Investment Location Final Report

Prepared For:
European Federation of Pharmaceutical

Industries and Associations (EFPIA)
Leopold Plaza Building, Rue du Trone 108
Brussels, B-1050
Factors affecting the location

of biopharmaceutical
investments and implications
for European policy priorities
Final Report
Prepared By:
Tim Wilsdon, Hannah Armstrong, Antun Sablek

and Peter Cheng
Charles River Associates
8 Finsbury Circus
London EC2M 7EA
Date: 3 October 2022
CRA Project No. D36423

Factors affecting location of biopharmaceutical investments and implications for European policy
November 22 Charles River Associates
Table of contents
Abbreviations ................................................................................................................................. i
Executive summary ...................................................................................................................... 1
1. Introduction ........................................................................................................................... 5
1.1. Background ................................................................................................................ 5
1.2. Methodology ............................................................................................................... 7
1.2.1. Literature review ............................................................................................. 7
1.2.2. Data analysis .................................................................................................. 8
1.2.3. Interview programme ...................................................................................... 9
1.3. Structure of this report ................................................................................................ 9
2. Trends in investment in R&D, clinical trials, and different types of manufacturing ..... 10
2.1. Trends in R&D expenditure ...................................................................................... 10
2.2. The location of clinical trials...................................................................................... 15
2.3. The location of investigational and commercial manufacturing ................................ 19
2.4. Foreign direct investment and exports ..................................................................... 22
2.5. Summary .................................................................................................................. 24
3. Factors driving the location of biopharmaceutical R&D and investigational and

commercial manufacturing ................................................................................................ 26
3.1. Research hubs ......................................................................................................... 26
3.2. Clinical trials ............................................................................................................. 31
3.3. Investigational and commercial manufacturing sites ................................................ 38
3.4. Summary .................................................................................................................. 49
4. Attracting greater biopharmaceutical inward investment in Europe ............................. 52

4.1. Addressing Europe’s relative decline in attractiveness as a centre for
biopharmaceutical investment .................................................................................. 53
4.2. Responding to the impact of new therapeutic solutions on dynamics and location of
investment, using ATMPs and digital technologies as examples ............................. 60
4.3. Learning from COVID-19 and managing risk and the external environment ............ 69
Appendix ...................................................................................................................................... 74
Final Report Page i

Table of figures
Figure 1: Pharmaceutical companies’ R&D expenditure is growing in all major markets,

but fastest in the US and China ................................................................................ 12
Figure 2: The US and China represent a growing share of biopharmaceutical R&D
investments made in major markets ......................................................................... 13
Figure 3: Pharmaceutical R&D employment has grown at a much faster rate in China than
in other major markets .............................................................................................. 14
Figure 4: US continues to outcompete Europe, China and Japan as the most attractive
location for industry-sponsored clinical trials*........................................................... 16
Figure 5: The location of Advanced Therapy Medicinal Products (ATMP) clinical trials
differ from the overall geographic pattern of biopharma clinical trial activity ............ 18
Figure 6: Relative growth in pharmaceutical manufacturing (including APIs and generics)
is greatest in China ................................................................................................... 21
Figure 7: The number of facilities capable of producing ATMPs is highest in the US....... 22
Figure 8: Europe as a region still attracts more pharmaceutical greenfield FDI projects
than the US or China ................................................................................................ 23
Figure 9: Europe has retained its position as the biggest exporter of pharmaceuticals
compared to the US, China and Japan over the last decade ................................... 24
Figure 10: The US and China are the top performers in more investment performance
metrics than Europe, exhibiting stronger growth trends ........................................... 25
Figure 11: The majority of large multinational pharmaceutical companies now have an
R&D centre in China ................................................................................................. 29
Figure 12: There has been strong growth in the number of clinical trials employing digital
technologies or virtual interactions ........................................................................... 35
Figure 13: The location of clinical trial sites and commercial sales of first cell therapies are
similar ....................................................................................................................... 38
Figure 14: The decision of where to locate manufacturing activities depends on which
type of activity is being undertaken .......................................................................... 40
Figure 15: Summary of factors driving the location of biopharmaceutical investments .... 51
Figure 16: NIH spending per capita is greater in the strongest US bioclusters................. 54
Figure 17: Horizon 2020 research spending in Europe is not concentrated in Member
States with high R&D activity.................................................................................... 55
Figure 18: Individual European clusters are outcompeted by those in the US based on
presence of major biopharmaceutical companies .................................................... 56
Figure 19: There is a degree of interconnectivity in the value chain for ATMPs, between
research, clinical development and manufacturing .................................................. 61
Figure 20: Europe’s strongest biopharma R&D centres do not rank highly on digital
competitiveness ........................................................................................................ 68
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Table of tables
Table 1: Guidance regarding regulatory requirements for local clinical trial evidence
appears to be relatively uniform ............................................................................... 32
Table 2: Global pharmaceutical companies typically conduct R&D across a range of major
markets, including their headquarter location ........................................................... 58
Table 3: Kearney FDI Confidence Index rankings show investors remain most confident in
the US market........................................................................................................... 74
Table 4: Sixteen biopharmaceutical investment case studies were reviewed during the
interview programme ................................................................................................ 75
Final Report Page iii

Abbreviations
AMR antimicrobial resistance

API active pharmaceutical ingredient
ATMP advanced therapy medicinal product
CAGR compound annual growth rate
CDMO contract development and manufacturing organisation
CH Switzerland
CHMP Committee for Medicinal Products for Human Use
CMC chemistry, manufacturing and controls
CMO contract manufacturing organisation
CRO contract research organisation
EMA European Medicines Agency
EU European Union
FDA Food and Drug Administration
FDI foreign direct investment
HTA health technology assessment
IMP investigational medicinal product
IP intellectual property
NGO non-governmental organisation
NIH National Institutes of Health
R&D research and development
RWE real-world evidence
UK United Kingdom
US United States
WHO World Health Organization
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Executive summary
The European Federation of Pharmaceutical Industries and Associations (‘EFPIA’) asked
Charles River Associates to research the factors affecting the location of biopharmaceutical
investments in Europe relative to other global regions (with a particular focus on the United
States (US), Japan, China):
• Distinguishing between investment drivers and patterns in the location of research

hubs, clinical trial sites, investigational manufacturing and commercial
manufacturing
• Accounting for the impact of evolving technologies and the implications of these for
industry’s investments
• Relating theory to real-life, recent investment decisions

This was achieved through a literature review at global, regional and national levels focused
on trends but also the impact of the recent COVID-19 pandemic; a long-term analysis of
investment data patterns; and an interview programme with senior executives from 15
pharmaceutical companies focused on actual recent major investment decisions.
Box 1: Summary of key findings
• Twenty years ago, the amount of investment made by pharmaceutical

companies in R&D in the US and Europe differed by only €2 billion; in 2020, the
difference had increased to almost €25 billion, with Europe increasingly lagging
behind.
• China is emerging as an increasingly competitive region for companies to locate

their activities; this is evidenced through the establishment of regional research
hubs, increased clinical trial activity, and rapid growth in manufacturing capacity.
• Areas of weakness in Europe’s competitiveness include a siloed approach to

policymaking and missed opportunities with new therapeutic solutions, such as
Advanced Therapy Medicinal Products and the digital transformation.
• The revision of the EU pharmaceutical legislation currently falls short of

protecting and future-proofing Europe’s life science sector.
• In this report we identify seven new areas of policy focus to help Europe reverse
its relative decline in attractiveness and keep up with the impact of new
therapeutic solutions and risks presented by the evolving geopolitical
environment.
Europe’s relative decline in attractiveness as a centre for biopharmaceutical

investment
Pharmaceutical research and development (R&D) expenditure in the US in 2020 exceeded
that in Europe by over €20 billion. This gap is widening: twenty years ago, in 2002, the
difference was only €2 billion. China exhibits much stronger growth: between 2010 and
Final Report Page 1

2020, private R&D expenditure in China grew by 540%.1 The establishment of regional
research hubs in China is likely not occurring in a material way at the expense of investment
in Europe; however, from a European Union (EU) perspective, it is notable that the choice
of greenfield regional research hubs in Europe, for example by non-European companies,
is focused primarily on markets such as Switzerland and the United Kingdom (UK). This
drives our first main recommendation:
1. Incentivise the development of truly world-class innovation hubs. The leading
research centres (Boston and San Francisco in the US), in addition to having
proximity to world-class academic institutions, also receive considerable policy and
funding focus. California, New York and Massachusetts rank as the states
receiving the most funding from the National Institutes of Health.2 Research
spending in Europe is significantly more uniform, and the countries with the highest
spending per population are not the centres of innovation. For example, the
European Commission should consider more strategic allocation of resources to
foster growth of world-leading research centres.
Another growing source of pharmaceutical innovation continues to be early-stage,
emerging companies. The share of European-headquartered emerging biopharma
companies has been declining over the last 10 years, with the US dominating in terms of
number of companies and their contribution to the global pipeline, and China growing
rapidly at a rate of 456% between 2016 and 2021.3 Our second main recommendation is:
2. Enhance end-to-end capabilities and funding of disruptive pharma
innovation. This has a spillover effect: a critical driver of most new investments is
the location and performance of existing R&D or manufacturing footprints. As
emerging US- and China-headquartered companies continue to grow into medium-
and large-sized enterprises, it is likely that they will invest in Europe, but their
investments will be more heavily directed towards the US and China than to Europe
(i.e. close to their home base). Although positive trends can be observed in some
Member States in supporting the growth of companies, there could be benefit from
adopting a more pan-EU policy and funding strategy to accelerate these efforts.
The impact of new technologies on dynamics and location of investment

The changing nature of science and healthcare needs to be taken into account to fully
understand recent global trends in pharmaceutical industry investment. In this report we
focus, based on feedback from our interviews, on Advanced Therapy Medicinal Products
(ATMPs) and on the digital transformation in life sciences as example of new therapeutic
solutions. While Europe produces more scientific publications on ATMPs than any other
1 See Figure 1 of this report.

2 NIH Awards by Location & Organization. Available at: https://report.nih.gov/award/index.cfm#tab1 [Accessed
October 2022]
3 IQVIA Institute for Human Data Science (2022) Available at: https://www.iqvia.com/insights/the-iqvia-
institute/reports/emerging-biopharma-contribution-to-innovation [Accessed July 2022]
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region,4 the clinical trial activity is twice as high in the US and almost three times as high in
China.5 Around half of the world’s ATMP manufacturing facilities are in the US.5 A general
weakness in Europe for pharmaceutical innovation is in the translation of scientific concepts
into commercial products; this has particular ramifications for ATMPs. Our research has led
to two main recommendations:
3. Rethink policies along the supply chain to attract ATMP investment in
Europe. Given the complexity of the technology and the precision involved, the
ATMP value chain is more interconnected than for small molecules and biologics.
Attracting early research that is then translated into therapies that can reach
patients requires an innovation-oriented access environment, not just an academic
ecosystem with strong centres of excellence. For ATMPs, this access environment,
in which companies can be sure to achieve an appropriate return on investment,
then also acts as a magnet for attracting manufacturing activities, because for
ATMPs “the process is the product”. The old approach of siloed policymaking
focused on innovation, manufacturing and healthcare sustainability does not work.
4. Support innovation by implementing early access mechanisms, including
generation and use of real-world evidence. Given the challenges with evidence
development, ATMPs for instance are more likely to launch with limited Phase II/III
data and subsequently generate real-world evidence (RWE). Europe needs to
create an environment that is more conducive to ATMP development, by
supporting generation and use of RWE and acceptance of RWE by payers and
health technology assessment (HTA) bodies through appropriate pricing and
market access routes.
Digital transformation in life sciences is also increasingly impacting all pharmaceutical
business functions, health systems, and all aspects of the pharmaceutical value chain.
Pharmaceutical companies increasingly look towards countries where there is a supportive
digital ecosystem. Currently the US is far ahead of Europe in terms of digital infrastructure,
interconnectedness and interoperability. Thus we recommend the following:
5. Boost EU digital transformation and support development of digital
capabilities. To enable digitalisation, for example through automation of value
chains or virtual clinical trials, pharmaceutical companies are being drawn towards
locations with a workforce that is well-versed in digital technology and where the
broader ecosystem is digital-ready. The EU’s top-ranking biopharma clusters,
however, rank poorly on digital competitiveness.6 Europe could take a more
proactive role in upskilling the scientific workforce in digital technologies and
accelerating the digitalisation of health systems.
4 Loche, A. et al. (2021) A call to action: Opportunities and challenges for CGTs in Europe. Available at:
https://www.mckinsey.com/industries/life-sciences/our-insights/a-call-to-action-opportunities-and-challenges-for-
cgts-in-Europe [Accessed June 2022]
5 CRA analysis of data retrieved in July 2022 from GlobalData.com
6 IMD World Digital Competitiveness Centre (2022) World Digital Competitiveness Ranking 2022. Available at:
https://www.imd.org/centers/world-competitiveness-center/rankings/world-digital-competitiveness/ [Accessed
October 2022]
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Learning from crises like the COVID-19 pandemic and managing risk and the
external environment
Pharmaceutical investments, although undertaken with a long-term outlook, are not
unaffected by major disruptive events such as the COVID-19 pandemic, the war in Ukraine,
tensions over global trade, the climate emergency and the recent global energy crisis. The
COVID-19 pandemic has had the most tangible impact on industrial policy thus far, with
increased attention being paid to the resilience of pharmaceutical supply chains and calls
for localisation of manufacturing. Our final recommendations are as follows:
6. Foster adoption of sustainable procurement and pricing policies for
innovation. There is a danger that industrial policy becomes focused on the most
novel technologies and relocating manufacturing of off-patent medicines, and the
need for a sustainable market is overlooked. Ongoing investment in manufacturing
and the development of medicines needs to be supported by policymakers and
governments, for example through sustainable pricing policies and a robust and
stable intellectual property environment; this has implications for types of
innovation receiving public support, procurement, and the trade-off between
investing in mature and future technologies.
7. Develop a longer-term, collaborative method for encouraging growth in
Europe’s attractiveness for biopharmaceutical investments. The increase or
perceived increase in risk in the global environment resulting from recent
geopolitical challenges has implications for where companies are placing their
investments. This could affect the attractiveness of Europe, both positively and
negatively. Europe needs to establish an effective process for implementation of
the Pharmaceutical Strategy (its first in over 50 years since the first pharmaceutical
legislation was implemented in the EU) with ongoing dialogue regarding how the
environment will change over 5-, 10- and 20-year timescales, and the expected
and actual impact of policy changes, and ensuring a focus and impact on
innovation as well as production.
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1. Introduction
Charles River Associates (‘CRA’) was commissioned by the European Federation of
Pharmaceutical Industries and Associations (‘EFPIA’) to undertake an analysis of global
trends in biopharmaceutical research and development (R&D), with a separate focus on
research and clinical trials, and the manufacturing of innovative medicines. The aim was to
understand the factors behind changes in Europe’s attractiveness as a location for
biopharmaceutical companies to invest compared to that of the United States, Japan and
China. The aim of the analysis was to consider if there are policy lessons and
recommendations for boosting Europe’s attractiveness.
1.1. Background
Europe is a leading centre for biopharmaceutical innovation and manufacturing. Looking
across Member States, we can find activity across every country and the industry makes a
significant contribution to employment and economic activity.
The subject of this study is what drives investment location and the performance of Europe
relative to other global regions and how this has changed. This is not a new area for
research. Many studies have been undertaken by academics, on behalf of the European
Commission and on behalf of the industry, over the last twenty years. However, the
environment continues to evolve as a result of new technologies, the changes in the
industry business model, global policy changes affecting innovation, and events such as
the COVID-19 pandemic, leading to new questions about the location of pharmaceutical
value chain. Moreover, there has been an increasing desire by European governments for
R&D investment and job growth. As set out recently by the European Commission in the
Pharmaceutical Strategy, location is an important policy debate.7
The relative decline in Europe’s attractiveness as a centre for innovation and manufacturing
has been a concern for many years, with a series of studies at the beginning of the century.8
This analysis was subsequently updated during the Pharmaceutical Sector Inquiry and
periodically over the last decade. In some cases, studies have looked specifically at
biopharmaceuticals, and in other cases, more generally across sectors but highlighting
biopharmaceuticals.9,10 The general conclusion is that Europe has underperformed when
compared to the US and growth in other regions. This is evident from statistics on the
percentage of global new treatments that are of European origin, the region’s share of
7 European Commission (2020) Pharmaceutical Strategy for Europe. Available at:

https://health.ec.europa.eu/system/files/2021-02/pharma-strategy_report_en_0.pdf [Accessed July 2022]
8 “Innovation in the pharmaceutical sector”. A report by Charles River Associates for DG Enterprise, 2004.
https://media.crai.com/sites/default/files/publications/innovation-in-the-pharmaceutical-sector.pdf. Indeed. The
recognition of the issue occurred much earlier still. In its 1994 Communication on the Outlines of an Industrial
Policy for the Pharmaceutical Sector in the European Community, the European Commission stated that the
pharmaceutical “industry is a substantial asset for growth and employment in the European Union” and that “there
are signs that the competitiveness of the Community industry is yielding in comparison with its main competitors”.
9 Study on the relationship between the localisation of production, R&D and innovation activities ANNEX 2: Data
analysis report. 2014. A report undertaken on behalf of European Commission
10 IDEA Consult and VDI Technologiezentrum on behalf of the European Commission (2018) R&D and Innovation
Activities in Companies Across Global Value Chains.
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global R&D, the investment in early phases of product development, the number of patents,
and employment in R&D.11
There are many surveys gathering investor sentiment on the location of investments. It is
possible to look historically at the annual Kearney Foreign Direct Investment (FDI)
Confidence Index from 2005 to present.12,13,14 These surveys show that a number of
factors are important for attracting investment: a stable political situation; strong
commitment and legislative framework for intellectual property and regulatory incentives;
strong and effective anti-corruption policies; a strong science-based educational model;
world-class university life sciences centres of excellence and associated private sector
biopharma clusters; a strong national medicines regulatory agency that is up to speed on
advanced medicines and diagnostics regulation; and ease of moving capital into and out of
the country. By looking at rankings over time, we can also observe the evolving competitive
dynamics between Europe, the US and China. China’s rise to the top of investment
attractiveness rankings is evident over the last two decades, although notably with a
gradual drop in global ranking from number two in 2016 to number 10 in 2022 (Appendix
Table 3: ).14,15 However, these long-standing reports contain very little specific information
on the pharmaceutical sector. More recently, a number of studies have focused on factors
affecting market attractiveness in Europe. One such study collated 21 different indicators
to develop an index of market attractiveness including the political, social and economic
environments, the industrial investment context, life science innovation and the healthcare
investment environment.16
Another way to look at location has been to focus on the location of the headquarters of
companies involved in the pharmaceutical sector.17 Although this is not based on activities
within the region but their headquarters, it supports that Europe has fallen behind but that
the picture depends on the type of technology. The most recent European Union (EU)
Industrial R&D Investment Scoreboard found that “EU companies grew R&D at a slightly
higher pace than their US counterparts, but their overall level of R&D remains well behind
that of the US companies (half the US level of R&D investment). In biotechnology, the R&D
growth of the US companies was remarkably higher; in 2020 they outperformed their EU
11 EFPIA has previously highlighted this in “Would the last pharmaceutical investor in Europe please turn the lights
out”. 3 January 2020
12 Kearney (2005) FDI Confidence Index. Available at:
https://www.kearney.com/documents/291362523/291366906/FDICI-2005.pdf/ [Accessed June 2022]
13 Kearney (2012) FDI Confidence Index ‘Cautious Investors Feed a Tentative Recovery’. Available at:
https://www.kearney.com/documents/291362523/291366906/Cautious_Investors_Feed_a_Tentative_Recovery-
FDICI+2012.pdf/ [Accessed June 2022]
14 Kearney (2022) FDI Confidence Index ‘Optimism Dashed’. Available at: https://www.kearney.com/foreign-direct-
investment-confidence-index/2022-full-report [Accessed June 2022]
15 Kearney (2016) FDI Confidence Index ‘FDI on the Rebound?’. Available at: https://www.kearney.com/foreign-
direct-investment-confidence-index/2016-full-report [Accessed June 2022]
16 Attracting Life Science Investments in Europe. An Initiative of the BIOMED Alliance, EUROPABIO & JOHNSON
& JOHNSON. 22 June 2021
https://www.janssen.com/emea/sites/www_janssen_com_emea/files/life_science_attractiveness_july.pdf
17 European Commission. The 2021 EU Industrial R&D Investment Scoreboard. Available at:
https://iri.jrc.ec.europa.eu/scoreboard/2021-eu-industrial-rd-investment-scoreboard [Accessed June 2022]
Final Report Page 6

counterparts in terms of R&D investment (11 times larger) and number of companies (166
vs 20) and, to a lesser extent, with higher R&D intensity (30.6% vs 26.5%).”18
Equally, the policy factors affecting location have long been debated. It is sometimes
argued that the problem in Europe is not that the decline in competitiveness has been
unreported or the underlying cause undiagnosed, or even that Europe lacks the resources
to compete on innovation (with 16 of the world’s top 50 life science universities and many
of the leading companies based in Europe). Rather, it is the lack of coherence in the policy
response. The current agenda has been set by the EU Commission 2020 ‘Pharmaceutical
Strategy for Europe’ document.19 While the Pharmaceutical Strategy for Europe has the
dual objective of promoting access to medicines for all European patients and boosting the
competitiveness of the pharmaceutical industry, the latter appears to receive less attention.
A vibrant innovative ecosystem in Europe will lead to better access to medicines for patients
and, ultimately, better health outcomes for all European citizens.
This report seeks to provide an up-to-date assessment of our current understanding of the
drivers of investment location, distinguishing between R&D hubs, clinical trial location and
types of manufacturing. It also, where appropriate, uses examples of specific types of new
technology – digital technology and Advanced Therapy Medicinal Products (ATMPs) – and
draws specific lessons for investment in these technologies. To the extent possible, we
take into account recent economic and geopolitical events (including COVID-19 and
European geopolitical crisis – the ‘Russia-Ukraine’ crisis). Finally, we consider the
implications, relate theory to real-life investment decisions, and provide recommendations
on European policies to attract more research, clinical trials, and manufacturing
investments in the future.
1.2. Methodology
To understand historical and recent trends in R&D and manufacturing investment and
consequently to consider potential policy reforms needed in Europe to improve its
attractiveness as a location to invest, our research involved three key steps:
• A literature review of recent government and non-government policy and academic

literature on the issue at global, European, and country-specific levels
• An analysis of long-term trends in the location of global biopharmaceutical R&D

and manufacturing activity over the past 20 years
• An interview programme with senior executives from major biopharmaceutical

companies focused on actual recent major investment decisions and the factors
that affected the decisions
1.2.1. Literature review

