Which is the company that, worldwide, invests more in research and development (R&D)? It is Alphabet (controlling holding of Google) with 23,2 billion euros (2019). We find this and other answers by consulting the precious - it is appropriate to say - "The 2020 EU Industrial Investment Scoreboard" published by the European Commission, which surveys the 2500 companies in the world that have invested the most in R&D. The latest edition published is that of December 2020 and shows the data as at 31 December 2019.
Is one Scoreboard which helps to shed light, in general, on a fundamental question: what is the position of the European Union (EU), compared to its main competitors (USA, China, Japan, and beyond), in the most innovative sectors of the economy world? But in times of pandemic, fight against the virus and mass vaccinations, this ranking lifts the veil on another gigantic issue; or, the dynamics taking place in the crucial pharmaceutical industry. This industry ("Pharmaceuticals and Biotechnology") is present with many companies in the ranking in question together with companies from other high-tech sectors, such as (we mention): "Software & Computer Services", "Technology Hardware & Equipment", “Electronic & Electrical Equipment”, “Software & Computer”, “Automobiles & Parts”.
The pharmaceutical industry, one of the pillars of world R&D
Seen from Europe and Italy, the (gigantic) question mentioned above becomes particularly sensitive considering the American success in the discovery of first vaccines against Covid-19: a good three out of four (let's stop at those approved to date by the European regulatory authorities), even if in the development of the first (Pfizer) very significant, as is widely known, was the contribution of a German company born as a technology start-up in Mainz in 2008 (BioNTech). Americans are then those of Moderna and Johnson & Johnson, while the AstraZeneca vaccine is European.
At this point, the question becomes: investments in R&D, as they result from Scoreboard, justify – above all, in quantitative terms – this result? Or does the response to the US-EU gap also bring other factors into play?
In the extensive ranking made available by the Brussels Commission, we focus our attention on the top 100 companies: or rather, on the top 100 R&D investors in the world. Well, as many as 23 companies of this elite belong to the "pharmaceutical and biotechnology" industry. Of course, the ICT world as a whole places a greater number of them but, as we said before, all these companies are in turn divided into many different specializations (hardware, software, etc.). In short, in the transition between the second and third decades of the XNUMXst century il Big Pharma confirms itself as one of the main engines of global research spending. This fact is confirmed by the so-called "research intensity" (the ratio between investments in R&D and turnover), which fluctuates around 20% for pharmaceutical and biotechnological companies.
The geographical distribution of these 23 companies (groups) brings us closer to the point of contention: US leadership in the vaccine race. Well, 10 are American, 5 from EU countries, 4 from non-EU European countries and, finally, 4 are Japanese. More in detail:
- the first in the ranking - compiled by absolute value of investment in R&D - is the Swiss Roche (almost 11 billion euros invested in 2019), which gains the ninth position overall (after Alphabet, Microsoft, Huawei, and so on), but which is not involved in the world of vaccines;
- the second (and tenth overall) is Johnson & Johnson with 10,1 billion spent on R&D.
The other large groups that, to date, have had success with their vaccines are placed like this:
- Pfizer is the sixth largest company in the world of this sector for investments in R&D (7,4 billion euros) and sixteenth in the general ranking;
- AstraZeneca is twelfth (4,8 billion euros) and thirty-second in the general ranking;
- finally, a very special case is that of Moderna, the company born in 2010 in the heart of the most important university city in the world (Boston). Moderna Inc. is not in the list of "top 100" companies – used here – and it is not even among the top 200 and 300, placing itself only (so to speak) in 375th place in the complete ranking of the 2500 from EU sources. But what matters is its marked specialization, since birth, in "mRNA technology" and its spectacular ratio between R&D expenditure (388,2 million euros) and turnover (53,6 million), equal to 724,3 %.
The race for the vaccine and the US-EU divide
To continue our attempt to give an initial answer to the question on the US-EU gap, it is now advisable to aggregate the data by macro-area. The ten American companies of the Big Pharma invested 54,3 billion euros in R&D in 2019, against 17,3 billion invested by the five EU (1 French, 2 German, 1 Danish, 1 Irish) and against 28,3 by the four non-EU ( 2 Swiss, 2 British, including AstraZeneca which lo Scoreboard census in the UK). If we add the EU and non-EU values to obtain a (theoretical) "Europe" value we arrive at 45,5 billion euros, not far from the over 50 billion Americans.
