We Actively Care for Tomorrow” program.
Under its framework, strategy and sustainability go hand in hand and in line with Chiesi’s values and mission to combine a commitment to results with integrity, operating in a responsible manner both from a social and environmental point of view (Chiesi Farmaceutici, 2021).
Chiesi’s sustainability manifesto materializes itself through multiple channels, among which we observe: environmental responsibility, employees wellbeing, transparency, ethical codes, links with the International Agenda and supply chain sustainability.
The most important association is with the Chiesi Foundation, whose commitment is to improve the health and relieve the suffering of patients with respiratory and neonatal diseases in countries where the company does not commercialise its products and where access to quality healthcare is not always guaranteed. An example of the Chiesi Foundation’s action is the NEST (Neonatal Essential Survival Technology) model, which aims to reduce neonatal mortality rates by improving the quality of healthcare in countries with limited resources (Chiesi Foundation, 2021).
Final remarks: what to do next?
The excellent positioning of the Italian pharmaceutical sector in the international scenario should not, however, be taken for granted. Research is a key factor of international competitiveness for an industry that is now organized on a global scale but operates in markets that are strongly regulated on a national scale, with substantial differences in the structure of final consumption, regulatory systems, and prices (Fondazione Astrid, 2015). Thus, the challenge of the future is to build an ecosystem capable of providing market regulation that ensures stability, responsiveness, and adaptability to innovation.
However, this sector seems to achieve commendable results and the stocks’ values of Italian pharmaceutical companies did nothing but grow in recent years, although based on the solidity exposed through the previous evidence.
We have reason to believe that this Italian industry will continue on a positive path and will offer great investment opportunities for both foreign and domestic investors. Moreover, we firmly believe that this industry could play a key role during the aftermaths of the pandemic in boosting the Italian economy, now fatigued by the recent crisis.
References
Fondazione Astrid. (2015). Investire e crescere in ITalia: il ruolo dell’industria del farmaco. Sanita24.ilsole24ore. Retreieved from: https://www.sanita24.ilsole24ore.com/pdf2010/Editrice/ILSOLE24ORE/QUOTIDIANO_SANITA/Online/_Oggetti_Correlati/Documenti/2016/03/18/ASTRID.pdf?uuid=ACEVwppC
Farmindustria. (2018, July). I numeri dell’industria farmaceutica in Italia. Retrieved from: https://www.farmindustria.it/documenticategory/i-numeri-dellindustria-farmaceutica-in-italia
Farmindustria. Indicatori farmaceutici 2020. Retrieved form: https://www.farmindustria.it/app/uploads/2017/12/028_IF_DEF4-web_20072020-PUBLIC.pdf
Cision PR Newswire. (2020, June 10). Menarini Group Completes a Solid Year of Operating Performance. Prnewswire.com. Retrieved from: https://www.prnewswire.com/news-releases/menarini-group-completes-a-solid-year-of-operating-performance-301073785.html
Menarini (2019). Il gruppo Menarini. Menarini.it. Retrieved from: https://www.menarini.it/il-gruppo-menarini
Quotidiano Sanità (2019, March 16). Farmaceutica. Menarini, crescono fatturato (+1,6%) e dipendenti — Quotidiano Sanità. Quotidianosanita.it. Retrieved from: http://www.quotidianosanita.it/scienza-e-farmaci/articolo.php?articolo_id=72003
Chiesi (2019). The Way we Act. Report di sostenibilità. Chiesi.com. Retrieved from: https://www.chiesi.com/chi-siamo/annual-report-e-csr/
Kedrion Biopharma (2019). Annual Report 2019. Kedrion.it. Retrieved from: https://www.kedrion.it/sites/www.kedrion.it/files/Annual%20Report%202019_ita.pdf
Harvard Business Review (2011 January). Creating shared value. Retrieved from: https://hbr.org/2011/01/the-big-idea-creating-shared-value
Chiesi Farmaceutici — Sostenibilità. Retrieved from: Www.chiesi.com
Chiesi Foundation. Retrieved from: https://www.chiesifoundation.org