For the literature review, we assessed governmental, non-governmental, industry and
academic literature on factors affecting location of investments, focusing on studies
18 European Commission. The 2021 EU Industrial R&D Investment Scoreboard. Available at:
https://iri.jrc.ec.europa.eu/scoreboard/2021-eu-industrial-rd-investment-scoreboard [Accessed June 2022]
19 European Commission. 2020. A pharmaceutical strategy for Europe. Available at:
https://ec.europa.eu/health/medicinal-products/pharmaceutical-strategy-europe_en [Accessed June 2022]
Final Report Page 7

published over the last five years. This encompassed a range of published studies,
including annual qualitative surveys of executive decision makers within companies,
statistical analyses and models of investment trends, and hybrid approaches. The literature
review included global studies as well as specific analyses of the market attractiveness of
Europe as a region, individual European countries, and the US and China. The search used
combinations of the following terms: ‘factors affecting location’, ‘market attractiveness’,
‘drivers of foreign direct investment’, and ‘pharmaceutical industry’. This review was
followed by a more targeted search into literature focused separately on location of
research hubs, clinical trials, and manufacturing facilities.
The literature review covered academic and governmental policy reports, non-
governmental organisation (NGO) publications and grey literature, including:
1.2.2. Data analysis

In parallel to the literature review, quantitative historical data were collected to understand
patterns of investment and relate these to the drivers of location choice identified in the
literature review. The data were sourced from open-access international databases,
numerous government and expert reports, and industry-published statistics. Where
possible, the data were validated and quality-checked with relevant experts before
incorporation into the analysis. The data collected included a range of indicators on
Europe’s performance in terms of attracting R&D, clinical trials and manufacturing:
• Expenditure on R&D and manufacturing
• Clinical trial locations
• Location of manufacturing focus on ATMPs as an example of a new therapeutic

solution
• Level of employment in R&D and manufacturing
• Foreign direct investment and exports
Final Report Page 8

1.2.3. Interview programme

As described above, there have been many surveys asking company executives to rank
the factors explaining the location of investments. The approach taken in this project was
to look at actual decisions and try to tease apart the company specific and environmental
factors. Interviews were conducted with key decision makers from pharmaceutical
companies. The interviews were structured around specific recent examples of major
investments made by pharmaceutical companies in Europe and other regions (Table 4see
Appendix Table 4). In total, 15 one-hour interviews were conducted between June and July
2022. The interviews provided insight on the factors affecting real investment decisions
involving pharmaceutical companies’ research and manufacturing facilities. Particular
attention was paid to any specific circumstances or decision drivers mentioned in press
releases related to the investment, as well as the type of technology involved and the
location of the company’s headquarters.
We draw on the insights from all of these discussions throughout the report, and also have
six specific case-study examples based on publicly available information. To draw lessons
from these we combine information available in the public domain as well as aggregate
findings obtained from the literature review, data analysis, and interview programme, rather
than reflecting a particular company’s perspective on a specific investment decision.
1.3. Structure of this report

The structure of this report is as follows:
• Chapter 2 examines the trends in investment in R&D, clinical trials and types of
manufacturing, taking a twenty-year time horizon.
• Chapter 3 considers what we know about the different drivers that influence
companies’ decisions to invest in R&D and manufacturing in specific locations and
how these factors can explain the observed trends of global investment activity. It
then considers if these changes are due to the nature of new technology or
geopolitical events.
• Chapter 4 assesses potential policy solutions to boost Europe’s attractiveness as

a location for biopharmaceutical companies to invest in R&D, clinical trials, and
manufacturing, and critiques the extent to which the current EU policy direction
achieves these objectives.
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2. Trends in investment in R&D, clinical trials, and different

types of manufacturing
To understand where investments in R&D, clinical trials and manufacturing of
investigational medicinal products (IMPs) and commercial products are occurring, it is
useful to start with broad statistics focusing on each component individually. In this chapter,
we set out to compare trends across the US, Europe (EU + United Kingdom (UK) +
Switzerland), Japan and China.
2.1. Trends in R&D expenditure

Given the headwinds facing the global economy, the increase in global R&D investment is
dramatic, with an expected growth rate of 4.2% per year to reach $233 billion in 2026.20,21
There is, however, evidence that R&D investments are shifting out of Europe and into the
US, and that the European pharmaceutical industry is facing increasing competition from
China and other emerging economies.22 To test this, it is useful to compare private R&D
investments in each of these regions. For this report, we define R&D investment data as
including basic and translational research, as well as developmental activities such as
clinical trials undertaken by private companies, which include contract research
organisations (CROs) and contract manufacturing organisations (CMOs). There are a
number of issues with comparing data on this basis:
• The coverage depends on the companies that are members of the relevant trade
associations.23,24 Indeed, coverage changes over time as companies enter or leave
these associations.
• Due to differing statistics reported, comparisons of R&D investment in relevant

geographical areas are needed.
• Definitions vary between countries and over time. Data may be based on tax
accounting (ideal case) or company estimates (where different approaches may be
20 EvaluatePharma (2021) World Preview 2021, Outlook to 2026 report. Available at:
https://www.evaluate.com/thought-leadership/pharma/evaluate-pharma-world-preview-2021-outlook-2026
[Accessed August 2022]
21 The 15 largest pharmaceutical companies invested a record $133 billion in 2021 in R&D expenditure, an increase
of 44% since 2016. Available at: https://www.iqvia.com/insights/the-iqvia-institute/reports/global-trends-in-r-and-
d-2022
22 European Parliamentary Research Service (2021) European pharmaceutical research and development: Could
public infrastructure overcome market failures? Available at:
https://www.europarl.europa.eu/thinktank/en/document/EPRS_STU(2021)697197 [Accessed June 2022]
23 Trade associations represent different numbers of pharmaceutical companies: EFPIA 39 members, PhRMA 33
members, JPMA 74 members, RDPAC 44 members [as of June 2022]. Although other trade associations cover
a wider set of companies, these do not report R&D expenditure data.
24 It is important to note the difference in the methodology to collect data on R&D investments. For example, PhRMA
collects data from PhRMA member companies, while EFPIA relates to the R&D carried out in each country. In
Europe, some countries reported the same level of R&D investment in the last six years (e.g. France, Netherlands,
Sweden) which potentially under- or overestimate the actual level of investments in R&D in Europe.
Final Report Page 10

used). There are also issues regarding the accounting for R&D; for example, R&D
expenditure for a product that failed may or may not be allocated to the year when it
occurred.
• Fluctuations in exchange rates and inflation need to be taken into account when making
a comparison across countries and over time.
R&D investment data collected annually by major pharmaceutical industry associations and
converted into euros is presented in Figure 1 below. This graph shows the US leading in
aggregate terms. However, in terms of compound growth, China leads, albeit with much
lower absolute numbers and a much larger population. Although in absolute terms Europe
remains ahead of China, the growth rate of R&D expenditure in China far exceeds that of
Europe over this period. R&D growth in China appears to have slowed from 2016 onwards
(36% average annual growth rate between 2010 and 2015 compared to 10% average
annual growth rate between 2016 and 2020); yet it is still occurring at a considerably faster
rate than in Europe, where the average annual growth rate between 2010 and 2020 was
only 3.7%.
Continued strong growth in the US is evident in Figure 1, which shows the expenditure of
surveyed members of PhRMA, in which membership has also increased over time.
Particularly rapid growth in US expenditure from 2014 onwards may also be viewed as a
reaction to stifled R&D investment during a conservative slowdown from 2008 to 2014 in
response to the financial crisis (which did not seem to have the same impact in Europe).
Nevertheless, it is clear that the US continues to attract considerably more pharmaceutical
R&D investment than other regions, including Europe.
These data can also be viewed as each region’s share of the combined R&D expenditures
from the four regions (Figure 2). Of the total R&D investments made in the US, Europe,
China and Japan in 2020, 31% occurred in Europe. This has declined steadily over the last
twenty years, down from 41% in 2001. Over the same period, China’s share has grown
from 1% to 8%. There is no evidence that expenditure in China is occurring at the expense
of investment into Europe. Indeed, expenditure in Europe continues to grow, but at a much
slower rate; this leads to Europe having a diminishing share of total global pharmaceutical
R&D investment.

Figure 1: Pharmaceutical companies’ R&D expenditure is growing in all major

markets, but fastest in the US and China
70
65 CAGR 5.78%
60
55
R&D expenditure (€ billions)
50
42.2
CAGR 3.75%
45
40
35.6 32.9
35
27.1
30
20.6 CAGR 2.47%
25 27.7
21.8
20
18.8 11.9
15 8.6
6.6 10.4
10 5.6
5 1.5
0.2 0.5 CAGR 20.38%
0
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
US China Japan EU + UK, CH
*CAGR (compound annual growth rate) is the average rate of growth between two given years

Figure 2: The US and China represent a growing share of biopharmaceutical R&D

investments made in major markets
100%
90%
31%
32%
33%
34%
35%
36%
37%
37%
37%
38%
38%
38%
38%
38%
39%
39%
39%
39%
Percentage of R&D investments
40%
80% 41%
70%
9%
11%
10%
12%
11%
60%
13%
14%
15%
14%
15%
14%
15%
15%
15%
14%
14%
14%
14%
7% 7% 8%
16%
14%
50% 2% 6% 6% 7%
1% 1% 1% 1% 1% 2%
1% 1% 1% 4% 5% 5% 6%
40%
30%
52%
50%
50%
48%
48%
47%
47%
47%
46%
46%
46%
45%
45%
45%
44%
44%
43%
43%
43%
42%
20%
10%
0%
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
US % China % Japan % EU + UK, CH %
Source: Various25
Another way to look at activity is to consider the level of employment in the pharmaceutical
sector in each region. Although there are also issues here in comparing data between
regions, it is possible to compare R&D employment over time, to a certain degree.26 This
is illustrated in Figure 3 below. According to available data, the number of pharmaceutical
R&D employees in China (as stated in the China Statistical Yearbook)27 has increased by
over 800% since 2001, although growth has stabilised from 2014 to the present. In contrast,
employment in Europe has increased by only 30% over the same period. Although metrics
for measuring pharmaceutical R&D employment differ in each country, we can nonetheless
conclude from the data that China is experiencing a significant increase in R&D
employment over the last two decades, overtaking Europe in 2012 and now rivalling the
level of employment in the US. When looking at Figure 1 andFigure 3, we observe that R&D
expenditure per employee is significantly lower in China compared to that of Europe and
25 US source: Pharmaceutical Research and Manufacturers of America, PhRMA Annual Survey; China source:
Chinese Statistical Yearbook; Japan source: Japan Pharmaceutical Manufacturers Association, R&D
Expenditures of the Pharmaceutical Industry; Europe source: European Federation of Pharmaceutical Industries
and Associations, the Pharmaceutical Industry in Figures. All currencies converted to Euros with ECB 2020
exchange rates to control for fluctuations in relative currency value over time.
26 We have defined the pharmaceutical industry as using NACE code C21 (Manufacture of basic pharmaceutical
products and pharmaceutical preparations). NACE codes are standard classification for businesses, which allow
consistent analysis across EU countries. R&D personnel include all persons employed directly within R&D, as
well as persons supplying direct services (such as managers, administrative staff and clerical staff). This is aligned
with the Frascati Manual 2015 – the internationally recognised methodology for collecting and using R&D
statistics. Available at: https://www.oecd.org/sti/frascati-manual-2015-9789264239012-en.htm
27 China Statistical Yearbook is provided by the National Bureau of Statistics of China. The statistical data covers all
state-owned and non-state-owned enterprises with annual sales revenue above 5 million CNY. As these
enterprises represented the main industrial components, it is credible that they reflect the main condition and
progress of R&D investment in China’s pharmaceutical industry.

the US; however, we can infer that the capacity for and the capability of conducting large-
scale R&D have increased in China, indicating its increasing attractiveness as a base for
pharmaceutical companies to locate their research activities.
Figure 3: Pharmaceutical R&D employment has grown at a much faster rate in China
than in other major markets
138000
140000 128589 134291
Number employed in pharmaceutical industry
123000
120000
121129
100000 115753
111676
99992 117000
80000 87798
(FTE)
60000
55234
38.334
40000 34039,5 34.448
20000 15229 23.132

29.459
19584
0
2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
EU + UK, CH China Year Japan US
Source: Various28
It is also instructive to look at the composition of the industry. Although an imperfect proxy,
the EU R&D scoreboard looks at the performance of companies based on the location of
their headquarters. This is particularly concerning for the development of smaller
companies in Europe. Investment in early-stage companies in Europe is lagging behind
that of the US and China. When comparing data from 2015 to 2017 with data from 2018 to
2020, the average early-stage funding in Europe increased by 13% ($14.1 million to $20.6
million), while in the US and China it grew by 17% ($22.5 million to $36 million) and 18%
($28.3 million to $46.2 million), respectively.29,30 In absolute terms, the majority of
innovation coming from early-stage companies continues to originate in the US (46%),
followed by Europe (20%), but strong growth has been observed in China.31 Between 2018
28 US source: National Science Foundation; China source: National Statistics Office, China Statistical Yearbook;
Japan source: Japan Pharmaceutical Manufacturers Association; Europe source: European Federation of
Pharmaceutical Industries and Associations, the Pharmaceutical Industry in Figures. FTE = full-time equivalent.
29 McKinsey & Company 2021. Can European biotechs achieve greater scale in a fragmented landscape? Available
at: https://www.mckinsey.com/industries/life-sciences/our-insights/can-european-biotechs-achieve-greater-scale-
in-a-fragmented-landscape [Accessed June 2022]
30 McKinsey & Company 2021. Infographic: Capital landscape for European biotechs is maturing, but it continues to
trail the United States. Available at: https://www.mckinsey.com/industries/life-sciences/our-insights/infographic-
capital-landscape-for-european-biotechs-is-maturing-but-it-continues-to-trail-the-united-states
31 IQVIA Institute for Human Data Science 2022. Available at: https://www.iqvia.com/insights/the-iqvia-

and 2020, 7 of the 10 largest biopharma Initial Public Offerings originated from China.32
Between 2020 and 2021, there was a notable rise in the number of Chinese institutions
ranking in the top 10 global R&D institutes, from only one in 2020 (the Chinese Academy
of Sciences – CAS) to four institutions in 2021.33
It would be interesting to break down R&D spending into spending on particular types of
technology, including new therapeutic solutions such as ATMPs, artificial intelligence (data
exists on its fast growth rate but not its location)34 and digital therapeutics, but this has thus
far not been possible.
2.2. The location of clinical trials

Although R&D investments include those made by pharmaceutical companies in clinical
trials, it is nevertheless useful to consider in more detail the locations of clinical trial activity
differentiated by types of clinical trials.
There are various data sources that can be used to compare clinical trials globally. This
includes the World Health Organization’s (WHO) International Clinical Trials Registry
Platform (ICTRP), which contains information from the European Union Clinical Trials
Register (EU-CTR), the National Institutes of Health (NIH)’s ClinicalTrials.gov, and
commercial data sources such as GlobalData. There are challenges in attributing clinical
trials to countries and regions:
• Inclusion of trials that have only started recruiting, are already completed, or have
had results reported
• Accounting for multinational studies with many different countries involved
• Incomplete datasets
Although these registries do not provide comprehensive results of clinical trials, a trend
analysis can still be undertaken (if the inclusion criteria are taken into account). To make
this comparison, we have focused on www.ClinicalTrials.gov, and specifically on industry-
sponsored trials.35 Although this database goes back over many years, only since 2007
32 McKinsey & Company 2021. The dawn of China biopharma innovation. Available at:
https://www.mckinsey.com/industries/life-sciences/our-insights/the-dawn-of-china-biopharma-innovation
[Accessed June 2022]
33 Nature Index institution rankings 2022. Available at: https://www.nature.com/nature-index/annual-
tables/2022/institution/all/all/global [Accessed September 2022]
34 https://www.pharmaceutical-technology.com/analysis/pharma-ai-investment/. There are estimates of public
investment in this area. For example, it is reported that annual investment of the EU in AI is €1bn, compared to
€5.1bn invested annually by the US and €6.8bn by China. https://euobserver.com/digital/154861
35 ClinicalTrials.gov is a web-based resource that provides patients, their family members, healthcare professionals,
researchers and the public with easy access to information on publicly and privately supported clinical studies on
a wide range of diseases and conditions. The website is maintained by the National Library of Medicine (NLM) at
the National Institutes of Health (NIH).

have companies been required to include clinical trials in it.36 Therefore our analysis is
based on the last 10 years. These data show that the US continues to outcompete Europe,
China and Japan as the most attractive location for industry-sponsored clinical trials (Figure
4). This is consistent across all phases of clinical development. As with research
expenditure (Figure 1), Europe still attracts more industry clinical trial investment than
China; however, industry investment in China, where clinical trial activity has historically
been largely government-led, is growing at a rapid pace across all phases of development
– particularly for Phase 1 studies. While Japan has historically attracted more industry-
sponsored clinical trials than China, China has overtaken it in the number of clinical trials
conducted per year since 2017. Strong growth in recent data is also likely to be partly due
to the COVID-19 pandemic. Industry clinical trial activity was generally maintained
throughout the pandemic, to which the industry has adapted by developing new approaches
to enable research to continue. This is discussed further in the next chapter.37
Figure 4: US continues to outcompete Europe, China and Japan as the most

attractive location for industry-sponsored clinical trials*
36 NIH US National Library of Medicines, ClinicalTrials.gov FDAAA 801 and the Final Rule. Available at:
https://www.clinicaltrials.gov/ct2/manage-recs/fdaaa#:~:text=To%20Top-
,Which%20Trials%20Must%20Be%20Registered%20on%20ClinicalTrials.gov%3F,as%20of%20December%20
26%2C%202007 [Accessed June 2022]
37 https://www.iqvia.com/insights/the-iqvia-institute/reports/global-trends-in-r-and-d-2022 [Accessed July 2022]

Source: Various38 *It is important to note that our numbers of clinical trials are lower compared to other research
papers39 or published data by WHO.40 CRA focused only on industry-sponsored trials having a status of
recruiting, active or completed, compared to other analysis which counted all registered clinical trials. We also
excluded trials with an unknown status or non-applicable study phase.
We also considered whether the pattern of clinical trial locations varies for different types
of technology, focusing on the trends for ATMPs as an example of a new therapeutic
solution. The key difference observed is the competitiveness of the Asia-Pacific region
(used as a proxy for China, where data are not available) in attracting ATMP clinical trials
relative to the US (Figure 5). The number of trials conducted in the US and Asia-Pacific
region grew by 70% and 67%, respectively, between 2014 and 2021. Meanwhile, the
number of ATMP trials in Europe appears lower and stagnant despite overall growth of the
38 CRA analysis on data extracted from clinicaltrials.gov. CRA included interventional, industry-funded studies
(recruiting, active not recruiting and completed) from 01/01/2010 to 31/12/2021. Observational studies and studies
with expanded access were excluded from the analysis. Countries included are the US, China, Japan, all EU
countries including the UK, CH, Norway, and Iceland.
39 George, M., Selvarajan, S., Dkhar, S. & Chandrasekaran, A. (2013) Globalization of clinical trials – where are we
heading? Current Clinical Pharmacology. 8(2): 115–123.
40 WHO Number of clinical trial registrations by location, disease, phase of development, age and sex of trial
participants (1999–2021) Available at: https://www.who.int/observatories/global-observatory-on-health-research-
and-development/monitoring/number-of-trial-registrations-by-year-location-disease-and-phase-of-development,

global clinical development pipeline.41 This observation is consistent with those in the
literature; the Alliance for Regenerative Medicine found that three times as many ATMP
trials were initiated in North America than in Europe between 2014 and 2018, and that
during this time there was a marked increase in North America (36%) and Asia (28%), but
not in Europe (<2%).42
This contrasts with the trends observed in Figure 4 and indicates that while Europe
continues to be an attractive location for pharmaceutical companies to conduct clinical trials
for more traditional medicinal technologies, this is not the case for all new therapeutic
solutions, including but not limited to ATMPs. It is also incongruous with Europe’s relative
strength in ATMP academic research: between 2017 and 2019, the lead authors of around
120,000 papers published in ATMP publications were affiliated with a European institution.
In the US and China, equivalent figures were 72,000 and 100,000, respectively.43 In
Chapter 3,Error! Reference source not found. we explore the reasons behind these
contrasting patterns of investment.
Figure 5: The location of Advanced Therapy Medicinal Products (ATMP) clinical trials
differ from the overall geographic pattern of biopharma clinical trial activity
300
250 255
226
Number of clinical trials
200
162 191
152
150
112
100 86
89
104
50
0
2014 2015 2016 2017 2018 2019 2020 2021
North America Asia-Pacific Europe
41 ASGCT (2021) Gene, Cell, & RNA Therapy Landscape. Available at: https://asgct.org/global/documents/asgct-
pharma-intelligence-quarterly-report-july-20.aspx [Accessed July 2022]
42 Alliance for Regenerative Medicine (2019) Clinical Trials in Europe: Recent Trends in ATMP Development.
Available at: https://alliancerm.org/indication-data/clinical-trials-in-europe/ [Accessed July 2022]
cgts-in-Europe [Accessed June 2022]

Source: GlobalData44
2.3. The location of investigational and commercial manufacturing