But is it reasonable to make this sum? No, because EU policies to fight the pandemic - from contracts for the purchase of vaccines (with their defects) to the Next Generation EU (with its opportunities), passing through the suspension of the Stability Pact, etc. - concern the 27 member states. Just as Community programs to support public and private scientific and technological research (think of Horizon) are conducted at EU level. Here then is that the gap between US and EU investment is considerable. We can then repeat the exercise by aggregating, again at macro-area level, the turnovers: 313 billion euros for the 10 American companies against 128 billion for the 5 EU (for the record, there are 162 billion for the 4 non-EU , thanks above all to the two Swiss giants, Roche and Novartis)
This does not mean that there are no excellent pharmaceutical companies in EU industry; on the contrary, the opposite is true if we think – to remain with the two largest ones – of the therapeutic areas covered by the products of Sanofi and Bayer. And the same can be repeated for the many technological excellences present in the Italian pharmaceutical industry, which as a whole - the data released by Farmindustria tell us - is worth "34 billion euros of production" and "invests more and more in R&D: 1,6, XNUMX billion euros”. Significantly, it is an industry that is now working on developing its own vaccines.
Nowadays, then, there are many European and Italian pharmaceutical industry companies which, respectively, Commissioner Thierry Breton and Minister Giancarlo Giorgetti are involving in the effort to produce, on our territory and under license, the many doses of vaccine that are missing to mass vaccination becomes a reality. And just last Friday, Prime Minister Mario Draghi, visiting the Fiumicino immunization center, announced the “first contract between an Italian company and a company that owns a patent” for the production of a vaccine in Italy.
European industrial policy, "European Champions", and CERN of medical-pharmaceutical research
To recap. Even without neglecting the positive aspects, it is difficult to escape the impression that, seen from a global perspective at the time of the pandemic, in the case of the EU pharmaceutical industry we are faced with what Ferruccio de Bortoli called "Small Pharma: small is not beautiful when there is a pandemic”. Overall, quoting Romano Prodi, the current situation has been stigmatized as “a defeat for the European pharmaceutical industry” (The Economy of the Corriere della Sera, 8 March).
So what is it that went wrong? Or, at least, did it not go as it would have been desirable? In short, the quantities involved (different levels of R&D spending and pharmaceutical industry turnover) on both sides of the Atlantic explain a lot but do not explain everything. And part of the answer lies, perhaps, in institutional aspects (Postgraduate Course ) and, if you will, in the rules of the game.
We certainly have something to learn from the way in which the relationship between the US federal government and pharmaceutical companies developed once the new coronavirus exploded; relationships that have materialized in the promptness with which the (conspicuous) public funding necessary to develop, in unimaginable times until the beginning of 2020, effective and safe vaccines respecting the fundamental three trials clinicians. AND we have something to learn from the American way to the development of technological start-ups thanks to the virtuous relationship between academic research, entrepreneurial activity and the financial system with the action of venture capital and private equity funds. But even looking at our home – the EU – we all have something to learn. Three stylized facts, among many.
First. The late Professor Alexis Jacquemin, former economic adviser to Jacques Delors at the presidency of the European Commission, underlined (I quote verbatim) "the need to formulate a concerted European industrial policy that will make it possible to go beyond sectoral strategies along national lines, to reduce the existing barriers between large national companies (…) ”
If this need was true then (Jacquemin's text is from 1987), it is - I believe - even more so today with a Union enlarged towards the East: a Union which is the largest single market in the world and which thus offers businesses that "(well) level playing field" on which to implement forward-looking growth strategies.
Second. The "European Champions" represent the natural outcome of these dynamics. In my previous works on European industrial policy, such as the monograph published with Routledge, I was able to classify these Champions into two types: those that can be born in the manner of Airbus and STMicroelectronics (collaboration between European governments pooling their respective assets in a given industry); and those that can arise from mergers and acquisitions on the market (integrating companies operating in the same core business, as in the recent cases of EssilorLuxottica and Stellantis, and not pears with apples). And next to the Champions start-ups in cutting-edge technologies must be cultivated, paying particular attention – today more than yesterday – to life sciences (think of the experience of the Italian Genextra, which invests on an international scale).
Third. Finally, many lessons can be drawn from the success story of CERN in Geneva, which offers an extraordinary example of the virtues of cooperation between several countries in the fields of science that lie along the frontier of technological progress. We are talking about that basic research where the efforts required in terms of capital endowment – human, financial, technological – they often go far beyond the possibilities of individual nation states. We can try to put it this way: in the beginning was particle physics; today is - and tomorrow still will be - medical and pharmaceutical research against all coronaviruses.