We next consider investment in the manufacturing of innovative medicines.45 We are
interested in IMPs, commercial manufacturing, and, to a lesser extent, active
pharmaceutical ingredient (API) manufacturing. An IMP is defined as a medicine used in a
clinical trial;46 commercial manufacturing is manufacturing of regulatory approved
medicines; and an API is any substance, or mixture of substances, intended to be used in
the manufacture of a drug (medicinal) product and that, when used in the production of a
drug, becomes an active ingredient of the drug product.47 There are even greater
challenges in making like-for-like comparisons across regions than there are with R&D
investments:
• Inconsistent metrics: Unlike investment in R&D, where comparisons are long-

standing, there has been less effort to standardise measurements across regions.
There are a number of potential definitions that could be useful, such as gross
investments in tangible goods in the EU, investments in private non-residential
fixed assets in the US and investment in fixed assets in China. These varying
definitions make comparison challenging:
o In the EU, gross investment in tangible goods is defined as investment during
the reference period in all tangible goods. Included are new and existing
tangible capital goods, whether bought from third parties or produced for own
use (i.e. capitalised production of tangible capital goods), and having a shelf
life of more than one year. This also includes non-produced tangible goods
such as land.48
o In the US, the Bureau of Economic Analysis defines fixed assets as those used
continuously in production for an extended period of time, and generally
44 CRA analysis on data extracted from GlobalData.com. CRA analysed cell and gene therapy clinical trials in North
America, Asia-Pacific and Europe between 2014 and 2021. The analysis included completed, ongoing not
recruiting, ongoing recruiting, ongoing recruiting by invitation, and planned clinical trials. Suspended, terminated
and withdrawn clinical trials were excluded. The analysis included all sponsor types (company, government,
individual, institution).
45 EMA defines innovative medicine as a medicine that contains an active substance or combination of active
substances that has not been authorised before. Available at: https://www.ema.europa.eu/en/glossary/innovative-
medicine [Accessed July 2022]
46 EMA Investigational medicinal product. Available at: https://www.ema.europa.eu/en/glossary/investigational-
medicinal-product [Accessed July 2022]
47 The EudraGMDP Glossary. Available at:
http://eudragmdp.ema.europa.eu/help_public/content/v3_0_user_manual/glossary.htm [Accessed July 2022]
48 Eurostat Glossary: Gross investment in tangible goods – SBS. Available at:
https://ec.europa.eu/eurostat/statistics-
explained/index.php?title=Glossary:Gross_investment_in_tangible_goods_-_SBS [Accessed July 2022]

defines consumer durables as tangible products that can be stored or

inventoried and that have an average shelf life of at least three years.49
• Incompleteness: Moreover, the data have many limitations. In Europe, several

smaller countries do not report data to Eurostat for confidentiality reasons, and in
the US, data is collected only at the level of chemical industry. Therefore, these
reports are inconsistent across different regions and, as a result, we cannot
aggregate them to obtain insight on regional shares.
• Level of granularity: Given the different drivers, we wanted to understand

investment location for both IMPs and commercial manufacturing; however, our
sources do not typically break down data on manufacturing investments by types
of manufacturing. Similarly, the sources used did not provide a breakdown of
commercial product manufacturing by API manufacturing versus formulation and
commercial production.
• Coverage: Although there are measures of investment in each market, coverage

varies for the total pharmaceutical and biotech sector. There are ambiguities as to
whether API production is included in this sector or rather in the chemical sector
statistics.
In order to compare between regions, we have therefore used the best data that exist in
the region50 and accept that while we cannot directly compare aggregate statistics, we can
compare trends. If we compare relative patterns of growth within each region over time, we
find that in Europe, investments in pharmaceutical production have increased at an annual
average rate of 10.9% per year (Figure 6), with a sharp notable decline from 2018 to 2019,
which potentially could be explained by delayed data reporting to Eurostat. The pattern
observed in the US is constant, with a 5.1% average annual growth rate between 2005 and
2019, and a sharp 16% increase observed from 2018 to 2019.51
At the same time, manufacturing investments in China have grown on average 19% each
year, a rate significantly higher than that observed in Europe and the US.52 This is
consistent with observations in the literature, that over the past 20 years, industry offshoring
strategies for small molecules, and especially for generics, have shifted all but the most
49 The Bureau of Economic Analysis (BEA). Available at: https://apps.bea.gov/iTable/index_FA.cfm [Accessed July
2022]
50 CRA used Eurostat data on gross investment in tangible goods for Europe; the US Bureau of Economic Analysis.
Used Non-residential Detailed Estimates – Investments, Chemicals sector, capital expenditure data; China
Statistical Yearbooks 2003–2019. Investments in Fixed for manufacturing medicines for China.
51 CRA analysis of US Bureau of Economic Analysis. Used Non-residential Detailed Estimates – Investments,
Chemicals sector, Investment in Private Nonresidential Fixed Assets (Updated 19 August 2021). Available at:
https://apps.bea.gov/national/FA2004/Details/Index.htm [Accessed June 2022]
52 CRA analysis of China Statistical Yearbooks 2003–2019.

challenging or sensitive API manufacturing out of the US and Europe into jurisdictions with
lower costs and taxes.,53, 54
Figure 6: Relative growth in pharmaceutical manufacturing (including APIs and

generics) is greatest in China55
CAGR 19% 1400

1.194,53 1300
Relative manufacturing investments size

1200
1100
1000
900
CAGR 10.9% 800
700
482,15 600
500
310,63
400
CAGR 5.1% 300
100 281,34 200
100
130,88 178,72
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
EU + UK, CH China US
Source: CRA analysis of various sources 56 *CAGR (compound annual growth rate) is the average rate of
growth between two given years
We are also interested in manufacturing activity broken down by types of technology, and
more specifically the impact of new therapeutic solutions (using ATMPs as an example) on
the location of investment. Given the lack of granularity on investment data and the fact
that ATMPs are still an emerging technology, it is more informative to look at investments
in the facilities capable of producing these products in the future, rather than historical
investments. We observe that the US and Europe (including the UK and Switzerland) are
two leading regions (Figure 7), and that China has relatively far fewer production facilities.
53 Woodcock, J. (2019) Safeguarding Pharmaceutical Supply Chains in a Global Economy. Available at:
https://www.fda.gov/news-events/congressional-testimony/safeguarding-pharmaceutical-supply-chains-global-
economy-10302019 [Accessed June 2022]
54 European Parliamentary Research Service (2021) European pharmaceutical research and development: Could
public infrastructure overcome market failures? Available at:
https://www.europarl.europa.eu/thinktank/en/document/EPRS_STU(2021)697197 [Accessed June 2022]
55 To account for the different definitions and that the data are not directly comparable, we have indexed each series
at 2005.
56 CRA used Eurostat data on gross investment in tangible goods for Europe; the US Bureau of Economic Analysis.
Used Non-residential Detailed Estimates – Investments, Chemicals sector, capital expenditure data; China
Statistical Yearbooks 2003–2019. Investments in Fixed for manufacturing medicines for China.

Figure 7: The number of facilities capable of producing ATMPs is highest in the US
140
121
120
96
100
Number of facilities
80
60
40
16
20
0
US EU + UK + CH China
Source: GlobalData [as of June 2022]
2.4. Foreign direct investment and exports

Another perspective on investment is to look at foreign direct investments (FDI), which are
made by entities outside of the country. There are annual reports that apply a range of
sophisticated methodologies based upon FDI data, surveys, and numerous social,
technological, and economic indices to compare countries. In the 2019 World Economic
Forum (WEF) Global Competitiveness Report, the key output is summarised in the form of
a table ranking the Global Competitiveness of national economies.57 The first conclusion
to be drawn from this analysis might be that size does not matter. The top 10 countries in
rank order are: Singapore, the US, Hong Kong, the Netherlands, Switzerland, Japan,
Germany, Sweden, the UK, and Denmark. However, this is non-specific to pharmaceutical
industry investment, as these reports typically do not break down data by industry.
Evidence for the pharmaceutical industry shows a similar pattern. Between January 2014
and December 2019, Western Europe received more than a third (36.12%) of all global
pharmaceutical investments, with the UK attracting the most FDI projects (22.12%),
followed by Germany (17.37%) and France (11.7%). In 2020, most sectors saw a decline
in FDI as a result of the COVID-19 pandemic, including the pharmaceutical industry.
Interestingly, Western Europe emerged as the leading region for attracting FDI in 2020,
with an increase in greenfield FDI projects from 2019, while Asia-Pacific and North America
saw a decrease.58 However, when looking at individual countries rather than regional
aggregates, the US stands out as a clear leader (Figure 8Error! Reference source not
found.). Notably, most of the 92 FDI projects in the US in 2020 came from European-based
companies (Germany: 20, UK: 18, Switzerland: 10).
57 World Economic Forum (2019) The Global Competitiveness Report 2019. Available at:
https://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2019.pdf [Accessed June 2022]
58 Karadima, S. (2022) FDI in pharmaceuticals: The state of play. Available at: https://www.pharmaceutical-
technology.com/analysis/fdi-pharmaceuticals-state-of-play-investment/ [Accessed June 2022]

Figure 8: Europe as a region still attracts more pharmaceutical greenfield FDI

projects than the US or China
Europe
US
China
0 50 100 150 200 250 300

Total number of pharmaceutical products subsector FDI projects (2019-2020)
Source: Adapted from Karadima, S. (2022)59
When separating the FDI data by business function, the ranking of countries changes:
China was the leading destination in 2020 for R&D.
A final way to look at location is to look at trade. This is clearly a proxy; while we might
expect countries attracting considerable investment to export to other markets, in reality,
large regions that are mostly self-sufficient may have higher levels of investments. In terms
of trade, EU exports and imports of medicinal and pharmaceutical products grew between
2010 and 2021, with the net combined exports of the EU, the UK and Switzerland (CH)
reaching €281 billion in 2021. Looking at the total value of pharmaceutical exports from
major markets (EU, US, China, Japan), this represents a 78% share (Figure 9). This share
has remained relatively stable over time. Even the COVID-19 pandemic, which affected
trade in many other products, did not cause a fall in exports or imports of medicinal and
pharmaceutical products. When compared to other regions, the EU is by far the largest
exporter of such products.
59 Karadima, S. (2022) FDI in pharmaceuticals: The state of play. Available at: https://www.pharmaceutical-
technology.com/analysis/fdi-pharmaceuticals-state-of-play-investment/ [Accessed June 2022]

Figure 9: Europe has retained its position as the biggest exporter of pharmaceuticals
compared to the US, China and Japan over the last decade
100% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%
15% 11% 11% 11% 12% 14% 14% 11% 11% 12% 10% 12%
6% 5% 5% 5% 5% 5% 5% 6%
80% 7% 5% 6% 10%
% share of total exports
60%
40% 81% 82% 83% 82% 79% 80% 83% 83% 83% 83%
78% 78%
20%
0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
EU+UK+CH China US Japan
Source: UNCTAD60
2.5. Summary
The long-term trends in location of R&D, clinical trials and manufacturing should not come
as a surprise. It has been well documented in many reports over the last 20 years. The
amount of annual investment in Europe is growing less quickly than the US, and China has
seen a dramatic increase in investment over the same period. However, the sub-trends
presented in this chapter are some of the important ones that are worth noting before we
attempt to explain the pattern of investment and consider the policy ramifications. Although
Europe is not yet so far behind in terms of absolute values, the downward trend already
taking place relative to the US and China – both regions that experience stronger growth
in multiple areas and possess more indicators in the “strongest performance” category – is
alarming (Figure 10). The picture for Europe is a loss of market share to the US and China
on most metrics, incongruous with some of its strengths, including hosting the majority of
academic research activity for ATMPs (not reflected in corresponding clinical trials) and
possessing the lion’s share in pharmaceutical exports (perhaps reflecting historical location
decisions). In many other areas, such as attracting pharmaceutical company R&D activity,
clinical trials and manufacturing, the US leads and China is growing rapidly. Understanding
what drives these trends is paramount and serves as the basis of Chapter 3 of this report.
60 UNCTAD data were used (Exports: medicinal and Pharmaceutical Product). All currencies converted to Euros
with ECB 2020 exchange rates to control for fluctuations in relative currency value over time.

Figure 10: The US and China are the top performers in more investment performance
metrics than Europe, exhibiting stronger growth trends
Ranking
Indicators
Europe US China Japan
Total private investment
Investment in Employment
R&D Early funding support
ATMP basic research
Investment in Industry-sponsored trials

clinical trials ATMP clinical trials
Investment in Total manufacturing investment

manufacturing ATMP manufacturing
Foreign Direct Foreign direct investment
Investment and
exports Exports
Key: = strongest performance = growth of ≥20% in last five years
= moderately strong performance = decline of ≥20% in last five years
= comparably weak performance
Source: CRA analysis of data described in Chapter 2 of this report.
• Recent trends in multiple indicators show a decline of Europe’s overall

attractiveness as a location for pharmaceutical companies to invest, with prior
areas of strength (in research, clinical trials and manufacturing) now failing to
keep up with the pace of progression in other regions.
• Pharmaceutical industry R&D investment is growing at a slower rate in Europe

than in the US, and China has seen a dramatic increase in investment over the
same period.
• While Europe continues to be an attractive location for pharmaceutical

companies to conduct clinical trials for more traditional medicinal technologies,
this is not the case for new therapeutic solutions, including but not limited to
ATMPs.
• Consistent with observations that high-volume manufacturing is increasingly

offshored to lower-cost markets, the growth rate of pharmaceutical
manufacturing investment in China is double what it is in Europe and quadruple
the growth rate in the US.
• The US is the leading country for attracting pharmaceutical FDI; however, when
looking specifically at pharmaceutical R&D FDI projects, China is now in the
lead.

3. Factors driving the location of biopharmaceutical R&D and

investigational and commercial manufacturing
In this chapter, we consider how we can explain the trends observed in the previous
chapter, drawing on the existing literature on the factors driving the location of
pharmaceutical industry investments and the interviews undertaken with decision makers.
Here, we first briefly summarise the literature to date for pharmaceutical research, clinical
trials, and manufacturing, and then focus in more detail on new issues regarding the impact
of recent global shocks and new technology. The case studies are based only on public
information.
It is clear from the existing literature and interviews that the factors driving the location of
research hubs, clinical trials, and manufacturing differ considerably.
3.1. Research hubs

One way to understand the patterns of spending on R&D investment is to consider the
location of research hubs.
Characteristics of research hub investment decisions

Research centres or hubs are often concentrated campuses focusing on a specific area of
scientific exploration. This is distinct from clinical trials activity, which is often spread across
leading hospitals and academic centres. Major companies will have a relatively small
number of research hubs; for example, Pfizer lists eight research centres, while GSK lists
10.
Given the relatively small number of research hubs, the decision regarding a hub’s location
is a significant strategic choice, often made at a Board level, representing a long-term
commitment to the market and the structure of the company. The literature and interviews
suggest that internal factors primarily dictate the decision on where to locate
biopharmaceutical research activities, both implicitly (e.g. company culture and strategy)
and explicitly (e.g. evaluation of the location and performance of existing sites).61,62,63 For
example, location of new research centres is often based on how these fit with existing
commitments to regional markets. A European hub will often replace an existing European
hub. So, for pharmaceutical companies, their existing geographic footprint in terms of R&D
hubs is the starting point for any decision regarding the choice between Europe, the US,
China and Japan.64
61 Bramley-Harker, E. et al. (2007) Key Factors in Attracting Internationally Mobile Investments by the Research-
Based Pharmaceutical Industry. London, UK: NERA Economic Consulting.
62 Rozek, R.P. (2011) Risk and Regulatory Factors Affecting Location Decisions by Research-Based
Pharmaceutical Companies. European Journal of Risk Regulation. 2(1): 92–103.
63 Rangan, S. (2000) Search and Deliberation in International Exchange: Microfoundations to Some Macro
Patterns. Journal of International Business Studies. 31(2): 205–222.
64 Ruane, F.P. and Zhang, X. The Determinants of Location Choices by Pharmaceutical MNEs in Europe.
Available at: https://www.etsg.org/ETSG2008/Papers/Ruane.pdf [Accessed June 2022]

For emerging start-up companies, there is not necessarily a proactive decision on where to
start activities. Still, the location may often be a passive result of where the innovation
ecosystem is more conducive to the spin-out of companies from universities, for example,
or where a wealth of venture capital funding is available. Without an established footprint,
we expect the location of biotech start-ups to be driven by the external factors summarised
below.
Studies indicate that quality of the scientific ecosystem takes precedence over cost for
research hub location decisions. Both surveys with decision makers and economic
analyses indicate that co-location with world-leading academic centres of excellence,
research scientists and skilled research staff are key drivers of location, and in many cases,
there are only a relatively small number of world-class locations.65,66 Ability for these
centres of academic excellence to collaborate with industry and translate academic
research into successful candidates for the clinic is also key.
Cost is consistently ranked as one of the least important factors in research location
decision-maker surveys.67,68 This balance of factors is evident in the recent decision to
establish a major research hub in London, UK, where the cost of labour and production are
high, but access to world-leading scientists and skilled staff acted as sufficiently attractive
incentives (Box 3).
Box 3: Case study | Investment in London’s “Knowledge Quarter”
In 2020, MSD announced that London had been selected as the location for their new
Discovery Research Centre, and they would be investing over $1.3 billion in its
development.69 The new research hub will be located opposite London King’s Cross
railway station, one of the UK’s largest transport hubs. This site was attractive for
multiple reasons:70
• Primarily, it allows proximity to highly qualified research staff. London has a
number of world-leading universities, is densely populated, and is regarded as
a desirable location to live, making recruiting and retaining the right talent easier
in an increasingly competitive labour market.
• It also facilitates access to potential collaborators. The UK’s science and
research capabilities are strong and have been for decades, being home to two
66 Guimón, J. (2008) Government strategies to attract R&D-intensive FDI. The Journal of Technology Transfer.
34(4): 364–379.
67 Michaelis, C., King, K. and Radevsky, A. (2010) Qualitative research into businesses’ Research and
Development (R&D) decision-making processes, UK: Databuild Research and Solutions Ltd for HM Revenue
and Customs.
68 Rodgers, P. et al. (2019) Exploring the determinants of location choice decisions of offshored R&D projects.
Journal of Business Research. 103: 472–483.
69 MSD Our new London Discovery Research Centre site. Available at: https://www.msd.com/stories/our-new-
london-discovery-research-center-site/ [Accessed June 2022]
70 Information from interview programme with MSD representative, June 2022.

of the world’s top five universities for life sciences.71 Locating by a major London
transport hub also facilitates connections to other collaborators in Europe and
the rest of the world.
• London also offers practical benefits, such as having English as the local
language (which for a US company helps with transferability of labour within the
company) and accessibility and connectivity (with links to the academic triangle
of Cambridge-Oxford-London, and direct flights possible to and from the US).
Source: Press releases and interview programme
Clusters also play an important role. Research clusters are likely a result of companies all
gravitating towards these centres of expertise,61,62 and a driver for further inward
investment due to the knowledge spillover benefits and “place-to-be effect”.72
The literature on factors attracting R&D investments suggests that there has been little
change over previous decades in what drives companies to invest in a location for a
research hub. Our interview programme largely confirmed this; however, one additional
driver is emerging: the digital infrastructure. Digital transformation in the pharmaceutical
industry is complex, especially in large companies with established infrastructure. To
modernise processes and keep pace with the digital evolution of the industry, particularly
post-COVID-19, pharmaceutical companies look towards countries with a supportive digital
ecosystem. This requires access to a rich talent pool of people and organisations who are
highly trained in digital skills and data handling, digital communication infrastructure and
data sharing capabilities, and presence of companies specialised in data who can act as
support services to the pharmaceutical industry in automating parts of the research process
(and subsequent value chain).73
Understanding global trends in location of research hubs: explaining China

The explanation above would suggest that the location of R&D hubs would change only
slowly over time; however, in reality, we have observed a series of significant decisions to
open research hubs in China, mostly in Shanghai. The first global pharmaceutical company
to establish a major research facility in China was Novo Nordisk in 1997, and now 11 of the
top 15 global pharmaceutical companies have a significant research hub in mainland China
(Figure 11).
71 HM Government Life Sciences Vision 2021. Available at:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1013597/life-
sciences-vision-2021.pdf [Accessed June 2022]
72 Erken, H. and Kleijn, M. (2008) Location factors of international R&D activities: an econometric approach.
Economics of Innovation and New Technology. 19(3): 203–232.
73 Information from interview programme with pharmaceutical company representatives, June–July 2022.

Figure 11: The majority of large multinational pharmaceutical companies now have
an R&D centre in China
Sources: Company websites and press releases74
This would appear inconsistent with the view regarding the location of R&D hubs. There
are several reasons for this:
• China has dramatically improved its position in terms of scientific infrastructure,

over the last 15 years. In 2000, US universities awarded twice as many doctorates
in STEM fields (18,289) as Chinese universities (9,038). But by 2007, the order
had reversed, and China began outpacing US universities. In 2010, 34,801 STEM
doctorates were awarded by Chinese universities, compared to 26,076 by
American universities. In 2019, Chinese universities produced 49,498 PhDs in
STEM fields, while US universities produced 33,759.75 In 2021, according to
Nature Index, which ranks institutions by their scientific output, four out of 10 top
global R&D institutes were located in China, with the Chinese Academy of Science
74 https://www.roche.com/innovation/structure/rnd–locations/pharma-shanghai;
http://www.china.org.cn/english/scitech/147304.htm; https://www.thepharmaletter.com/article/novartis-to-open-
new-r-d-faciltiy-in-china-with-100-million-investment; https://www.jnj.com/media-center/press-releases/johnson-
johnson-innovation-launches-asia-pacific-innovation-center-and-announces-new-alliances;
https://www.merck.com/news/merck-establishes-new-msd-rd-asia-headquarters/;
https://www.yicaiglobal.com/news/sanofi-unveils-first-global-research-institute-in-china-to-develop-innovative-
drugs; http://www.chinadaily.com.cn/bizchina/2007-07/03/content_908686.htm;
https://focus.cbbc.org/astrazeneca-makes-shanghai-a-global-rd-centre/#.Yqr_anbMKUk;
https://www.amgen.com.cn/en/media/amgen_asia_reserach_development_center.html;
https://www.fiercebiotech.com/biotech/lilly-to-shutter-u-s-china-r-d-centers;
https://www.novonordisk.com/science-and-technology/research-and-technology-centres.html [Accessed June
2022]
75 CSET Data Brief China is Fast Outpacing U.S. STEM PhD Growth 2021. Available at:
https://cset.georgetown.edu/publication/china-is-fast-outpacing-u-s-stem-phd-growth/ [Accessed June 2022]

taking the number one position on this list of top R&D institutes.76 This showed a
significant change from 2020, when only one Chinese institute reached the top 10
global R&D institutes list. 77
• China is now a market that is seen to warrant or require a regional research centre.
The opening of such a centre in China does not represent a move away from other
regions, but the need for a new regional centre. Clearly, this is partly due to the
growth of the Chinese economy and the growing importance of the Chinese
pharmaceutical market. China’s pharmaceutical market has been constantly
growing in recent years. It is estimated to reach $161.8 billion by 2023 and take a
30% share of the global market.
• China is strengthening its intellectual property (IP) laws in order to strengthen and
support the pharmaceutical industry. Many of China’s laws governing patents,
trademarks, copyrights and other areas have recently been amended or are in the
process of being amended, and it is acknowledged that the pharmaceutical industry
will be a beneficiary of these changes.78
This would suggest that investments in China are not at the expense of investment in
European research hubs, but rather indicate the development of a regional R&D hub in an
increasingly important global market. However, the issue for the EU is that when choices
regarding the location of new research hubs in Europe come along, the choice is focused
on markets such as Switzerland and the UK, unless there are existing R&D hubs in EU
markets.79
The impact of new technology: learnings from ATMP research

In the last chapter, we set out how some new therapeutic solutions, particularly ATMPs,
appear to differ from overall trends. There is significant literature on the difference in the
R&D process between ATMPs and other therapeutic areas – with distinct challenges in pre-
clinical development, the clinical development programme, vector development and
manufacturing, and patient-specific drug product manufacturing. Some of the complexities
and differences are related to the nature of ATMPs relative to conventional medicines,
whereas others arise from the rarity of the target patient population. This results in a subtle
change in the factors driving a company’s decision on where to locate research activities:80
• The strength of the overall innovation ecosystem, while important for all research
activities, becomes more important for new emerging therapeutic solutions, such
76 Nature Index 2022 tables: Institutions. Available at: https://www.nature.com/nature-index/annual-

tables/2022/institution/all/all/global [Accessed September 2022]
77 FierceBiotech The top 10 global R&D institutes of 2021. Available at: https://www.fiercebiotech.com/biotech/top-
10-global-rd-institutes-2021 [Accessed September 2022]
78 China: Patent Law Amendment brings sea change to pharmaceutical patent regime; Available at:
https://www.allenovery.com/en-gb/global/news-and-insights/publications/china-patent-law-amendment-brings-
sea-change-to-pharmaceutical-patent-regime [Accessed June 2022]

as ATMPs. Incubators and accelerators and access to funding are increasingly

relevant for taking innovative (and potentially high-risk) scientific concepts forward.
• A company’s existing R&D footprint plays less of a role in driving the decision, as
ATMP facilities tend to be distinct from small molecules and biologics. The location
of existing research staff is still somewhat relevant if there is considered the
potential of retraining and redeploying staff, but the source of talent to drive the
research programmes is largely considered to depend on the extent to which local
universities are producing expert researchers.
It is clear that the US market is leading the development of ATMPs, but China appears to
have a significantly higher share of R&D investments in this area, while Europe lags further
behind. There are two potential reasons for this: the higher investments could represent
the new area where strategic hubs are being decided (i.e. it is a timing issue rather than
specific to the technology), or China has an advantage over Europe in these technologies.
In the literature, a number of reasons are used to explain the performance of China:81
• The result of STEM investment targeted in this area. According to the Chinese
Academy of Sciences analysis, China generated 24,199 publications and 4,850
patent applications related to ATMPs between 1988 and 2017, ranking second
after the US, which generated 36,901 publications and 14,573 patent applications.
• The regulatory environment is seen as supportive. In 2003, China became the first
country worldwide to approve gene therapy. Although there are concerns about the
lack of clear and strict regulatory frameworks, the series of regulatory reforms
implemented by the government over the last 20 years is seen as encouraging
progress.82 In 2017, the National Development and Reform Commission (NDRC)
issued the “13th Five-Year Biological Industry Development Plan”, which stressed
that the development of stem cell and CAR-T industry should be one of the main
focuses in the next five years.
• There has been a push to encourage collaborations between multinational

companies and their Chinese counterparts.
3.2. Clinical trials

There is common agreement that the factors affecting investment in research hubs and
clinical trials are distinct. It is also important to differentiate between the different stages of
clinical trials. The early stages have relatively few patients and are often more likely to be
held in a relatively small number of locations. For phase III clinical trials, much larger patient
populations are needed, and this is likely to mean more clinical centres in more countries.
Indeed, for rare conditions, it may be necessary to conduct clinical trials across regions in
order to find the required number of patients. It should also be noted that clinical trials are
81 Boodhoo, A. (2021) How China is making progress in cell and gene therapy. Available at:
https://www.ey.com/en_gl/life-sciences/how-china-is-making-progress-in-cell-and-gene-therapy [Accessed July
2022]
82 Wang, Y. et al. (2022) An Overview of Cell and Gene Therapy Development in China. Human Gene Therapy.
33(1–2): 14–24.

often undertaken by contract research organisations (CROs), which have a significant role
in the decision-making process.
External factors affecting the location of clinical trial sites

In terms of the main factors driving clinical trial location there appears a consensus that for
the long, expensive development phases, it is essential to work with leading hospitals with
world-class specialists in key disease areas, who conduct trials based upon the appropriate
diagnostics methods and standard of care.83
Additional regulatory and practical considerations also apply, such as ease of trial approval,
ease of patient recruitment, good clinical practice regulations with related inspections, and
potential medicine regulators’ preference for locally generated data.61,62,83 While most
regulators do not impose formal requirements for a specific proportion of clinical trial
evidence to come from local populations, in practice regulators exhibit a preference for this,
and applications for new drugs relying solely on data from a narrow range of countries
require a defensible explanation from the submitting company (Table 1). However, there is
evidence that flexibility is increasing for new technologies in rare diseases; for example,
the European Medicines Agency (EMA)’s Committee for Medicinal Products for Human
Use (CHMP) advisory committee recently recommended approval of gene therapy Upstaza
for the treatment of aromatic L-amino acid decarboxylase (AADC) deficiency, largely based
on the results of three clinical trials conducted in Taiwan, where the gene therapy was first
developed.84 This contrasts with the US Food and Drug Administration (FDA)’s recent
rejection of Eli Lilly’s PD-1 inhibitor Tyvyt based on clinical trial data generated solely in
China, requesting that an additional multiregional trial be conducted.85
Table 1: Guidance regarding regulatory requirements for local clinical trial evidence
appears to be relatively uniform
Regulatory
Location Requirements
authority
Guidelines indicate that a substantial proportion of
the evidence in marketing authorisation dossiers
European European Medicines
is to be gathered in European populations.
Union Agency (EMA)
Guidance defines characteristics of a medicine’s
likely sensitivity to ethnic factors.86
Food and Drug
United Administration (FDA) Under 21 CFR 312.120 regulations, marketing
States approval of a new drug based solely on foreign
CDER/CBER/CDRA
83 Gehring, M. et al. (2013) Factors influencing clinical trial site selection in Europe: the Survey of Attitudes towards
Trial sites in Europe (the SAT-EU Study). BMJ Open. 3(11): e002957.
84 APM HealthEurope EMA acceptance of largely Taiwanese data for PTC's Upstaza partly down to ethnicity-neutral
nature of gene therapy 2022. Available at: https://www.apmhealtheurope.com/story.php?objet=79823 [Accessed
June 2022]
85 Cancer Network FDA’s ODAC Cites Need for Additional Research for Sintilimab Combo for Frontline NSCLC
2022. Available at: https://www.cancernetwork.com/view/fda-s-odac-cites-need-for-additional-research-for-
sintilimab-combo-for-frontline-nsclc [Accessed July 2022]
86 EMA Available at: https://www.ema.europa.eu/en/documents/scientific-guideline/ich-e-5-r1-ethnic-factors-
acceptability-foreign-clinical-data-step-5_en.pdf [Accessed June 2022]

clinical data is possible.87 However, a common

assumption applied in practice is that at least 20%
of the clinical data should be gathered in US
patients.88
If a product is likely to be affected by ethnicity,
Pharmaceuticals and
data generated in Japanese populations is
Japan Medical Devices
required. If it is unlikely to be affected by ethnicity,
Agency (PMDA)
this does not apply.89
If a product is likely to be affected by ethnicity,
State Administration
data generated in Chinese populations is
China for Market
required. If it is unlikely to be affected by ethnicity,
Regulation (SAMR)
this does not apply.90
Sources: Regulatory guidance
However, much of the literature recognised that there is also strategic commercial
consideration in determining the location of clinical trial programmes. They are often spread
across many OECD (Organisation for Economic Co-operation and Development) countries
to provide a platform for international uptake. Having strong links to top clinical research
centres locally which understand the new medicine is seen as a considerable asset.
Logically, a major commercial market may be an attractive location for a clinical trial
because of the advantages associated with familiarising clinical key opinion leaders with a
new product pre-launch to support its rapid uptake post-marketing authorisation.91
Furthermore, the Helsinki Declaration revision of 2013 stipulates patients participating in a
clinical trial must retain post-trial access, which is now factored into decisions on where to
initiate clinical trials.92
Commercial conditions may also indirectly influence the ability for a high-quality trial to be
conducted. A restrictive pricing and access environment for innovative therapies can
stagnate the standard of care in a market, as physicians may be treating patients with older,
low-cost therapies rather than newer, high-cost therapies. From a clinical standpoint, this
may be considered the most appropriate comparator for a clinical trial in the same therapy
area. This could prevent a company from conducting a clinical trial in such a market in the
87 FDA Available at: https://www.fda.gov/files/about%20fda/published/FDA-Acceptance-of-Foreign-Clinical-Studies-

Not-Conducted-Under-an-IND--Frequently-Asked-Questions.pdf [Accessed June 2022]
88 IQVIA Global approaches to drug development: when ex-US clinical data can support US drug approvals.
Available at: https://www.iqvia.com/-/media/iqvia/pdfs/library/white-papers/global-approaches-to-drug-
development.pdf [Accessed June 2022]
89 https://www.clinicalleader.com/doc/meeting-clinical-trial-data-requirements-in-asian-markets-0001 [Accessed
June 2022]
90 Morgan Lewis (2018) China national drug administration sets guidelines for overseas drug trial data. Available at:
https://www.morganlewis.com/pubs/2018/08/china-national-drug-administration-sets-guidelines-for-overseas-
drug-trial-data [Accessed June 2022]
91 Bramley-Harker E., et al. (2007) Key Factors in Attracting Internationally Mobile Investments by the Research-
Based Pharmaceutical Industry. London: NERA Economic Consulting.
92 Iunes, R. et al. (2019) Who should pay for the continuity of post-trial health care treatments? International Journal
for Equity in Health. 18:26.

future because the outdated clinical guidelines used may not reflect what a comparator arm
needs to be in an innovative clinical trial.93
Potentially this provides an explanation that reconciles the conflict in the literature, where
statistical analyses show correlation between price regulations and location of clinical
trials,94,95 whereas many qualitative decision-maker interviews suggest that – although
important – price regulation is not a key driver when deciding on location of clinical
trials.96,97,98 For example, it may be true that changes to price regulations in a country
would not impact a company’s near-term clinical trial location decision. However, over the
long term, poor market conditions could impact the clinical standard of care and in five to
10 years could become a reason why that country is not a suitable location for clinical trials.
Understanding global trends in clinical trial activity

It is clear that Europe has been losing market share in terms of the location of clinical trials.
According to GlobalData, Europe accounted for a 19.3% share of global clinical trial activity
in 2020, a decrease of 6.3% compared with a 25.6% average over the last 10 years.99 A
number of reasons for this are stated in the existing literature:100
• The pool of eligible patients
• The speed of approvals
• Presence of disease-management networks
• Development of other geographical areas
• Costs and government financial incentives, although these were seen as relatively
less important
94 Golec, J. and Vernon, J.A. (2010) Financial effects of pharmaceutical price regulation on R&D spending by EU
versus US firms. Pharmacoeconomics. 28(2): 615–628.
95 Eger, S. and Mahlich, J. C. (2014) Pharmaceutical regulation in Europe and its impact on corporate R&D. Health
Econ Rev. 4:23.
98 IQVIA (2022) Attracting Investment in Clinical Development. Available at: https://www.iqvia.com/-

/media/iqvia/pdfs/library/white-papers/iqvia-attracting-investment-in-clinical-development.pdf
99 Europe accounts for 19.3% share of global clinical trial activity in 2020. Available at:
https://www.clinicaltrialsarena.com/clinical-trials-analysis/europe-accounts-for-19-3-share-of-global-clinical-trial-
activity-in-2020/ [Accessed June 2022]
100 Gehring, M., Taylor, R. S., Mellody, M., Casteels, B., Piazzi, A., Gensini, G., & Ambrosio, G. (2013). Factors
influencing clinical trial site selection in Europe: the Survey of Attitudes towards Trial sites in Europe (the SAT-EU
Study). BMJ Open, 3(11): e002957. Available at: https://bmjopen.bmj.com/content/3/11/e002957

Clinical trials have historically been concentrated around the clinical site, typically an
academic or general hospital, employing experienced investigators and site staff. However,
this could be changing with innovation. The increasing adoption of new technologies like
artificial intelligence, big data analytics, blockchain, clinical trial payments, and patient
engagement solutions, among others, have significantly contributed to the market growth
(Figure 12). The COVID-19 pandemic has also improved the adoption of virtual clinical
trials. There have been a number of interesting initiatives relating to the use of these
technologies in clinical trials in Europe; for example, the Innovative Medicines Initiative
(IMI)’s ‘Trials@Home’ project, which aims to conduct a pan-EU pilot on innovative,
technology-led, decentralised clinical trial designs.101 However, in overall adoption of digital
health technologies, Europe has lagged behind other regions, such as the US, which is
perceived to be at the forefront of the digital healthcare revolution,102 putting Europe a step
behind in attracting modern clinical trials.
Figure 12: There has been strong growth in the number of clinical trials employing
digital technologies or virtual interactions
Sources: Trialtrove® (Pharma Intelligence), March 2022. Trialtrove consolidates data from over 58,000 distinct
trial intelligence sources.
More generally, the COVID-19 pandemic had an impact on the location of clinical trials.
While Europe initially observed a smaller negative impact than the US, there is evidence
that the US has rebounded more quickly.103
The impact of new technology: learnings from ATMP clinical trials

As observed in the last chapter, the location of clinical trials for ATMPs diverges from the
general pattern of global clinical trial investments, with the highest proportion of trials
occurring in Asia, followed by the US, and then Europe, which has substantially fewer
101 Trials@Home Available at: https://trialsathome.com/ [Accessed July 2022]

102 Keen, C. E. (2018) The USA’s digital healthcare revolution. Available at: https://healthcare-in-
europe.com/en/news/the-usa-s-digital-healthcare-revolution.html [Accessed July 2022]
103 Lasch, F. et al. (2022) The Impact of COVID-19 on the Initiation of Clinical Trials in Europe and the United States.
Clinical Pharmacology & Therapeutics. 111(5): 1093–1102.

(Figure 5). To understand this trend, a number of reasons have been suggested in the
literature:
• The importance of R&D support: China’s leadership in ATMP clinical trial research
has been largely government-driven (three quarters of Chinese gene therapy trials
are non-industry sponsored).104 Biotech was prioritised in the Chinese
government’s Five-Year Plans and subsequently built upon by a series of policies
and funding to create an ATMP research ecosystem that brings together
government, industry, academics, hospitals and investors. In the US, access to
more venture capital also supports greater translation of ATMP research into
commercial development, as 85% of ATMP assets launched to date have not
originated in a large pharmaceutical company.105
• Regulator acceptance of clinical trial design: Due to the novelty of the technology
and the number of rare diseases that lack therapeutic alternatives, there are not
always established pathways for ATMP clinical development.106 This results in the
regulatory environment weighing more heavily on a decision on where to conduct
trials for ATMPs versus traditional therapies. There is also increasing reliance on
virtual decentralised clinical trial models to recruit a wider pool of patients in rare
diseases,107 although historically there has been some reluctance to accept these
models in Europe.108 Despite being the first country worldwide to approve a gene
therapy, in 2003, China initially lacked a clear and comprehensive regulatory
framework for these therapies, which is thought to have damaged its attractiveness
for future development investment. Triggered by their therapeutic potential and the
rapid growth of the market, the government then conducted a range of regulatory
reforms to promote the development of ATMPs in China.109
• The role of specialist centres: There are multiple hospitals in China sponsoring
CAR-T trials, with the four most prominent being Shenzhen Geno-Immune Medical
Institute, Beijing Boren Hospital, Chinese PLA General Hospital (in Beijing) and
104 Clinical Trials Arena (2021) The changing dynamics of gene therapy research: 2001–2021. Available at:
https://www.clinicaltrialsarena.com/comment/gene-therapy-research/ [Accessed July 2022]
105 McKinsey & Company (2021) A call to action: Opportunities and challenges for CGTs in Europe. Available at:
cgts-in-europe [Accessed July 2022]
106 Ilieva, K. Borissov, B. and Toumi, M. (2020) Gene therapy randomised clinical trials in Europe – a review paper
of methodology and design. J Mark Access Health Policy. 8(1): 1847808.
107 Raconteur. How Covid-19 rocked rare disease communities 2021. Available at:
https://www.raconteur.net/healthcare/covid-rare-disease-impact/ [Accessed July 2022]
108 De Jong, A. J. et al. (2022) Opportunities and Challenges for Decentralized Clinical Trials: European Regulators’
Perspective. Clinical Pharmacology and Therapeutics. 112(2): 344–352.
109 Wang, A. et al. (2022) An Overview of Cell and Gene Therapy Development in China. Human Gene Therapy.
33(1–2): 14–24.

Southwest Hospital (in Chengdu, Sichuan).110 The active role of hospitals in

sponsoring trials appears lesser in the US111 and Europe.112
• Degree of patient centricity: A patient-centric approach to healthcare delivery is

critical to the successful uptake of ATMPs and thus forms a larger part of the
decision of where to locate clinical development activity.
The pricing environment may also be more significant in locating new therapeutic solutions,
such as ATMP, because they are perceived as riskier investments. One way to look at this
is to consider CAR-T cell therapies that were first launched in 2017. By comparing the
location of the pivotal trial sites to the eventual commercial sales in each region, we see a
similar pattern. The US accounted for 50% of trial site locations in the JULIET Phase 2 trial,
and in 2020 the US represented 43.2% of global sales at that point (Figure 13), while 25%
of trial sites were in Europe, and Europe represented 29.5% of global sales in 2020. A
challenging commercial environment may also impact post-launch clinical research, and
send a signal to other developers: with Glybera, the first gene therapy approved in Europe,
in 2012, poor commercial uptake of the drug post-launch led to its eventual withdrawal from
the European market and termination of the European Phase IV studies that the EMA had
required.113,114 Subsequently, between 2012 and 2020, Europe’s share of global gene
therapy clinical trials fell from 30.5% to 19.3%.115
110 Boodhoo, A. (2021) How China is making progress in cell and gene therapy. Available at:
https://www.ey.com/en_my/life-sciences/how-china-is-making-progress-in-cell-and-gene-therapy [Accessed July
2022]
111 Kassir, Z. et al. (2020) Sponsorship and Funding for Gene Therapy Trials in the United States. JAMA. 323(9):
890–891.
112 Catapult. The Cell and Gene Therapy Catapult UK clinical trials database. Available at:
https://ct.catapult.org.uk/clinical-trials-database [Accessed July 2022]
113 MIT Technology Review (2016) The World’s Most Expensive Medicine Is a Bust. Available at:
https://www.technologyreview.com/2016/05/04/245988/the-worlds-most-expensive-medicine-is-a-bust/
[Accessed July 2022]
114 Labiotech (2017) Goodbye Glybera! The World’s First Gene Therapy will be Withdrawn. Available at:
https://www.labiotech.eu/trends-news/uniqure-glybera-marketing-withdrawn/ [Accessed July 2022]
115 Clinical Trials Arena (2021) Europe accounts for 19.3% share of global clinical trial activity in 2020. Available at:
https://www.clinicaltrialsarena.com/clinical-trials-analysis/europe-accounts-for-19-3-share-of-global-clinical-trial-
activity-in-2020/ [Accessed July 2022]

Figure 13: The location of clinical trial sites and commercial sales of first cell
therapies are similar
100%
25% 27%
80%
60% 25% 30%

40%
20% 50% 43%
0%
Clinical trial sites 2020 sales
US Europe Rest of World
Source: clinicaltrials.gov and EvaluatePharma, accessed July 2022.
3.3. Investigational and commercial manufacturing sites

Manufacturing facility investment decisions differ from research hub decisions in that they
are made more frequently, as companies aim to upscale and upgrade their production
capacity and capabilities to manage evolving demand, access new markets and manage
the evolution of their portfolio. However, there are still long-term commitments that are,
therefore, often strategically important. It is also important to distinguish between the
commercial manufacturing of medicines and the manufacturing for supply of IMPs for
clinical studies.
IMP and commercial manufacturing have different characteristics which may impact what
makes a particular location more or less attractive for investment:
• Scale: Products going through clinical development are produced in much lower
quantities and have more predictable demands for the specific clinical studies than
commercial products being produced for global delivery to patients, for which the
demand may vary extremely in the first years of being marketed and afterwards
based on various factors (e.g. as a result of epidemics or pandemics in extreme
circumstances, or more commonly as a result of changes in competition in the
market, or unanticipated off-label use).
• Need for revision and flexibility: During the development process, there is a need
to produce sufficient volume for the clinical trials but also to investigate and
overcome the challenges affecting commercial production. Any changes in the
production process affect the regulatory process.
API and manufacturing associated with formulation and finishing also have different
characteristics, largely related to the degree of outsourcing and how production can be
undertaken most efficiently, as does whether the product is on- or off-patent.
The type of manufacturing affects the strategic choice of which parts of the manufacturing
process to undertake and where to partner with other companies, for example through
contract manufacturing organisations (CMOs) and contract development and
manufacturing organisations (CDMOs), as illustrated in Figure 14, and the location
decision.
• IMP versus commercial production: Pharmaceutical companies often outsource

IMP manufacturing to CDMOs; commercial manufacturing is more likely to occur

in-house using a pharmaceutical company’s own manufacturing sites and

capacities where the manufacturing can be combined with other products in the
portfolio using similar or the same equipment to use capacity effectively.116
• API versus formulation and finishing: Over the last 20 years we have seen
companies continue to outsource the production of large-scale raw materials and
APIs to specialised companies. In fact, the growth of the CMO/CDMO market is
expected to outpace the growth of the overall pharmaceutical industry between
now and 2025, with the majority of outsourcing to CDMOs occurring at the API
production stage rather than at finished product manufacturing or packaging.117
Outsourcing of production is particularly prevalent in the Asia-Pacific region, where
it is estimated that the CDMO market will be worth over $80 billion by 2025 (versus
$34 billion and $23 billion in North America and Europe, respectively).118 This is
particularly driven by outsourcing API manufacturing to countries such as China
and India as a result of low labour and production costs.119 Although data are not
yet available, we might expect the COVID-19 pandemic, the energy crisis and
environmental or transport-related aspects to impact companies’ attitudes towards
outsourcing.
• Generic versus on-patent medicines: Although there is a common perception that

API manufacturing is not undertaken in Europe, this is confusing the manufacturing
of innovative medicines with off-patent medicines. For generics, Europe is highly
dependent on Asia; in terms of APIs and precursors, European direct and indirect
dependency is estimated to be around 74%.120 However, for innovative medicines,
a 2020 survey of 16 EFPIA member companies reported that 64% of APIs are still
manufactured in Europe, with 15% manufactured in North America and only 11%
in both China and India combined.121 The majority of European chemical APIs use
raw materials manufactured in Europe (64%), but there is also dependency on
India and China (29% of raw materials) and the US (5%).
This shows that European production remains an important element for the research-based
companies, at least in ensuring the quality and sustainability of European medicine supply
chains, but remains interwoven with the global supply chain.
116 Information from interview programme with pharmaceutical company representatives, June 2022.
117 PwC (2019) Current trends and strategic options in pharma CDMO market. Available at:
https://www.pwc.de/de/gesundheitswesen-und-pharma/studie-pharma-cdmo-market.pdf [Accessed July 2022]
118 https://www.grandviewresearch.com/industry-analysis/pharmaceutical-contract-manufacturing-market [Accessed
July 2022]
119 IQVIA (2020) EU Fine Chemical Commercial KPI. Available at: https://efcg.cefic.org/wp-
content/uploads/2021/06/20201211_IQVIA-for-EFCG_Executive-summary.pdf [Accessed July 2022]
120 IQVIA (2020) EU Fine Chemical Commercial KPI. Available at: https://efcg.cefic.org/wp-
content/uploads/2021/06/20201211_IQVIA-for-EFCG_Executive-summary.pdf [Accessed July 2022]
121 EFPIA (2021) Drug Shortages in Europe: 2nd EPFIA member companies survey investigating the role of API as
a possible root-cause for drug shortages.

Figure 14: The decision of where to locate manufacturing activities depends on

which type of activity is being undertaken
Source: Adapted from PwC (2019)122
In-house manufacturing remains important, especially for research-based manufacturers

to gain knowledge and the ability to share and understand the processes, particularly for
commercial production, and companies are unlikely to entirely outsource production. We
can see this when looking at the number of sites owned by major pharmaceutical
companies with many marketed products: while Pfizer only has eight major research
centres, it lists 35 manufacturing sites across six continents.123 Given the complexity and
vulnerability of global supply chains, it is imperative that a company’s global network of
manufacturing plants enable it to reliably meet demand and support business growth. The
location of these plants is therefore something under frequent review and consideration.124
Factors affecting the location of manufacturing investments

As with R&D, manufacturing decisions are not made from a blank page; internal company
considerations strongly influence the decision on manufacturing location for both IMP and
commercial manufacturing.125 In fact, multinational companies expand their existing
production sites up to six times as often as they establish new facilities, likely as this
involves fewer costs and relocation of existing resources.126 Internal company-driven
factors can also be relevant at the final decision-making step: even if a location is deemed
attractive for cost, quality, reliability or market-driven reasons as well as demand, lack of
122 PwC (2019) Current Trends and Strategic Options in the Pharma CDMO Market. Available at:
https://www.pwc.de/de/gesundheitswesen-und-pharma/studie-pharma-cdmo-market.pdf [Accessed July 2022]
123 Pfizer. Available at: https://www.pfizercentreone.com/manufacturing-network [Accessed July 2022]
124 ReliablePlant, Pfizer announces plans to reconfigure its global plant network. Available at:
https://www.reliableplant.com/Read/24643/Pfizer-reconfigure-plant-network
34(4): 364–379.

internal capabilities or resources to exploit these conditions may nullify its attractiveness.127
This inevitably means there is considerable inertia, and moving away from an existing
location of manufacturing needs to be justified. Often the decision to move away is
attributable to long-term negative drivers away from the existing site (such as trade barriers,
and inflexibility to expand locally) rather than positive drivers associated with a new
potential site (such as lower labour costs).128
Looking at the external environment, the consensus in the literature is that the overall cost
plays a bigger role for commercial manufacturing than for manufacturing of IMPs. This was
corroborated by our interview programme.
Literature from the 1990s onwards also emphasises that taxation is a critical cost factor for
manufacturing investments; from both statistical analysis and qualitative interviews, it is
clear that high tax rates act as a major deterrent for manufacturing investments.129,130
Typically ranking second is labour flexibility, which allows companies to move more easily
to new activities, and is viewed as more important than the cost of labour itself.129 As a
stand-alone metric, some modelling has suggested labour cost does not significantly
impact manufacturing location choice as it can be balanced with productivity.131 Transport
costs are less important still, as they generally account for a small proportion of the overall
cost of production. However, this may change in the future. Cost factors are collectively
considered more critical by our interviewees for large-scale commercial manufacturing with
evolving demands than for small-scale IMP manufacturing.
For commercial manufacturing, it is still seen as imperative that locations meet quality
levels, mainly in terms of availability of a skilled workforce, compliance with internationally
recognised regulatory standards (such as good manufacturing practices and inspections)
and infrastructure (such as reliable power and water supply, and access to support
services).129132
For IMP manufacturing, the need for high quality and efficient processes that allow fast
speed to market largely dominates over cost. The key drivers reported by our interviewees
overlap more with research activities than with commercial manufacturing, namely the need
for access to highly qualified staff to drive process development.133 The impact of this is
127 Theyel, G., Hofmann, K. and Gregory, M. (2018). Understanding Manufacturing Location Decision Making:
Rationales for Retaining, Offshoring, Reshoring, and Hybrid Approaches. Economic Development Quarterly.
32(4): 300–312.
129 Rozek, R.P. (2011) Risk and Regulatory Factors Affecting Location Decisions by Research-Based Pharmaceutical
Companies. European Journal of Risk Regulation. 2(1): 92–103.
130 Devereux, M.P. and Griffith, R. (1998). Taxes and the location of production: evidence from a panel of US
multinationals. Journal of Public Economics. 68(3): 335–367.
34(4): 364–379.
132 United Nations Conference on Trade and Development (2011). Investment in Pharmaceutical Production in the
Least Developed Countries: A Guide for Policymakers and Investment Promotion Agencies. Available at:
https://unctad.org/system/files/official-document/diaepcb2011d5_en.pdf [Accessed June 2022]

evident from recent IMP manufacturing facilities established by major pharmaceutical

companies, which tend to locate in areas of concentrated academic expertise (Box 4).
Box 4: Case study | Investment to bridge development and manufacturing for clinical
trials
In 2020, Merck KGaA announced a €250 million investment in Switzerland, aiming to

bridge biotech development and manufacturing for clinical trials in order to support
growth and progression of Merck’s biologic pipeline and get medicines to patients
earlier.134 Particularly for biologics, which are more complex to produce than small
molecules, this choice of location enables the facility to access high-quality staff in two
ways:
• Close proximity to Merck’s existing manufacturing site in Corsier-sur-Vevey,
Switzerland. This allows ease of transfer of internal knowledge and expertise.
• Switzerland is perceived to have high-quality infrastructure for complex
manufacturing and is globally renowned in life sciences, with over 45,000 life
sciences employees in the country.135 Switzerland was also ranked first in the
Global Talent Competitiveness Index (GTCI) in 2020, demonstrating its strong
talent base.136
The importance of tax rates, labour skill, regulations and quality infrastructure can explain
the development of clusters where many companies have located manufacturing activities.
In Ireland, for example, despite being one of the smallest countries in the EU by geographic
area, all of the world’s top 10 pharmaceutical companies have operations, and there are
90 pharmaceutical and biopharmaceutical plants throughout the country.137 This is
attributed to consistent low corporate taxation, low labour costs and high workforce
skills.138 Once established, the benefits of a cluster become self-justifying. The benefits to
a company in joining a cluster include the existing stock of skilled staff and the established
infrastructure, such as availability of manufacturing support service firms. Co-location with
the chemical industry can offer efficiency benefits, as can co-location with the source of raw
materials.139 This gravitational pull effect can be observed when clusters’ attractive
134 FiercePharma (2020) Merck KGaA antes up €250M to bridge R&D with manufacturing. Available at:
https://www.fiercepharma.com/manufacturing/merck-kgaa-antes-up-eu250m-to-bridge-r-d-manufacturing
135 Interpharma, Switzerland as a pharma hub. Available at: https://www.interpharma.ch/themen/starke-
wirtschaftliche-rahmenbedingungen/pharmastandort-schweiz/?lang=en [Accessed July 2022]
136 Hobson Prior (2020) Why are there so many pharmaceutical companies in Switzerland? Available at:
https://www.hobsonprior.com/blog-post/2020-8/why-are-there-so-many-pharma-companies-in-switzerland
137 Hobson Prior (2020) Why are there so many pharmaceutical companies in Switzerland? Available at:
https://www.hobsonprior.com/blog-post/2020-8/why-are-there-so-many-pharma-companies-in-switzerland
138 Siedschlag, I., Yan, W. and Driffield, N. (2021) Enhancing the Attractiveness of the Island of Ireland to High-Value
Foreign Direct Investment. ESRI Research Series 133. Available at: https://www.esri.ie/publications/enhancing-
the-attractiveness-of-the-island-of-ireland-to-high-value-foreign-direct [Accessed June 2022]
139 Ruane, F.P. and Zhang, X. The Determinants of Location Choices by Pharmaceutical MNEs in Europe. Available
at: https://www.etsg.org/ETSG2008/Papers/Ruane.pdf [Accessed June 2022]

conditions remain stable over time and companies continue to benefit from co-location;
Ireland, for example, was home to only two biologics manufacturing sites in 2003, and by
2020 this had increased tenfold to 20 sites.137 Modelling also indicates that companies are
more likely to expand production at sites that are located in a cluster with other
companies.140 We now see the attractiveness of the Irish cluster extending beyond
European and US-based companies and also attracting investment from Chinese-based
companies (Box 5) due to the quality, stability and reliability of the business environment.
Box 5: Case study | Foreign direct investment into Ireland cluster
In 2018, the first major FDI greenfield pharmaceutical manufacturing project from China
was announced by WuXi Biologics, a major Chinese contract manufacturing
organisation. The location chosen was Dundalk, Ireland.141 Looking to expand
operations outside of China, Europe was the initial region of choice (although operations
are also expected in North America from 2024).142 Considering the potential locations
within Europe, Ireland was most attractive to WuXi Biologics for a number of reasons:143
• As a Chinese company with no experience of European business operations,
the presence of all of the top 10 global pharmaceutical companies in Ireland
increases confidence to invest.
• The existing cluster also means support service firms are nearby and easily
accessible to support establishment and operation of the site.
• An English-language-speaking business environment is more accessible to
Chinese-speaking headquarter staff than an alternative European language.
• Proximity and ease of movement to the rest of the EU allows access to the
European market; good transport links to China facilitate interaction with
headquarters.
• The 12.5% corporate tax rate helps to de-risk investment, which as the first ex-
China greenfield project could be considered high-risk.
• Existence of a sizeable and highly qualified labour pool allows rapid
recruitment and start-up of operations.
• The Irish government provides strong support through the Industrial
Development Agency (IDA) Ireland, for example through pre-purchase and
preparation of the site by IDA Ireland before sale to WuXi.
141 The Irish Times (2021) Wuxi Biologics Ireland in €679.6m gain after restructuring. Available at:
https://www.irishtimes.com/business/health-pharma/wuxi-biologics-ireland-in-679-6m-gain-after-restructuring-
1.4699274 [Accessed June 2022]
142 Wuxi Global Network. Available at: https://www.wuxibiologics.com/locations-facilities/#Global_Network [Accessed
June 2022]
143 Information from interview programme with WuXi representative, June 2022.

There are also potential drawbacks to locating in a cluster. For example, companies in a
cluster may lose staff to other firms, potentially resulting in a wage ‘bidding war’ between
co-located companies,14464 but the upside of knowledge availability is typically stronger.
Understanding global policy trends: localisation of manufacturing

As a potential disruptor to the cluster model, in recent years an increasing number of
countries have considered manufacturing localisation policies. These policies can favour
domestic manufacturing at the expense of products from other countries (‘forced
localisation’). Policies can take multiple forms:145
• Intellectual property (IP)-based rules that support speed and breadth of IP

protection and ability to defend it
• Regulatory rules that impact the speed and approval in regulatory submissions
• Reimbursement, pricing and procurement rules
• Absence of trade barriers such as import or export bans for components, raw and
the final material, favour of a locally produced alternative (for generics only) or
discriminatory taxation policies
Until recently, localisation policy debate and implementation has primarily occurred with
governments aiming to drive localisation for perceived economic or health system benefits.
This was applied by China, with the ‘Made in China 2025’ strategy aiming to increase local
manufacturing of innovative pharmaceutical and medical devices in China, supporting a
lower time to access and increased availability of innovative drugs.146 Innovative medicines
produced locally benefit from a number of policies, including reduced corporate tax rates147
and priority regulatory review.148 We can observe increased pressures for reshoring or
localisation in the EU Member States, which risk harming Europe’s global competitiveness,
given the potential for retaliation or reciprocal measures from other economies.149 To date,
the EU has supported global supply chains, and successfully defended against the
implementation of forced localisation policies, most recently in Turkey, with the World Trade
145 Perspectives on Trade 2017 Trade Barriers Report: Government Procurement. Available at:
https://trade.djaghe.com/?p=3911
146 Institute for Security & Development Policy. Made in China 2025. Available at:
https://isdp.eu/content/uploads/2018/06/Made-in-China-Backgrounder.pdf
147 PugatchConsilium (2016) Separating Fact from Fiction – How Localization Barriers Fail Where Positive Non-
discriminatory Incentives Succeed. Available at: https://www.pugatch-
consilium.com/reports/Localization%20Paper_US_FINAL.pdf
148 ITIF (2019) China’s Biopharmaceutical Strategy: Challenge or Complement to U.S. Industry Competitiveness?
Available at: https://itif.org/publications/2019/08/12/chinas-biopharmaceutical-strategy-challenge-or-complement-
us-industry
149 EFPIA (2020) COVID-19 Key Messages regarding International Trade. Available at:
https://www.efpia.eu/media/554474/covid-19-and-international-trade.pdf [Accessed July 2022]

Organization (WTO) ruling against forced localisation measures in July 2022 being
upheld.150
Although the localisation debate started in the EU with the discussion on drug shortages, it
has accelerated as a result of a crisis situation (initially the Iceland volcano eruption,
followed by the COVID-19 pandemic), as countries seek localisation as an empirical means
to protect supply continuity in case of global supply chain disruption. Although in 2021 the
Biden Administration withdrew the proposal,151 forced localisation was politically backed in
the US in 2020 with the Trump administration’s ‘Buy American’ Executive Order for
purchases of essential medicines, requiring that these be removed from the coverage of
any international free trade agreements.152 Similar debates can be observed in Russia,
Brazil, Turkey and China. In the EU, the European Parliament has highlighted the
importance of a more proactive EU policy on reshoring the pharmaceutical industry to
mitigate concerns around supply security, focusing on generic API.153
The impact of new technology: learnings from continuous manufacturing

Crisis situations like the COVID-19 pandemic have also accelerated other manufacturing
trends. Well-established techniques in other industries (e.g. food and vitamins) such as
continuous manufacturing have often been cited as another solution for increasing the
strength of pharmaceutical supply chains, and the pandemic has reinvigorated this.154
Furthermore, there is the development of the harmonised standard for filing under the
International Council for Harmonisation (ICH Q13 guideline). Continuous manufacturing
contrasts with traditional batch manufacturing in that the production of APIs or drugs occurs
in a continuous flow rather than in stop-start multi-step batches.155 Furthermore, it can
decrease the environmental footprint by enabling smaller factory sizes, using less territory
and energy, as well as reducing unproductive cleaning cycles. Even smaller quantities can
be manufactured, and alternative facility setups can be used, such as containers.
150 European Commission (2022) Press release: “EU wins WTO case against Turkey's discriminatory practices on
pharmaceuticals”. Available at: https://ec.europa.eu/commission/presscorner/detail/en/IP_22_4670 [Accessed
July 2022]
151 The National Law Review, “Buy American” Update: Essential Medicines May Continue to Come From Abroad (For
Now). Available at: https://www.natlawreview.com/article/buy-american-update-essential-medicines-may-
continue-to-come-abroad-now
152 Perspectives on trade. Trump’s Buy American Order for Medicines. Available at:
https://trade.djaghe.com/?p=6547
153 Policy Department for External Relations Directorate General for External Policies of the Union. Post Covid-19
value chains: options for reshoring production back to Europe in a globalised economy. Available at:
https://www.europarl.europa.eu/RegData/etudes/STUD/2021/653626/EXPO_STU(2021)653626_EN.pdf
154 Pharmaceutical Technology. Continuous manufacturing builds on hype but adoption remains gradual. Available
at: https://www.pharmaceutical-technology.com/analysis/continuous-manufacturing-builds-on-hype-but-adoption-
remains-gradual/
155 FDA. Modernizing the Way Drugs Are Made: A Transition to Continuous Manufacturing. Available at:
https://www.fda.gov/drugs/news-events-human-drugs/modernizing-way-drugs-are-made-transition-continuous-
manufacturing

The pandemic increased the debate on continuous manufacturing, although a trend was
already evident with major pharmaceutical companies such as Novartis, Johnson &
Johnson, Amgen, and Eli Lilly making use of the technology for parts of their manufacturing
processes.156 Although this may not affect location decisions for some companies – Pfizer,
being one of the first companies to venture into continuous manufacturing technology,
chose to upgrade their existing site in Germany rather than adopt a different location
strategy (Box 6) – for others continuous manufacturing enables all stages of the production
chain (Figure 14) from raw material through to packaging to occur at a single site, so we
would expect this to influence investment decisions.156
Box 6: Case study | Investment in continuous manufacturing plant in Germany
Pfizer was an early adopter of continuous manufacturing technology, opening the world’s
first continuous manufacturing facility for the pharmaceutical industry in Freiburg,
Germany, in 2017.157 The main decision for the company to make was whether to invest
in this type of technology or not, rather than where would be a viable place to do so. As
continuous manufacturing sites produce finished products, existing reliable Pfizer
manufacturing sites with the capabilities of launching new products and in locations
where there would be unrestricted access to global markets were the main contenders
for locating the new technology. By avoiding a greenfield investment, efficiencies were
gained from leveraging the utilities, infrastructure and labour skill at the existing site.158
Therefore, some shortening of the industry value chain appears inevitable.
The impact of new technology: learnings from ATMP manufacturing

Relative to other technologies, manufacturing of certain new therapeutic solutions,
particularly ATMPs, is complex, high-risk, more time-sensitive, and smaller-scale. This is
particularly the case for ex vivo products, given the need to manufacture for individual
patients using their source material, leading to additional cost and a need for advanced
technical expertise and support. The consistency of manufacturing quality is also more
critical: while new drug reviews by regulators typically focus 80% on clinical factors and
20% on chemistry, manufacturing and controls (CMC) factors, for ATMPs this ratio is
reversed. Currently, this may be driven in part by the unknowns in the new technology.159
For these and other new technologies, the concept of “the process being the product” is
even more true, and therefore manufacturing quality needs to stay consistent from Phase
1 through to commercial rollout. The location of the source of raw materials for ATMPs must
also be considered, as the value chains need to be structured differently:
156 World Economic Forum (2021) Top 10 Emerging Technologies of 2021. Available at:
https://www3.weforum.org/docs/WEF_Top_10_Emerging_Technologies_of_2021.pdf
157 Healthcare Industry BW, Industry 4.0: Pfizer opens continuous manufacturing plant in Freiburg. Available at:
https://www.gesundheitsindustrie-bw.de/en/article/news/industry-40-pfizer-opens-continuous-manufacturing-
plant-in-freiburg
158 Information from interview programme with Pfizer representative, June 2022.
159 Deloitte (2020) Cell and gene therapies: Delivering scientific innovation requires operating model innovation.
Available at: https://www2.deloitte.com/us/en/insights/industry/life-sciences/operating-models-for-gene-cell-
therapy-manufacturing-process.html [Accessed July 2022]

• For ex vivo therapies, such as autologous cell therapies, the patient is the source
of raw materials.
• For in vivo therapies, such as viral vector gene therapies, raw materials are not
required from patients.
For ex vivo therapies, there is therefore a need for manufacturing to occur in closer
proximity or with ease of transport to where the therapy is been administered to patients.
The limited stability of the material, once collected, will reduce over time post-collection,
and therefore manufacturing location must be chosen in part based on availability of
appropriate resources for shipping and processing starting materials.160 The current
concentration of ATMP manufacturing on the US East Coast can in part be attributed to the
strong transport and logistics infrastructure161 and the innovation centres linked to a strong
landscape of universities. The critical need for effective transportation routes was
highlighted during the COVID-19 pandemic when two thirds of cell therapy companies
reported supply chain disruptions caused by transport and travel restrictions of regulators
to approve these products.162
To ensure an efficient manufacturing process, there is also a greater need versus traditional
therapies for high flexibility and to be ready to start manufacturing when a patient enrols
onto the therapy: personnel, cold rooms (needed to guarantee stability) and innovative
equipment must be ready at any time, meaning clean rooms will run below capacity for a
significant proportion of time.163 Hospital or bedside manufacturing might be anticipated in
the future; this is currently in a pilot phase.
The manufacturing of both ex vivo and in vivo ATMPs relies on access to highly qualified
staff, given the complexity of the manufacturing processes. With the increasing number of
ATMPs being developed globally, demand for talent is high and can limit the expansion of
manufacturing capacity. Companies so far have launched most of the world’s ATMPs out
of the US and have focused on building manufacturing capacity in the US first before
expanding to Europe. Indeed, estimates suggest that two of the largest ATMP
manufacturing plants in the US will soon match Europe’s total manufacturing capacity.164
European scientists are therefore being drawn to the US for job opportunities, creating a
talent gap in Europe.164 The US is also investing heavily in the skill of its workforce: for
160 Cell & Gene Therapy Insights (2019) Managing starting material stability to maximize manufacturing flexibility and
downstream efficiency. Available at: https://insights.bio/immuno-oncology-insights/journal/article/209/managing-
starting-material-stability-to-maximize-manufacturing-flexibility-and-downstream-efficiency [Accessed July 2022]
161 AreaDevelopment (2021) Location Factors for Cell and Gene Therapy Companies. Available at:
https://www.areadevelopment.com/Biotech/Q4-2021/location-factors-for-cell-and-gene-therapy-companies.shtml
162 McKinsey & Company (2020) COVID-19 and cell and gene therapy: How to keep innovation on track. Available
at: https://www.mckinsey.com/industries/life-sciences/our-insights/covid-19-and-cell-and-gene-therapy-how-to-
keep-innovation-on-track [Accessed July 2022]
163 Clarke, D. & Smith, D. (2019) Managing starting material stability to maximize manufacturing flexibility and
downstream efficiency. Cell & Gene Therapy Insights, 5(2): 303–314. Available at: doi.org/10.18609/cgti.2019.033
164 McKinsey & Company (2021) A call to action: Opportunities and challenges for CGTs in Europe. Available at:
cgts-in-europe [Accessed July 2022]

example, the New Jersey Institute of Technology and the New Jersey Innovation Institute
have recently launched the US’s first master’s degree programme and professional
graduate certificate in cell and gene therapies, and an apprenticeship programme for bio-
manufacturing.165 Similar programs are observed in Ireland with the expansion of cell and
gene therapy manufacturing training at Ireland’s National Institute for Bioprocessing
Research and Training (NIBRT).166 Countries with a large existing footprint of
pharmaceutical activity are also often more attractive to manufacturers, as the existing
talent pool can be used and upskilled to meet the needs of new technologies.167 For
example, UCB’s new gene therapy process development and clinical manufacturing facility
is under construction on the site of their existing campus in Braine-l’Alleud, Belgium. The
campus is already home to a community of engineers and manufacturing personnel skilled
in biologic manufacturing,168 which has overlaps with the processes needed for viral vector
gene therapies.169
IMP manufacturing for ATMPs is also more likely to be co-located with commercial
manufacturing and/or R&D for knowledge transfer and scalability reasons (e.g. Box 7).
There are efficiencies to be gained in doing so for many types of therapy, but particularly
for new therapeutic solutions for which accelerating internal competencies and shortening
time-to-market is a key driver and affects where and how investment happens.170
Box 7: Case studies | Co-location of the value chain for new therapeutic solutions
In February 2022, Eli Lilly and Company announced an investment of $700 million in a
new facility in Boston which, once complete, will house the Lilly Institute for Genetic
Medicine.171 The aim of the Institute is research and development of innovative RNA-
and DNA-based therapies to treat and prevent diseases. For Lilly, this is the first instance
in which research, IMP manufacturing and commercial manufacturing will occur in one
facility.172 Depending on where a drug candidate or product is in its life cycle, it will be
able to be transferred around to the relevant section of the facility rather than being
moved to a separate site. In May 2022, Lilly also invested $2.1 billion in two new
165 The New Jersey Institute of Technology, NJIT to start programs in cell and gene therapy. Available at:
https://www.choosenj.com/news/njit-to-start-programs-in-cell-and-gene-therapy/ [Accessed July 2022]
166 National Institute for Bioprocessing Research & Training. Available at: https://www.nibrt.ie/
167 AreaDevelopment (2021) Location Factors for Cell and Gene Therapy Companies. Available at:
https://www.areadevelopment.com/Biotech/Q4-2021/location-factors-for-cell-and-gene-therapy-companies.shtml
168 UCB (2022) UCB expands innovation footprint with new state-of-the-art gene therapy facility. Available at:
https://www.ucb.com/stories-media/Press-Releases/article/UCB-expands-innovation-footprint-with-new-state-of-
the-art-gene-therapy-facility [Accessed July 2022]
171 Lilly (2022) Lilly Announces the Institute for Genetic Medicine and $700 Million investment in Boston Seaport Site.
Available at: https://investor.lilly.com/news-releases/news-release-details/lilly-announces-institute-genetic-
medicine-and-700-million [Accessed July 2022]
172 Information from interview with pharmaceutical company representative, June 2022.

manufacturing sites in Indiana, which will expand the company’s manufacturing network
for active ingredients and new therapeutic modalities, such as genetic medicines.173
In 2021, Sanofi announced that a €400 million annual investment would be made in an
mRNA vaccine centre of excellence in Cambridge, Massachusetts (US) and Lyon,
France.174 The sites will bring together R&D, digital, and chemistry, manufacturing and
controls (CMC) teams, allowing end-to-end development and accelerating the mRNA
vaccines pipeline. In Lyon, Sanofi already has both an R&D and a manufacturing
presence, so the existing internal capabilities and infrastructure can be utilised.
3.4. Summary
As described in Chapter 2, Europe’s relative global performance in attracting research,
clinical trials and IMP and commercial manufacturing investments differs substantially for
each activity. Understanding the drivers impacting the location of these activities
(summarised in Figure 15) helps us to explain this trend and identify Europe’s areas of
strength and weakness.
• Research hubs: Companies are primarily driven to locate their research activities
in places with access to world-leading research staff. Given Europe’s and the US’s
strength in producing highly qualified researchers, this explains their historical
dominance in attracting R&D investment; and China’s recent heavy investments in
higher education and scientific infrastructure have seen corresponding increases
in private investment. Where the US leads and China is catching up, is in the
strength of the overall innovation ecosystem, meaning access to research funding,
public-private partnerships and other collaboration opportunities. Europe has
historically lagged in this domain. However, it is also seen as important to have a
research hub in leading pharmaceutical markets, and the opening of hubs in China
needs to be seen in this light (rather than as a movement away from Europe).
• Clinical trials: Europe continues to perform strongly in attracting clinical trial

investments. However, we observed in Chapter 2 that this is not the case for some
new therapeutic solutions, such as ATMPs. The reasons for China’s dominance in
ATMP clinical research appear multifaceted and may include the strong
government support for ATMP clinical trials, the focus on improving regulatory
pathways, and the existence of leading specialist centres. The US’s attractiveness
as a location for ATMP clinical trials appears driven by many of the world’s leading
academic centres, the overall strength of the innovation ecosystem, and the
commercial attractiveness of the US ATMP market.
• IMP manufacturing: IMP manufacturing location should be considered mostly

separately to commercial-scale manufacturing, as the drivers of investment
location more closely mirror those of research hubs. They are related to a smaller
173 Lilly (2022) Lilly plans to invest $2.1 billion in new manufacturing sites in Indiana. Available at:
https://investor.lilly.com/news-releases/news-release-details/lilly-plans-invest-21-billion-new-manufacturing-
sites-indiana [Accessed July 2022]
174 Sanofi (2021) Sanofi launches dedicated vaccines mRNA Center of Excellence. Available at:
https://www.sanofi.com/en/media-room/press-releases/2021/2021-06-29-08-00-40-2254458 [Accessed July
2022]

scale and better demand planning: companies look for areas where they can
conduct high-quality manufacturing and innovation in manufacturing facilities and
techniques to support the clinical development process, supported by access to
knowledgeable staff and quality infrastructure. For many new therapeutic solutions,
decisions may also involve more co-location with late-stage R&D to ensure
knowledge transfer. We find this is a critical decision factor for ATMPs.
• Commercial manufacturing: Commercial manufacturing is driven largely by the

financial viability of investment in a given location, which can explain – particularly
for generic medicines – the increasing outsourcing of API to lower-cost jurisdictions
such as Asia. More recently, accelerated by the COVID-19 pandemic, there have
been calls in the US, China and some European Member States for localisation of
commercial manufacturing of products and components to improve security of
pharmaceutical supply chains, and this may disrupt the trend towards outsourcing
in the future. We expect trends to differ slightly for some new therapeutic solutions,
specifically for ATMPs as lower shelf life drives more local manufacturing. This is
seen to be occurring in markets with higher affordability and ability to reimburse
innovative products. This is also driven by the quality of the manufacturing
processes as it is imperative to their success, so companies look for the areas in
which they have greatest confidence in being able to access the right workforce in
order to deliver the product.
In Chapter 4, we use this assessment to identify potential areas for improvement in the
European industrial policy environment that would serve to attract greater pharmaceutical
investments in the future.
• The factors driving Europe’s relative global performance in attracting research,

clinical trials and IMP and commercial manufacturing investments differ
substantially for each activity.
• The location of talent and the strength of clusters is important for R&D. Europe’s
and the US’s strength in producing highly qualified researchers helps explain
their historical dominance in attracting R&D investment. However, China’s large
investments in higher education and scientific infrastructure have seen
corresponding increases in private investment.
• Europe continues to attract clinical trial investments; this is primarily due to long-
term competitive advantages regarding the national healthcare systems, with
hospitals, competences and knowledge for conducting clinical trials. However,
this appears to be changing, with the commercial environment attracting an
increasing number of clinical trials outside of Europe.
• The drivers of IMP manufacturing location more closely mirror those of research
hubs. IMP manufacturing is often co-located with late-stage R&D to ensure
knowledge transfer.
• Commercial manufacturing is driven by financial viability of investment in a given

location. However, for new therapeutic solutions, such as ATMPs, companies
look for the areas in which they have greatest confidence in quality but also in

being able to access the right workforce and patients in order to deliver the
product.
Figure 15: Summary of factors driving the location of biopharmaceutical investments
What are the most important drivers of investment location?
IMP Commercial
Research Clinical trials
manufacturing manufacturing
1. Location of 1. Existing IMP 1. Existing

1. Existing R&D
leading hospitals manufacturing manufacturing
footprint
and specialists footprint footprint
2. Access to highly
2. Regulatory 2. Access to highly 2. Cost (labour,
qualified
environment qualified staff production, tax)
research staff
3. Interconnected 3. Strategic 3. Co-location

3. Access to highly
innovation commercial with late -stage
qualified staff
ecosystem considerations research
What has changed as a result of recent global and geopolitical trends?
New driver:
4. Strength of digital infrastructure
More important:
5. Political stability and risk
6. Proximity to major markets
Do the most important drivers differ fornew therapeutic solutions

(example ATMPs)?
IMP Commercial
Research Clinical trials
manufacturing manufacturing
1. Interconnected 1. Location of 1. Co-location 1. Co-location

innovation leading hospitals with late -stage with rest of
ecosystem and specialists research value chain
2. Access to highly 2. Flexibility of 2. Access to 2. Access to

qualified regulatory highly qualified highly qualified
research staff environment staff staff
3. Pricing and 3. Proximity to 3. Proximity to

3. Existing R&D
access major markets/ major markets/
footprint
environment ease of transport ease of transport
Key: = increase in importance relative = decrease in importance relative

to historically important drivers to historically important drivers

4. Attracting greater biopharmaceutical inward investment in

Europe
The European Commission has noted the pharmaceutical industry as one of the most
important industries in Europe.175 This was repeated in the Pharmaceutical Strategy for
Europe, where the industry is recognised as being “of key importance for the EU’s economy
in terms of creation of highly skilled jobs and investment in innovation”. Previous analysis
estimates the pharmaceutical industry contributed over €200 billion in Gross Value Added
(GVA) and 2.5 million jobs in Europe. Per employee, this equates to a higher GVA than
other major European industries such as automotive manufacturing, aerospace
manufacturing and computer programming.176 Looking at the EU R&D Scoreboard, the
pharmaceutical industry also emerges as the industry with the highest R&D intensity in the
EU.175
The previous chapters have shown how Europe is falling behind other regions, and even
maintaining Europe’s share of current investments will likely become increasingly
challenging over time, given the factors drawing companies towards locating their activities
in the US and China, as outlined in Chapter 3. If investments into Europe are to return to a
stronger growth pattern, there is a need to critically assess policy factors in Europe relative
to those on offer from other competitive regions. However, there are relatively few policies
highlighted in the Pharmaceutical Strategy that aim to improve the attractiveness of Europe.
The purpose of this paper is not to repeat the many existing reports calling for strong
venture capital or better investment in STEM education. Instead, drawing from the review
of statistics, the literature review and the interviews, we have developed seven new areas
where policymaking should focus. We evaluate the extent to which current EU policy
priorities are in line with these focus areas, and also consider lessons for the UK and
Switzerland. The seven recommendations below are not set out in order of relative
importance; instead, they are categorised into three strategic themes:
1. Addressing Europe’s relative decline in attractiveness as a centre for
biopharmaceutical investment
2. Responding to the impact of new therapeutic solutions on dynamics and
location of investment (examples used: ATMPs and digital technology)
3. Learning from COVID-19 and managing risk and the external environment
175 European Commission (2018) R&D and innovation activities in companies across Global Value Chains. Available
at:
https://iri.jrc.ec.europa.eu/sites/default/files/contentype//publication//reports//1568800267//R%26D%20and%20in
novation%20activities%20in%20companies%20across%20Global%20Value%20Chains.pdf [Accessed October
2022]
176 PwC (2019) The economic and societal footprint of the pharmaceutical industry in Europe. Available at:
https://www.efpia.eu/media/412941/efpia-economic-societal-footprint-industry-technical-report-250619.pdf

4.1. Addressing Europe’s relative decline in attractiveness as a

centre for biopharmaceutical investment
Recommendation 1: Incentivise the development of truly world-class innovation
hubs
There is a general consensus on where the world’s leading research hubs are located, e.g.
Cambridge (Massachusetts) and San Francisco (California) in the US.177 As set out in the
previous chapters, these benefit from world-class universities and a cluster of the world’s
leading companies. These are also recognised as the leading hubs in the US, and this is a
policy dimension that contributes to their development.178 There are the well-recognised
differences in the venture capital funding (including by state institutions, e.g. National
Institutes of Health) and the strength of the specialist healthcare institutions, but an area
that gets less attention is whether this is a result of innovation policy in the US. In 2017, it
was reported that “California and Massachusetts rank first and second in terms of total NIH
funding to its institutions. And Massachusetts ranks a far-and-away first with regards to NIH
funding per capita, nearly 3x higher than most other strong states (like CA, NY, PA, NJ,
etc.). Five of the top six NIH-funded independent research hospitals are in the Boston area.
Fund flows like these further contribute to the consolidation of biomedical activity into the
key clusters.”179
To investigate this, we consider the distribution of NIH spending per capita across US states
in 2021 (Figure 16). We see that Massachusetts continues to lead in terms of receipt of
NIH funding per capita, followed by other bioclusters in Maryland, Washington DC and
North Carolina. As in Europe, this only reflects part of the total funding; indeed, state-based
funding has multiplied the impact of the NIH.180
177 https://lifescivc.com/2017/03/inescapable-gravity-biotechs-key-clusters-great-consolidation-talent-capital-
returns/ [Accessed July 2022]
178 https://www.fiercebiotech.com/special-reports/top-biotech-hubs [Accessed July 2022]
179 https://lifescivc.com/2017/03/inescapable-gravity-biotechs-key-clusters-great-consolidation-talent-capital-
returns/ [Accessed July 2022]
180 https://cognite.co/where-is-the-most-innovative-square-mile-on-the-planet/ [Accessed July 2022]

Figure 16: NIH spending per capita is greater in the strongest US bioclusters
500
450
NIH spending per capita, 2021 ($)
400
350
300
250
200
150
100
50
0 Vermont
Massachusetts
New York
Illinois
Texas
Maryland
Colorado
Rhode Island
Pennsylvania
California
Missouri
Tennessee
Michigan
New Hampshire
Virginia
Maine
Utah
Ohio
Alabama
Nebraska
Georgia
Iowa
New Mexico
Indiana
Louisiana
District Of Columbia
North Carolina
Washington
Minnesota
Wisconsin
Oregon
Delaware
Montana
Connecticut
Kentucky
Source: CRA analysis of data retrieved from https://report.nih.gov/award/index.cfm#tab1 (NIH funding) and
https://data.ers.usda.gov/reports.aspx?ID=17827 (state population size) [Accessed September 2022]
Given Europe’s long history in pharmaceutical innovation, it is inevitable, and a strength,

that biopharmaceutical companies are spread across Member States. However, although
many countries attract investment because of the legacy of company structure, in terms of
world-class centres, our interviewees generally reported the Basel and Zurich areas in
Switzerland, followed by the UK,181 as having world-class science and a hub for innovation
that would be considered for a greenfield site. When considering European policymaking,
it is notable that both countries are outside of the European Union. The distribution of EU
research spending is significantly more uniform than that of the US, and the countries with
the highest EU spending (focusing on Horizon 2020) relative to their Gross Domestic
Product (GDP) are not the centres of innovation (Figure 17).
181 https://www.pmlive.com/pharma_intelligence/Building_European_biotech_firms_to_rival_those_of_the_US_1301494

Figure 17: Horizon 2020 research spending in Europe is not concentrated in Member
States with high R&D activity
400
Horizon 2020 spend per capita (EUR)
350
300
250
200
150
100
50
0
Cyprus
Netherlands
Czech Republic
Denmark
Belgium
Switzerland
Luxembourg
Bulgaria
Finland
Ireland
Estonia
Slovenia
Austria
Greece
Spain
Portugal
France
Malta
Latvia
Lithuania
Croatia
United Kingdom
Hungary
Italy
Slovakia
Sweden
Romania
Germany
Poland
Source: Horizon 2020 dashboard (https://ec.europa.eu/info/funding-
tenders/opportunities/portal/screen/opportunities/horizon-dashboard) and Eurostat
(https://ec.europa.eu/eurostat/databrowser/view/NAMA_10_GDP/default/table?lang=en) [Accessed September
2022]
Unlike the US, spending by the European Commission appears negatively correlated with
high levels of spending by Member States.182 Instead, the concern seems to be about how
to even out the spending on European research.183 This appears a weak strategy for
supporting European innovation, particularly given the evidence indicating that international
R&D investments generate knowledge and investment flows across borders, and therefore
suggests that the economic benefits of policy-induced investments in one Member State
are likely to spread to others184 (in addition to the European-wide societal benefits of new
innovations reaching patients).
182 https://www.researchprofessionalnews.com/rr-news-europe-views-of-europe-2021-3-take-this-chance-to-reboot-
europe-s-r-d-spending/ [Accessed July 2022]
183 Horizon 2020: Geographical balance of beneficiaries: Performance gap between EU13 and EU15 Member States
“The reasons for lower participation of the EU13 Member States in Horizon 2020 are related mainly to the size
and performance of the national research and innovation systems, quality of research, and weaker connections
to European research collaboration networks.”
184 https://blogs.lse.ac.uk/businessreview/2018/05/05/when-multinationals-offshore-production-where-do-they-
locate-innovation/ [Accessed July 2022]

Figure 18: Individual European clusters are outcompeted by those in the US based
on presence of major biopharmaceutical companies
Source: Pharmaceutical Industry in Basel, Switzerland – Cluster Analysis
Recommendation
A policy that focuses on developing a truly world-class innovation hub would serve Europe
well. For example, the European Commission should consider more strategic allocation of
resources to foster growth of world-leading research centres. The EU should consider
sponsoring a review of existing life science industrial policies across Member States to
identify success factors and opportunities for replication. The same applies to the UK and
Switzerland, where a continued focus on key hubs is clearly a policy priority.
Current policy priorities
The Pharmaceutical Strategy for Europe emphasises the need for a resource-efficient EU
pharmaceutical industry in the context of industry’s investment into different therapeutic
areas, but not in the context of geographic areas. Building on the success of public-private
research partnerships remains a priority for the EU, but no specific mention is made of the
geographic distribution of such funding sources.185 In non-EU industrial policy, the UK
government’s 10-year Life Sciences Vision supports the growth of specific clusters across
the country, highlighting where there is potential for growth of world-leading research
centres of excellence, and separately the formation of manufacturing clusters.186 There is
potential in the implementation of the Pharmaceutical Strategy and in the revision of the
EU’s pharmaceutical legislation to adopt a more strategic approach to allocation of EU
funding for innovation.
Recommendation 2: Enhance end-to-end capabilities and funding of disruptive

pharma innovation
The pharmaceutical industry is made up of very large and very small companies. In Europe
there are approximately 1,400 biotech companies involved in the innovative pharmaceutical
https://health.ec.europa.eu/system/files/2021-02/pharma-strategy_report_en_0.pdf [Accessed September 2022]
186 HM Government (2021) Life Sciences Vision. Available at: https://www.gov.uk/government/publications/life-
sciences-vision [Accessed September 2022]

industry.187 Early-stage, emerging companies play an important role in innovation. Latest

figures show that emerging biopharma companies (defined as those with less than $500
million in annual sales and less than $200 million in annual R&D spend) currently represent
65% of the total global drug development pipeline.188 The share of European-
headquartered emerging biopharma companies has been declining over the last 10 years,
with the US dominating in terms of number of companies and their contribution to the global
pipeline, and China growing rapidly at a rate of 456% between 2016 and 2021.188 We see
this reflected in the EU R&D Scoreboard, which noted China overtaking the EU in terms of
number of world-ranking companies in 2018, and the gap has widened every year since. In
2021 the number of world-ranking companies in China had grown by 61 compared to 2020,
whereas in Europe the number had declined by 20.189
The traditional argument is that we should not be concerned by the source of companies
but rather the activities they undertake. However, Europe’s comparative weakness in
attracting and growing emerging biopharma companies is a cause for concern if the goal is
to boost Europe’s attractiveness as a place to invest for biopharma companies of all sizes,
from within and beyond Europe. Unanimous feedback from interviews with large biopharma
company decision makers suggests that an important driver of most new investments is
the location and performance of their existing R&D or manufacturing footprint.190 This is
because it is often more cost-efficient and time-efficient, and less risky, to continue to invest
in a location where human capital, company culture, expertise and infrastructure have
already been established. This is particularly true for research sites, where it is important
to have a critical mass of expertise in one location to sustain the research efforts there over
time, whereas innovation can be hindered by having the workforce spread thinly over too
many locations.190 Once a company is well established, investing in a brand new region
where they have no existing presence would require a substantial financial- or talent-related
pull factor to overcome the efficiency lost by not building up existing sites.191 Our findings
are consistent with the literature, where consensus is that geographic distance is negatively
associated with the location of company investment activities. When greenfield R&D
investments occur, evidence indicates that a company’s previous R&D and manufacturing
activities in a given global city increase the probability of that city being chosen as the
location for the new R&D investment.192 The strength of the US and China in growing
emerging companies may in part explain their increasing global R&D footprint relative to
Europe over the last two decades, explained in Chapter 2 of this report.
187 https://www.mckinsey.com/industries/life-sciences/our-insights/infographic-biotech-hot-spots-in-a-fragmented-
european-landscape [Accessed July 2022]
188 IQVIA Institute for Human Data Science (2022) Available at: https://www.iqvia.com/insights/the-iqvia-
189 European Commission et al. (2022) The 2021 EU industrial R&D investment scoreboard, Publications Office of
the European Union. Available at: https://data.europa.eu/doi/10.2760/559391 [Accessed July 2022]
192 Castellani, D., Lavoratori, K. (2019). Location of R&D Abroad – An Analysis on Global Cities. In: Capik, P., Dej,
M. (eds) Relocation of Economic Activity. Springer, Cham. https://doi.org/10.1007/978-3-319-92282-9_9

Therefore, where a company is growing as it becomes established is critical. The declining

share of emerging biopharma companies originating in Europe can be read as a warning
signal that as emerging US- and China-headquartered companies continue to grow into
small-, medium- and large-sized enterprises, their investments will be more heavily directed
towards the US and China over Europe (i.e. close to their home base). We can observe the
consequences of headquarter location by looking at the history of today’s top biopharma
companies. All of the top 20 global pharmaceutical companies have an active R&D centre
in their home country (Table 2). Roche, for example, was founded in 1896 in Basel,
Switzerland, and today invests almost €12 million per working day in R&D in Switzerland,
employs over 5,000 scientists, and conducts over 100 clinical studies in the country each
year.193 In 2020, work began on a new €1.2 billion upgrade of the Basel R&D site.194
Companies also do not tend to change the location of their headquarters, even in the face
of changes to the external environment. Despite the EU–UK Trade and Cooperation
Agreement introducing new trading barriers versus membership of the EU, no UK-
headquartered pharmaceutical companies, such as GSK and AstraZeneca for example,
relocated their headquarters from the UK following Brexit. Major companies in other
industries have since relocated.195
Table 2: Global pharmaceutical companies typically conduct R&D across a range of

major markets, including their headquarter location
Proximity of R&D
Company Headquarter location
locations to headquarter
US-headquartered companies
Johnson & Johnson New Brunswick, NJ, US Same country
Pfizer New York, NY, US Same country

AbbVie Chicago, IL, US Same country
MSD Kenilworth, NJ, US Same city

BMS New York, NY, US Same country
Eli Lilly Indianapolis, IN, US Same city
Gilead Foster City, CA, US Same city
Amgen Thousand Oaks, CA, US Same country

Moderna Cambridge, MA, US Same city
Viatris Canonsburg, PA, US Same city
Europe-headquartered companies
Roche Basel, Switzerland Same city
193 https://www.roche.ch/dam/jcr:82edb623-2dcc-4fe9-b406-b140cf3ef99f/en/roche-in-switzerland-2021.pdf
194 https://www.pharmaceutical-technology.com/projects/roches-basel-expansion-basel/ [Accessed July 2022]
195 https://readyforbrexit.co.uk/the-list-of-companies-leaving-the-uk-because-of-brexit-grows/ [Accessed July 2022]

Proximity of R&D
Company Headquarter location
locations to headquarter
Novartis Basel, Switzerland Same city
GlaxoSmithKline Brentford, UK Same country

Sanofi Paris, France Same city
AstraZeneca Cambridge, UK Same city
Bayer Leverkusen, Germany Same city
Boehringer Ingelheim Rhein, Germany Same country
Novo Nordisk Bagsværd, Denmark Same city

BioNTech Mainz, Germany Same city
Asia-headquartered companies
Takeda Tokyo, Japan Same country
Source: Top 20 pharmaceutical companies and headquarter information taken from

https://www.fiercepharma.com/special-reports/top-20-pharma-companies-2021-revenue. Research hub locations
from company websites.
We do also observe companies moving research activities or parts of it away from

headquarter locations. Arguments in the literature suggest that due to companies’ ability to
transfer external and internal knowledge across geographies, geographical distance may
play less of a role in R&D location decisions. The drive to access external knowledge or
infrastructure, for example in a specialised cluster, may therefore overrule the desire to
invest in more familiar locations.196 Amgen, for example, moved 100 R&D jobs from its
headquarters in Thousand Oaks, California, into the Cambridge, Massachusetts, and San
Francisco, California, bioclusters in 2017.197 However, this does not demonstrate a
departure from Amgen’s home country, and this pattern is not the norm (as indicated in
Table 2). Departures from headquarter location are also more likely to apply to large-sized
companies, where there are greater capabilities to coordinate firm operations across
geographically dispersed sites.198
Recommendation
Through the Innovative Medicines Initiative (IMI), built upon by the Innovative Health
Initiative and other EU programmes, the EU and EFPIA are already supporting several of
these initiatives through provision of research funding, but there could be benefit from
adopting a more proactive coordination role. It could be useful to develop an audit of these
largely national initiatives, identifying which business models stand out, and suggest pan-
197 https://www.fiercebiotech.com/biotech/amgen-moves-r-d-jobs-from-hq-to-cambridge-and-san-francisco-as-
rolling-reorganization [Accessed July 2022]

European strategies to fund and accelerate the adoption of similar models in other EU
countries or to explore closer cross-country collaborations (e.g. the original setup of the
Horizon research initiative including UK and Switzerland). There could also be a role for
EU-led benchmarking of emerging European biopharma companies against the emerging
companies from the US clusters to establish a long-term view of Europe’s performance and
global competitiveness.
The Pharmaceutical Strategy for Europe acknowledges the importance of EU-level funding
and national schemes to enable R&D for small- and medium-sized companies (SME).
Initiatives such as the EU SME Strategy for a sustainable and digital Europe, Startup
Europe, the European Innovation Council, and the European Institute of Innovation and
Technology are listed as tools for creating an environment conducive to the growth of
emerging companies.199 As these initiatives are already in place, and at the same time we
observe the declining competitiveness of Europe in growing biopharma companies, a more
critical look at the design and effectiveness of these programmes in the context of the
pharmaceutical industry may be warranted.
Within EU Member States, some positive trends can be observed in supporting the growth
of small- and medium-sized companies. In Denmark, efforts have been channelled into
growing new successful companies; approximately 200 new life sciences companies were
founded in the eastern Denmark cluster between 2017 and 2022. The success of Danish-
headquartered companies has also been supported via the government-led ‘Innovation
Centre Denmark’ in Boston, which aims to accelerate cooperation between the clusters and
to support entry of Danish companies into the Boston area.200,201
4.2. Responding to the impact of new therapeutic solutions on dynamics

and location of investment, using ATMPs and digital technologies as
examples
Recommendation 3: Rethink policies along the supply chain to attract ATMP
investment in Europe
The importance of new therapeutic solutions in the industry pipeline has clearly been
growing for some time and will continue to do so. In this report, we focus on ATMPs as a
case study, given the wealth of recent data that are available for evaluation. These data
are serving as example for the entire landscape on biopharmaceutical innovation. In 2021,
there were 804 next-generation biotherapeutics (defined as cell therapies, gene therapies,
gene editing, nucleotide and RNA interference or mRNA therapies) in development from
200 Øresundsinstituttet on behalf of the Interreg-project Greater Copenhagen Life Science Analysis Initiative 2022,
available at: https://mva.org/wp-content/uploads/2022/05/20220518_Life_science_easter_denmark.pdf
201 https://usa.um.dk/en/about-us/danish-missions/innovation-centre-denmark-boston [Accessed July 2022]

Phase 1 through filing with a regulatory agency.202 This represents a 27% compound
annual growth rate (CAGR) since 2016. As reviewed in Chapter 2 of this report, we see
that Asia has been the most competitive region in attracting ATMP clinical trials for the last
seven years, and that the number of trials conducted in Europe has fallen (Figure 5). In
manufacturing, the US leads, with approximately 50% of the world’s ATMP manufacturing
facilities. There is, therefore, clearly a high level of global competition for attracting
investment from companies leading the next phase of biopharmaceutical R&D and
production.
There appears to be a view in the European policy debate that Europe can focus on
elements of the value chain, such as manufacturing. However, for Europe to start
competing more effectively for ATMP investment, it needs to recognise the increased
complexity of these new technologies, and the scientific and logistical precision required to
ensure effective development, quality production and timely delivery to patients. This
means the value chain is likely to be more interconnected (Figure 19). When referring to
interconnectivity, it is also important to distinguish between the implications for ex vivo and
in vivo technologies (as described in Chapter 3). Close proximity and connection to the
patient population, for clinical trials and commercial launch, is critical for ex vivo
technologies as these rely on tissues extracted from patients. For both ex vivo and in vivo
technologies, proximity with the patient population is not a deciding factor for the location
of investment, but interconnectedness with the right labour pool and knowledge-sharing
across the value chain (e.g. between early research, process development and
manufacturing) bring substantial benefits.
Figure 19: There is a degree of interconnectivity in the value chain for ATMPs,
between research, clinical development and manufacturing
Source: Interviews with companies locating activities associated to ATMPs
202 IQVIA (2022) Global Trends in R&D 2022. Available at: https://www.iqvia.com/insights/the-iqvia-
institute/reports/global-trends-in-r-and-d-2022 [Accessed July 2022]

Competing globally for investment starts with attracting research. Private investment into
ATMP research is primarily drawn to where the academic expertise exists and is supported
by a well-developed, innovation-oriented ecosystem. Europe performs strongly in academic
research for ATMPs, with European institutions authoring 48,000 more publications than
the US between 2017 and 2019, and 20,000 more than China.203 This provides a highly
educated, highly trained workforce for biopharma companies. Where Europe lags behind
the US is in the supportiveness of the broader ecosystem. The success of supportive
ecosystems in attracting investment is evident in the emergence and growth of a few key
ATMP clusters, for example in Boston and North Carolina, where investing companies can
establish partnerships with leading universities, medical schools and hospitals, and access
the facilities of incubators, accelerators and research parks.204
IMP manufacturing for ATMPs, which occurs at a lower production scale and relies on
specific, innovative techniques, is likely to be co-located with research activities. Even more
than biologics, for ATMPs “the process is the product” and ability to transfer and share
knowledge iteratively with research staff during the development of production processes
is critical.205 This is consistent with broader literature that finds that “the complexity of
products and processes, the increasing rate of industry change and new product
introduction, low maturity of production process and low degree of modularity are factors
that may increase the need of proximity” of R&D and production.206 We also see co-location
evidenced in the US:
• In 2021, the Center for Advanced Biological Innovation and Manufacturing

(CABIM), a public-private partnership led by Harvard and the Massachusetts
Institute of Technology (MIT), announced the acquisition of a site in Massachusetts
that will contain both research and manufacturing facilities to provide a bridge
between academic research and private investment.207
• In 2022, Vertex opened a new ATMP research and clinical manufacturing site in
the Boston cluster and at the same time announced an additional facility in Boston
for research and clinical manufacturing activities.208
• ATMP clusters are, in general, hybrids of both R&D and manufacturing activity. In
North Carolina, for example, there is a density of academic and corporate research,
cgts-in-Europe [Accessed July 2022]
204 https://www.areadevelopment.com/Biotech/Q4-2021/location-factors-for-cell-and-gene-therapy-companies.shtml
206 Ketokivi, M. and Ali-Yrkkö, J. (2009) Unbundling R&D and Manufacturing: Postindustrial Myth or Economic
Reality? Review of Policy Research, 26 (1–2): 35–54.
207 https://news.harvard.edu/gazette/story/2021/01/center-for-cell-and-gene-therapy-to-open-next-year/ [Accessed
July 2022]
208 https://investors.vrtx.com/news-releases/news-release-details/vertex-announces-further-expansion-boston-
seaport-dedication [Accessed July 2022]

CROs, CMOs, and IMP and commercial-scale manufacturing capabilities.209 This

differs from the pattern observed in other biopharma clusters, where R&D (e.g.
Basel in Switzerland, Cambridge-Oxford-London in the UK) and manufacturing
(e.g. Ireland, Singapore) activities tend to cluster in separate locations.
Improving Europe’s competitiveness in attracting early- and late-stage research is therefore
likely to lead to spillover benefits in attracting greater investments in early manufacturing.
Europe has an opportunity to catch up by innovating future new modalities. Commercial
manufacturing is similarly likely to follow suit because of complexities involved in moving
activities away from the site of IMP production while ensuring absolute consistency in the
manufacturing process and resulting product. This again diverges from the traditional
biopharma business model, under which typically commercial manufacturing will be drawn
towards locations in which scaling-up production can be done in a cost-efficient way (for
example, due to lower labour costs or favourable tax rates).
Recommendation
There are positive examples in Europe of ATMP investment clusters. Stevenage in the UK,
for example, is home to 13 ATMP companies, benefitting from proximity to the government-
supported Stevenage Bioscience Catalyst (SBC) and the Cell and Gene Therapy Catapult
manufacturing centre, who work with companies to help progress therapies through
development and production.210 The Belgian region of Wallonia has become a “global
powerhouse of cell therapy research and development”211 over the past 20 years and
continues to attract investment for other advanced therapies. In 2022, UCB announced
their decision to locate their new gene therapy facility in Belgium in order to tap into the
existing community of scientists, technicians, engineers and manufacturing personnel.212
The EU could benefit from taking a more proactive role in coordinating and fostering the
growth of these emerging ATMP clusters and by seeing R&D, IMP and commercial
manufacturing as interdependent. This could involve directing funding and supporting talent
development to meet the needs of the interconnected activities concentrated at these
locations. Learnings can also be taken from the Commission’s reaction to the COVID-19
pandemic, during which the genetically modified organism (GMO) approval requirement for
clinical trials was suspended for COVID-19 vaccines and therapeutics. Extending this more
broadly could increase manufacturers’ interest in performing ATMP clinical trials in Europe,
209 https://www.ncbiotech.org/transforming-life-sciences/sectors-attention/gene-and-cell-therapy [Accessed July

2022]
210 SQW (2021) Life sciences in Hertfordshire and the emergence of a global and gene therapy cluster. Available at:
https://www.hertfordshirelep.com/media/e3dhe4jc/hertfordshire-s-cell-and-gene-therapy-cluster-july-2021.pdf
211 https://www.nature.com/articles/d43747-020-00721-0 [Accessed July 2022]
212 https://www.thepharmaletter.com/article/ucb-expanding-gene-therapy-facilities-with-200-million-euro-investment

which, given the interconnectedness of value chains, particularly for ex vivo therapies,
could also positively affect IMP manufacturing investments.213
The learnings from the ATMP example should be used in preparing Europe to create ideas
and support future innovation more broadly.
The Pharmaceutical Strategy for Europe emphasises the complexity of pharmaceutical
manufacturing and supply chains but not their interconnectedness with research activity
and clinical trials, nor the specific challenges presented by new life sciences
technologies.214
Recommendation 4: Support innovation by implementing early access

mechanisms, including generation and use of real-world evidence
The traditional life cycle of medicine development is changing. Given the focus on rare
diseases and precision medicines, it is more common for products to gain marketing
approval with Phase II trials. For example, of 19 ATMP approvals in Europe as of
September 2021, fewer than half included a pivotal Phase III trial.215 Given the challenges
in evidence development, it is more common for products to be given conditional approval
and for RWE to be collected. The regulatory, value assessment and price and
reimbursement systems need to reflect this to ensure patient access. However, this is also
important for innovation.
Speed to market can be supported in part through internal factors, such as co-locating R&D
with existing company footprints of expertise and infrastructure (see Recommendation 2)
and with the location of innovative, high-quality academic research (see Recommendation
3). Biopharma companies are also continually exploring new CMC approaches to reduce
development time of ATMPs.216
However, time and efficiency of the development process is also influenced by the external
environment in which companies choose to locate their activities. For example, this can be
supported by regulatory agencies through use of adaptive regulatory frameworks to keep
up with the fast pace of pharmaceutical innovation and expedite development and approval
of new therapies.217 Companies may also be drawn to conducting clinical trials in locations
where there is support and infrastructure for conducting long-term registry-based trials,
given that regulators are increasingly looking at RWE of potentially curative therapies when
213 ARM, EFPIA, EuropaBio, and Beattie, S. (2021) Call for More Effective Regulation of Clinical Trials with Advanced
Therapy Medicinal Products Consisting of or Containing Genetically Modified Organisms in the European Union.
Hum Gene Ther. 32(19–20): 997–1003.
215 Iglesias-Lopez, C. et al. (2021) Current landscape of clinical development and approval of advanced therapies.
Molecular Therapy Methods & Clinical Development. 23: 606–618.
216 https://bioprocessintl.com/sponsored-content/reducing-cell-and-gene-therapy-development-time-and-cost-with-
new-purification-strategies/ [Accessed July 2022]
217 https://www.ema.europa.eu/en/human-regulatory/research-development/adaptive-pathways [Accessed July
2022]

assessing effectiveness.218 Even if long-term RWE is not required for initial marketing
authorisation, companies will approach the decision on where to locate ATMP pivotal
studies with this long-term view, given that these patients may be required to roll on to an
extension study to generate the required RWE. It is also practical for companies to co-
locate clinical trials with target patient populations for ATMPs:
• China’s leadership in attracting ATMP clinical trials may be attributed to a range of

factors, but at least in part to the large demand for access to these therapies. A
high prevalence of rare diseases (76 cases per 100,000 population)219 and an
overall large population size generates high demand and eases patient recruitment
for studies. However, the eventual commercial success is less certain: although
the National Reimbursement Drug List (NRDL) is increasingly funding more new
therapeutic solutions, reimbursement of ATMPs remains highly uncertain and large
price cuts are expected.220
• The US is the second most frequently chosen location for ATMP clinical trials,
which may be because it is the largest global market for pharmaceuticals. Data
show that 64.4% of sales of new medicines launched between 2016 and 2021 were
in the US market (compared with 16.8% in European markets).221 Companies with
a higher proportion of their business in the US vs Europe tend to display higher
R&D investments.222 ATMP developers may therefore be favouring the US for
clinical trial investments given the advantages associated with familiarising clinical
key opinion leaders with a new product pre-launch to support its rapid uptake post-
marketing authorisation.
There has been recognition of the importance of the regulatory process for ATMPs, and
despite their different procedures, the regulatory pathways in the US and Europe are seen
to lead to broadly similar results.223 However, there has been less focus across
geographies on the role of the price and reimbursement system. New drugs typically reach
the public more quickly in the US than in Europe.224 Systems that delay patient access
218 https://www.fda.gov/regulatory-information/search-fda-guidance-documents/long-term-follow-after-
administration-human-gene-therapy-products [Accessed July 2022]
219 Wakap, S. W. et al. (2019) Estimating cumulative point prevalence of rare diseases: analysis of the Orphanet
database. European Journal of Human Genetics, 28:165–173.
220 Deloitte (2020) Winning in the cell and gene therapies market in China. Available at:
https://www2.deloitte.com/content/dam/insights/us/articles/APAC_63550_Winning-in-the-cell-and-gene-
therapies/DI_China_CGT_white_paper.pdf [Accessed July 2022]
221 EFPIA (2022) The pharmaceutical industry in figures 2022. Available at: https://www.efpia.eu/media/637143/the-
pharmaceutical-industry-in-figures-2022.pdf [Accessed July 2022]
222 Eger, S. and Mahlich, J. C. (2014) Pharmaceutical regulation in Europe and its impact on corporate R&D. Health
Econ Rev. 4: 23.
223 Iglesias-Lopez, C. et al. (2021) Comparison of regulatory pathways for the approval of advanced therapies in the
European Union and the United States. Cytotherapy. 23(3): 261–274.
224 Van Norman, G. A. (2016) Drugs and Devices: Comparison of European and U.S. Approval Processes. JACC
Basic Transl Sci. 1(5):399-412.

obviously have a direct impact on patients but also affect the attractiveness of undertaking
innovative activities in Europe.
Recommendation
Early access and strong reimbursement needs to be supported through a streamlined
regulatory process and early access mechanisms, preventing the HTA system or
reimbursement from being a barrier for early access, and ensuring RWE is used as a
mechanism for encouraging faster patient access. In the EU, ensuring the success of
ongoing initiatives to improve RWE and data operability – for example, as DARWIN (Data
Analysis and Real-World Interrogation Network) and the European Health Data Space
(EHDS) evolve – should take into account their ability to support and attract clinical trials
for ATMPs.
The Commission’s Pharmaceutical Strategy for Europe shares some of these objectives.
Supporting innovative trial designs and new methods of evidence generation and
assessment, including use of RWE, are priorities.225 This is similarly reflected in the
inception impact assessment for the upcoming revision of the EU’s general pharmaceutical
legislation, which discusses future-proofing the legislation to account for the new ways in
which innovative medicines are developed and evidence is generated.226
What the Strategy and the impact assessment do not cover is the link between access
mechanisms and the attractiveness of Europe as a destination for companies to locate their
research, clinical trials and manufacturing, particularly for new technologies.
Recommendation 5: Boost EU digital transformation and support development of

digital capabilities
There is strong consensus, in our interviews with biopharma companies, that digital
transformation in life sciences is increasingly impacting all business functions and all
aspects of the value chain, including research, development and different types of
manufacturing. This affects the needs of different types of biopharma companies and thus
their choice of where to locate R&D and manufacturing activities:
• Large pharmaceutical companies are currently working through the transition of

their activities from traditional on-site and lab-based science to hybrid models that
leverage digital technologies and related innovation. With decades of heritage in
traditional science-led research, this transformation is complex. When considering
which countries to locate their activities in, large companies are therefore now also
considering the level of support each country can offer, including support with
digitalisation.227 For example, this may require existence of local organisations to
support internal digital transformation, establish data infrastructure in life sciences
226 European Commission (2021) Evaluation and revision of the general pharmaceutical legislation: Inception Impact
Assessment. Available at: https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12963-
Revision-of-the-EU-general-pharmaceuticals-legislation_en [Accessed September 2022]

and support firms who can advise and aid in internal digitalisation and automation
of value chains.
• Newer small- and medium-sized companies are being established from the start
with a large focus on leveraging digital technologies throughout their organisation,
granting them such internal capabilities. Moderna, for example, founded only
twelve years ago in Massachusetts, relies on artificial intelligence (AI) and robotic
automation in R&D and production processes. These were used to help them move
from manually producing around 30 mRNA molecules per month to around 1,000
per month to accelerate development of their COVID-19 vaccine.228 Externally,
what newer companies look for when choosing where to invest is the existence of
a highly qualified workforce, well versed in digital technology and data
management, that they can add to their existing teams.229
Looking at the digital competitiveness of countries (ranked by the International Institute for
Management Development (IMD) based on 52 digital criteria), we see as expected that the
US is among the leading countries, but notably there are also five European countries in
the global top 10 countries for digitalisation (Figure 20). China, somewhat surprisingly, is
ranked 17th. This is attributed to the state-based model of digitalisation it has adopted,
potentially leading to concerns about data access and ownership.230 From an EU
perspective, there may nevertheless be concern that major hubs of biopharma R&D and
manufacturing investment are lagging behind, such as Germany (19th), Belgium (23rd) and
Ireland (24th).
228 https://theprint.in/tech/ai-helped-moderna-speed-up-covid-vaccine-development-now-it-can-help-climate-
too/955061/ [Accessed July 2022]
230 https://www.imd.org/news/updates/China-US-pursuing-markedly-different-but-equally-competitive-digital-
transformations-WCC/ [Accessed July 2022]

Figure 20: Europe’s strongest biopharma R&D centres do not rank highly on digital
competitiveness
IMD World Competitiveness Center (WCC) Countries ranked on 2021 pharmaceutical R&D
World Digital Competitiveness Rankings 2022 expenditure
1 Denmark 1 United States
2 United States 2 Japan
3 Sweden 3 China
4 Singapore 4 Germany
5 Switzerland 5 Switzerland
6 Netherlands 6 United Kingdom
7 Finland 7 Belgium
8 Republic of Korea 8 France
9 Hong Kong 9 Italy
10 Canada 10 Denmark
Lower ranking or no data Lower ranking or no data
Source: https://www.imd.org/centers/world-competitiveness-center/rankings/world-digital-competitiveness/
[Accessed October 2022]. Pharmaceutical R&D expenditure from Pharmaceutical Research and Manufacturers
of America, PhRMA Annual Survey; China source: Chinese Statistical Yearbook; Japan source: Japan
Pharmaceutical Manufacturers Association, R&D Expenditures of the Pharmaceutical Industry; Europe source:
European Federation of Pharmaceutical Industries and Associations, the Pharmaceutical Industry in Figures.
Recommendation
More effort is needed to increase the interconnectedness of these hubs or to upskill these
nations to help ensure that they continue to remain attractive locations for pharmaceutical
investment in the future.
Specifically, one action emphasised by pharmaceutical companies during our interview
programme was the need to future-proof the skills of the European workforce to match the
new hybrid science-digital approach required for modern R&D and manufacturing. The skill
set required to support pharmaceutical innovation and production is changing; whereas
traditionally Europe has performed well in producing a workforce of world-leading
biologists, chemists and bioengineers, modern processes require the workforce to be
literate in both pure science and digital skills. Lessons could be learnt from the success in
Ireland in developing a flexible pharmaceutical workforce that can adapt to changing
industry needs. There are continuing education programmes that, for example, enable the
retraining of parts of the workforce involved in small molecule manufacturing to support
new biologic manufacturing processes.231 We now observe pharmaceutical companies
investing in upskilling their own workforce to meet new digital needs, such as Moderna’s
‘AI Academy’ launched for all 2,400 of Moderna’s employees at all levels to help them
231 Information from interview programme with pharmaceutical company representative, June 2022.

integrate artificial intelligence into their work.232 If Europe can proactively create a digital-
ready talent pool, this could offer a competitive advantage in attracting future investments.
A more fundamental shift of mindset towards proactivity may also be to Europe’s
advantage. With digitalisation, and with innovation and production of novel therapies such
as ATMPs, this analysis has focused on identifying opportunities for Europe to catch up to
the standard being set largely by the US, China, and individual Member States within
Europe. While Europe is now adopting a more digital mindset, as evidenced in the
Pharmaceutical Strategy for Europe and with recent creation of the European Health Data
Space, this is occurring later than in markets such as the US, where proactive policy in the
late 2000s resulted in rapid early adoption of digital technologies in the health sector, with
96% of hospitals now using electronic health records (EHRs) versus 9% in 2008.233
Following the paths set by other major economies is a risky strategy to adopt; as we
described in Recommendation 2, a compounding effect can set in, with pharmaceutical
companies now being drawn towards US clusters for ATMP development activities, as an
example, because the workforce and ecosystem is already there. With each new
technology, there is a new opportunity for a shift in investment activity. The pharmaceutical
industry is more likely to invest in areas where they have a footprint of activity and expertise;
when a new technology comes along, in which they do not yet have a footprint, companies
show greater flexibility in relocating where the investment goes. This creates an opportunity
for Europe to have a competitive edge. Europe could benefit from horizon scanning and
proactively preparing the life sciences ecosystem for new upcoming transformational
technologies, beyond digital and ATMPs.
The EU’s Pharmaceutical Strategy shares a focus on preparing for the digital
transformation. Specifically, the Commission sets out an aim to ensure Europe’s
pharmaceutical policy evolves in line with the digital transition. This includes, for example,
the creation of the European Health Data Space, which is now under establishment and
aims to optimise data sharing and use in Europe. However, there is a lack of strong
emphasis in the Strategy on broadly supporting Member States in modernising their digital
infrastructure to support development and production of, and access to, innovative
medicines.
4.3. Learning from COVID-19 and managing risk and the external
environment
Recommendation 6: Foster adoption of sustainable procurement and pricing
policies for innovation
The importance of creating an ecosystem in Europe that supports early access, leans into
the digital transformation and supports the use of RWE as well as protecting IP, is clear for
new therapeutic solutions such as ATMPs. At the same time, as a result of the global
disruption caused by the COVID-19 pandemic, we see the EU prioritising initiatives to
232 https://www.modernatx.com/en-US/media-center/all-media/blogs/moderna-launches-ai-academy-all-employees
233 https://healthcare-in-europe.com/en/news/the-usa-s-digital-healthcare-revolution.html [Accessed July 2022]

strengthen supply and production of these medicines. The EU Pharmaceutical Strategy, for
example, focuses on boosting the EU’s “strategic autonomy” in medicine supply, noting that
there may be a need for production of certain critical medicines within the EU.234 There is
a danger that industrial policy focuses on the most innovative medicines while the relocation
of manufacturing focuses on off-patent medicines, leaving a gap in the middle. Interviews
with pharmaceutical companies called out a lack of such support for established
conventional medicines.
Recommendation
The solution to ensuring sustainability of these medicines is likely to be multifaceted.
• Investment in R&D for traditional technologies continues to play a critical role; even
in rapidly evolving therapy areas and vaccines, traditional technologies continue to
account for a large proportion of innovation. In neurology, for example, for which
there are many promising transformative therapies in development, 77% of the
pipeline consists of small molecule products.235 Continuing to attract these types
of investments is therefore important to Europe’s overall competitiveness in the
biopharmaceutical industry. While there are successful examples of EU-led
initiatives to support innovative medicines and technologies, such as Horizon 2020,
these need to support innovation in the round and maximise involvement of other
like-minded science-strong countries in the region, including the UK and
Switzerland.
• Approaches need to reflect the development of medicines and improve the

manufacturing process post-launch. Medicines continue to be developed after they
are initially approved in the EU, in terms of targeted patient population, forms of
administration and new indications, as well as in optimising the manufacturing
process. Many of these improvements are perceived as being more valued outside
of Europe. This has implications for where companies will invest in upgrading and
improving manufacturing capabilities.
• Support is needed for flexible approaches to procurement that do not focus on the
lowest prices. Some individual Member States are already piloting novel models to
promote sustainability, from which there may be lessons for the EU more broadly:
for example, the French government has guaranteed no further price cuts to
paracetamol between 2022 and 2025 in response to Seqens agreeing to invest
€100 million in the creation of a new factory to manufacture the API to promote
supply resilience.236 For this model to be effective in promoting sustainability, such
investments at the EU level would need to be respected in the reimbursement
https://health.ec.europa.eu/system/files/2021-02/pharma-strategy_report_en_0.pdf [Accessed July 2022]
235 IQVIA (2022) Global Trends in R&D 2022. Available at: https://www.iqvia.com/insights/the-iqvia-
institute/reports/global-trends-in-r-and-d-2022 [Accessed July 2022]
236 https://www.apmhealtheurope.com/story.php?objet=80563 [Accessed July 2022]

process in all Member States, as companies cannot sustainably manufacture all

medicines in every Member State.237
• There is a need to support continued investment in manufacturing. Cost-

containment policies targeting older, established medicines push prices downward
and reduce profit margins, which limits resources available for manufacturing
capacity and quality investments in innovation and improvements. Furthermore,
medicine production cost increases are anticipated by the industry, particularly in
light of the increasing energy crisis. Markets need to be sustainable in supporting
ongoing investment in manufacturing capacity.
The Pharmaceutical Strategy for Europe adopts a narrower definition of sustainability than
described above, focusing on medicine production and promoting supply chain
sustainability, environmental sustainability and financial sustainability of health systems.
Sustaining the health of the innovative industry is not a primary objective of the strategy,
nor is it highlighted as a potential tool to restore economic growth in Member States post-
COVID and in the face of the Russia–Ukraine war and subsequent energy crisis. Further,
the ongoing revision of intellectual property rights in the EU risks sending a negative signal
to companies considering future investments.
Recommendation 7: Develop a longer-term, collaborative method for encouraging

growth in Europe’s attractiveness for biopharmaceutical investments
Decisions regarding investment in research hubs, IMP manufacturing and commercial
manufacturing are long-term decisions. Even clinical trials programmes are conducted over
a number of years and require consideration of what might change in the environment.
However, over the last few years, we have seen considerable global challenges: crises like
the COVID-19 pandemic, the war in Ukraine, tensions over global trade and the
materialisation of the climate emergency have all come into focus, most recently with the
spiralling energy crisis. This has led to significant policy debate regarding the localisation
of the industry, the implications of sanctions and import and export bans, the role of joint
purchasing and the introduction of environmental, social and governance (ESG) standards.
Perhaps surprisingly, this was not a topic that weighed heavily on decisions regarding
actual investment with decision makers (although many of these were made pre-COVID,
and all were investments made before the Russia–Ukraine war and subsequent energy
crisis). There are a number of reasons for this: (1) the industry has long been a global
industry and is used to managing business risks across regions and countries; (2) unlike
other industries, there is a responsibility to continue to supply medicines in many markets,
meaning that some continued investment in infrastructure is inevitable; (3) some global
risks, such as the environment, are longstanding and the industry has already worked
extensively on it;238 and (4) the existence of a global regulatory system – inspections by
FDA and EMA and by Pharmaceutical Inspection Co-operation Scheme (PIC/S)
237 https://www.apmhealtheurope.com/story.php?objet=80563 [Accessed July 2022]

238 López-Toro et al. (2021) Influence of ESGC Indicators on Financial Performance of Listed Pharmaceutical
Companies. Int J Environ Res Public Health. 18(9): 4556

participating authorities – means that the industry faces the same rules independent of
location.239
However, there are clearly potential risks that can have large impacts on investment
decisions. For example, international trade was noted in some interviews. The US has
proposed legislation to better regulate outbound investments in countries such as China
and Russia, seeking to move more of the supply chain for critical sectors like technology to
countries that are seen to comply with international best practices.240 This could affect
funding for new facilities like factories, joint ventures that involve technological transfers to
China and capital investments in Chinese start-ups and technology firms.
The increase or perceived increase in risk in the global environment will have some
implications:
• Managing risk of disruption and reducing carbon footprints is likely to lead to a

shorter supply chain and greater requirements in terms of monitoring.241,242 This
can be considered specially for high-volume products. On the face of it, this would
be seen to benefit Europe – where production has commonly been undertaken in
India and China – but in reality this will also focus location on markets with the
highest growth: the US and Asia.
• The location of clinical trials will adapt. This will mean avoiding some locations that
are seen as highly risky from a geopolitical perspective. However, it will also mean
adapting to address diversity within clinical trials. This will be affected by policy and
regulatory decisions; for example, the acceptance of trials conducted in a single
region or country is still evolving, with recent decisions by the EMA and the FDA.
Recommendation
Given the long-term focus on investment decisions, regions that offer long-term stable
environments coupled with growing markets will benefit from decreased perceived risk.
This necessitates ongoing dialogue between policymakers and other stakeholders,
including the industry, on how the environment needs to adapt and be renewed. For the
EU, Europe needs to establish an effective process for implementing the Pharmaceutical
Strategy (its first in over 50 years since the first pharmaceutical legislation was implemented
239 https://www.accesstomedicineindex.org/amr-benchmark/research-areas/responsible-manufacturing# [Accessed

July 2022]
240 Leonard, J. (2022) New Rules for U.S. Investments in China Face Fresh Hurdle: Biden’s Team. Available at:
https://www.bloomberg.com/news/articles/2022-04-29/biden-team-splits-on-new-rules-for-u-s-investments-in-
china [Accessed July 2022]
241 Bottomley, K. (2022) The growing impact of Environmental, Social, and Governance (“ESG”) on pharmaceutical
supply chains. Available at: https://resultsig.com/the-growing-impact-of-environmental-social-and-governance-
esg-on-pharmaceutical-supply-chains/ [Accessed July 2022]
242 Black, M. (2022) ESG and supply chains: assessing the growing risks. Available at:
https://global.lockton.com/gb/en/news-insights/addressing-growing-supply-chain-risks-from-an-esg-perspective

in the EU243) with ongoing dialogue regarding how the environment will change over 5-,
10- and 20-year time periods, the expected and actual impact of policy changes, and
ensuring a focus on innovation and production.
There is an acknowledgement in the Pharmaceutical Strategy of the need for “future-
proofing” legislation, particularly as the current pharmaceutical legislation was developed
at a time when certain technologies that exist today were either absent or in their infancy.
There is an opportunity with the implementation of the Strategy and with the revision of the
pharmaceutical legislation to adopt a long-term outlook. Specifically, this should involve an
evaluation of the likely long-term effects of policy decisions being undertaken and
consideration of whether these will support the objective of increasing Europe’s
attractiveness as a location to invest in the long-term. Ongoing dialogue with industry will
be important to establish a forward-looking partnership. Tangible and relevant key
performance indicators can be co-created to ensure revised legislation is having its
intended impact, and to enable benchmarking of Europe’s long-term competitiveness for
attracting investment relative to countries such as the US and China.
243 European Commission Legal framework governing medicinal products for human use in the EU. Available at:
https://health.ec.europa.eu/medicinal-products/legal-framework-governing-medicinal-products-human-use-
eu_en#. [Accessed July 2022]

Appendix
Kearney Foreign Direct Investment (FDI) Confidence Index
Table 3: Kearney FDI Confidence Index rankings show investors remain most
confident in the US market
2010
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Country
US 2 4 1 1 1 1 1 1 1 1 1 1
Germany 5 5 7 6 5 4 2 3 2 3 3 2
Canada 9 20 4 3 4 3 5 2 3 2 2 3
Japan - 21 13 19 7 6 6 6 6 4 5 4
UK 10 8 8 4 3 5 4 4 4 6 4 5
France 13 17 12 10 8 8 7 7 5 5 6 6
Italy - - - 20 12 16 13 10 8 9 8 7
Spain - 24 16 18 17 13 11 15 11 11 9 8
Switzerland - 22 18 14 14 11 12 9 13 10 10 9
China + HK 1 1 2 2 2 2 3 5 7 8 12 10
Australia 7 6 6 8 10 7 9 8 9 7 7 11
New Zealand - - - - - - 23 16 19 13 13 12
Sweden - - - 16 18 22 15 14 15 15 14 13
UAE 11 15 14 - - - 21 - - 19 15 14
Netherlands - - - 22 13 14 14 13 12 14 11 15
South Korea - 19 21 - 16 17 18 18 17 17 21 16
Belgium - - - 21 19 19 22 21 18 16 17 17
Singapore - 7 10 9 15 10 10 12 10 12 16 18
Portugal - - - - - - - 22 - 21 20 19
Austria - 21 24 24 - - - 19 20
Source: Kearney FDI Confidence Indices 2010–2020244
244 Available at: https://www.kearney.com/foreign-direct-investment-confidence-index [Accessed June 2022]

Investment case studies and additional contributions

The interview programme was structured around a series of case-study based interviews
with senior executives at pharmaceutical companies, listed below in Table 4.
Additional non-case-study based discussions were held with a number of individual
companies and trade associations, which also fed into the development of the report,
including:
• Johnson & Johnson (J&J)
• The Association of the British Pharmaceutical Industry (ABPI)
• Pharmaceutical Research and Manufacturers of America (PhRMA)
Table 4: Sixteen biopharmaceutical investment case studies were reviewed during

the interview programme
1. Research investment case studies
European companies investing in Europe
Company Case study Source
Roche CHF 1.2 billion expansion of existing Basel R&D site 245
announced in 2020
Roche Global IT Centre in Poland with R&D support capabilities, 246
established 2004 and headcount expanded in 2018
Merck KGaA R&D and Investigational Medicinal Product (IMP) biologic 247
manufacturing site in Switzerland
US companies investing in Europe
MSD New central London R&D site with investment of $1.3 billion; 248
expected completion in 2025
Moderna Global mRNA research centre planned in the UK; deal 249
reached with UK government also on manufacturing
US and European companies investing in US
Eli Lilly $200 million gene therapy R&D site (Lilly Institute for 250
Genetic Medicine) established in Boston in 2022
Sanofi Combined €400 million annual investment in mRNA vaccine 251
research in US and France sites
245 Available at: https://www.biopharmadive.com/news/roche-to-spend-32b-on-massive-rd-cluster-in-basel/326244/

246 Available at: https://impactcee.com/2018/05/09/roche-sees-the-potential-in-it/ [Accessed June 2022]
247 Available at: https://www.fiercepharma.com/manufacturing/merck-kgaa-antes-up-eu250m-to-bridge-r-d-
manufacturing [Accessed June 2022]
248 Available at: https://www.msd.com/stories/our-new-london-discovery-research-center-site/ [Accessed June
2022]
249 Available at: https://www.gov.uk/government/news/moderna-to-open-vaccine-research-and-manufacturing-
centre-in-uk [Accessed July 2022]
250 Available at: https://investor.lilly.com/news-releases/news-release-details/lilly-announces-institute-genetic-
medicine-and-700-million [Accessed June 2022]
251 Available at: https://investor.lilly.com/news-releases/news-release-details/lilly-announces-institute-genetic-
medicine-and-700-million [Accessed June 2022]

European companies investing in China

Sanofi Establishment of Sanofi’s first global research institute in 252
China
2. Manufacturing investment case studies
European companies investing in Europe
Menarini €150 million investment in new Florence commercial 253
manufacturing site
UCB New €200 million gene therapy Investigational Medicinal 254
Product (IMP) manufacturing site in Belgium
Bayer Bayer’s public-private partnership in Germany for a cell and 255
gene therapy translation centre
US, Chinese and Japanese companies investing in Europe
Pfizer Recent €50 million investment into high-tech continuous 256
manufacturing site in Freiburg, Germany
WuXi €500 million investment in biologic and vaccine 257
manufacturing in Ireland in 2018/2019
Takeda Cell therapy commercial manufacturing sites in Europe, US, 258
and Japan
US and European companies investing in the US and Puerto Rico
Biogen Investigational Medicinal Product (IMP) manufacturing of 259
gene therapies in US
3. Clinical trial case studies
European companies investing in Asia
PTC Taiwan-based pivotal clinical trial studies for Upstaza 260
Therapeutics
252 Available at: https://www.yicaiglobal.com/news/sanofi-unveils-first-global-research-institute-in-china-to-develop-

innovative-drugs [Accessed June 2022]
253 Available at: https://www.menarini.com/en-us/news/news-detail/menarini-invests-150-million-euros-in-a-new-
pharmaceutical-plant-in-italy [Accessed June 2022]
254 Available at: https://www.ucb.com/stories-media/Press-Releases/article/UCB-expands-innovation-footprint-with-
new-state-of-the-art-gene-therapy-facility [Accessed June 2022]
255 Available at: https://www.bayer.com/media/bayers-bluerock-therapeutics-establishes-european-site-for-cell-
therapy-innovation/ [Accessed June 2022]
256 Available at: https://www.gesundheitsindustrie-bw.de/en/article/news/industry-40-pfizer-opens-continuous-
manufacturing-plant-in-freiburg [Accessed June 2022]
257 Available at: https://www.irishtimes.com/business/health-pharma/wuxi-biologics-ireland-in-679-6m-gain-after-
restructuring-1.4699274 [Accessed June 2022]
258 Available at: https://www.takeda.com/newsroom/featured-topics/takeda-breaks-ground-on-commercial-cell-
therapy-manufacturing-facility-in-lexington-massachusetts/ [Accessed June 2022]
259 Available at: https://investors.biogen.com/news-releases/news-release-details/biogen-announces-plans-build-
new-state-art-gene-therapy [Accessed June 2022]
260 Available at: https://ir.ptcbio.com/news-releases/news-release-details/ptc-therapeutics-receives-positive-chmp-
opinion-upstazatm [Accessed June 2022]

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Prepared For:

European Federation of Pharmaceutical

Leopold Plaza Building, Rue du Trone 108

Factors affecting the location

Tim Wilsdon, Hannah Armstrong, Antun Sablek

London EC2M 7EA

Date: 3 October 2022

CRA Project No. D36423

November 22 Charles River Associates

Executive summary ...................................................................................................................... 1

3. Factors driving the location of biopharmaceutical R&D and investigational and

4. Attracting greater biopharmaceutical inward investment in Europe ............................. 52

Final Report Page i

November 22 Charles River Associates

Figure 1: Pharmaceutical companies’ R&D expenditure is growing in all major markets,

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Final Report Page iii

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AMR antimicrobial resistance

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• Distinguishing between investment drivers and patterns in the location of research

• Relating theory to real-life, recent investment decisions

Box 1: Summary of key findings

• Twenty years ago, the amount of investment made by pharmaceutical

• China is emerging as an increasingly competitive region for companies to locate

• Areas of weakness in Europe’s competitiveness include a siloed approach to

• The revision of the EU pharmaceutical legislation currently falls short of

Europe’s relative decline in attractiveness as a centre for biopharmaceutical

Final Report Page 1

November 22 Charles River Associates

The impact of new technologies on dynamics and location of investment

1 See Figure 1 of this report.

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7 European Commission (2020) Pharmaceutical Strategy for Europe. Available at:

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• A literature review of recent government and non-government policy and academic

• An analysis of long-term trends in the location of global biopharmaceutical R&D

• An interview programme with senior executives from major biopharmaceutical

1.2.1. Literature review

Final Report Page 7

November 22 Charles River Associates

1.2.2. Data analysis

• Expenditure on R&D and manufacturing

• Clinical trial locations

• Location of manufacturing focus on ATMPs as an example of a new therapeutic

• Level of employment in R&D and manufacturing

• Foreign direct investment and exports

Final Report Page 8

November 22 Charles River Associates