Presentation: The return of the factories – how Sweden is winning the battle for pharmaceutical production

Sweden currently has a unique opportunity to attract more of the global life science industry's manufacturing. But more cooperation, rapid action on skills development and competitive tax levels are needed. These were the conclusions of SwedenBIO's seminar The Return of the Factories in Almedalen.

Current initiatives give hope – but much work remains to be done

During Almedalen week, SwedenBIO organized a seminar on pharmaceutical production(read more about the speakers and see the invitation here). Participating on stage were Oscar Stenström, State Secretary to the Minister for Trade Ann Linde, and representatives from AstraZeneca, Cobra Biologics, GE Healthcare, Pfizer and Sobi. This was due to the high level of investment in manufacturing by both companies and governments over the past year. In total, more than SEK 4 billion has been announced since spring 2015 (see box below).

During the seminar, it was noted that it is important for Sweden as a life science nation to have a strong presence of manufacturing companies. Not only because it generates multi-billion dollar export revenues, but also because the expertise that manufacturing companies bring to the table is important for the entire value chain of the life science industry.

Through short presentations and a concluding discussion, the participants highlighted what is needed for the recent investments to be the start of a strong growth of life science manufacturing in Sweden and not just a coincidence.

Asia is the growth market and is getting stronger and stronger on production

Margareta Ozolins, the manager of AstraZeneca’s factories in Södertälje, began by explaining that AstraZeneca will continue to invest hundreds of millions of SEK per year in Sweden in the coming years, but according to the company’s own forecasts, investments in Sweden will decrease from 2019. According to Margareta Ozolins, there are a couple of important trends that challenge Sweden as a manufacturing country. More and more countries are requiring domestic production to access the market. In the long term, this means that more production will take place in Asia, as more and more exports are already going to Asia. The experience of expanding production there is also getting better and better. At the same time, the world around us is becoming increasingly changeable, which places greater demands on flexibility, which Sweden can benefit from.

Margareta Ozolins sees several things that we can influence locally, including productivity, making use of automation and remaining flexible and adapting when needed. To improve further, she would like to see more exchanges between different industrial companies in Sweden. For example, AstraZeneca has a fruitful collaboration with Scania. Margareta Ozolins also noted that Sweden must offer a stable and efficient climate for entrepreneurship, especially at a time when other countries are lowering their corporate taxes. A couple of other important areas to focus on are training initiatives to ensure the supply of skills and simplified regulations that can, for example, shorten lead times,” Margareta Ozolins concluded.

Unique opportunity to gain market share in organic production

Jan Erneberg, Global Head of Manufacturing at GE Healthcare, spoke about the operations in Uppsala. GE Healthcare does not manufacture pharmaceuticals but is a supplier of equipment for the production of protein medicines. The company is growing at 10 percent a year as the market for protein drugs increases, and its manufacturing in Sweden generates about 1 percent of Swedish exports. The business is developing towards modular factories for the Asian market, for example, and delivering services alongside products for protein purification. For example, GE Healthcare was deeply involved in the development efforts for the production of the Ebola vaccine.

Last fall, GE decided to invest almost SEK 1 billion to double the production capacity in Uppsala. Jan Erneberg noted that access to the unique expertise that has been built up over a long period of time was an important reason for investing in Uppsala and not anywhere else in the world. According to Jan Erneberg, Sweden currently has a unique opportunity to become strong in biological manufacturing because we have a strong tradition and the global market is growing rapidly. But if GE Healthcare is to continue to invest in Sweden, the supply of skills must also be secured in the long term. Jan Erneberg sees the investment in a national test bed for the production of biological drugs that GE Healthcare is making together with Vinnova as an important part of the future supply of skills, especially as the test bed welcomes both small and large companies and academia.

Manufacturing comes earlier and earlier in product development

Kirsti Gjellan, Head of Biologics Development and Production at Sobi, spoke about how scientific and regulatory developments mean that manufacturing issues are finding their way earlier and earlier into product development. Sobi, inherited from Pharmacia, has a long tradition and history in biopharmaceuticals. Today, they focus on rare diseases, are present in 24 different countries, have a turnover of about SEK 3.2 billion and are now hiring more people to add to the current 700 employees.

As the medical need for orphan drugs is high, regulatory authorities are more active than before in helping to speed up the time to market, said Kirsti Gjellan. Sobi has the same goal and this has led to the development of working methods. Today, manufacturing expertise is brought in earlier in process development, both internally and in collaboration with partners, and different risk assessments are made than before. As for the future, skills management is a key issue for Sobi as well, and it is about integrating different skills in process development.

Kirsti Gjellan asked that the concept of collaboration be given a new content. In the case of pharmaceutical manufacturing, it is about working with open innovation where the knowledge of how we industrialize development is put at the centre. Kirsti Gjellan hopes that the new initiative in Uppsala announced by Vinnova and GE Healthcare can become the open innovation platform needed.

Does Sweden meet the requirements of a global company?

Christopher Siegmund, site manager for Pfizer’s Strängnäs plant, discussed the factors that determine where a global pharmaceutical company chooses to invest in new manufacturing facilities.

The list of criteria is long, said Christopher Siegmund, but one of the most important is the level of corporate tax. It can vary from zero in Singapore to 10% in Ireland and 22% in Sweden. In the US, it is closer to 40%. However, corporation tax is only one of several factors. Patent protection, long-term access to the right skills at all levels, low staff turnover, stable infrastructure such as water and electricity, and political and economic stability are other factors considered in investment decisions. The situation in Sweden is favorable in terms of several of these factors, but it also monitors developments closely and evaluates all important factors before making new investment decisions, including additional investments.

Christopher Siegmund is positive about the future of the Strängnäs site but welcomes initiatives that will further improve conditions. A training initiative focusing on the biotech industry to ensure a long-term supply of skills would be particularly welcome. Other countries do this, but Sweden has no such initiatives.

Siegmund also called for Sweden to develop and clarify its value proposition to attract companies to invest. Standing on the sidelines is not an option because the investment in question will end up in another country.

Contract manufacturing plays an important role in the value chain

Carl-Johan Sundberg, board member of Cobra Biologics AB and professor at KI, began his presentation by pointing out that in the same way that the state made investments 30-40 years ago that now cast positive shadows in the 2010s, the state should think long-term and continue to make investments that cast shadows 15-20 years ahead. Cobra is a contract manufacturer of biological medicines. The range of competences includes DNA production for gene therapy studies, viral components for DNA vaccines and production of peptides and proteins. Cobra has about 150 employees in Sweden in Södertälje and Matfors outside Sundsvall.

Carl-Johan Sundberg explained that the company has grown significantly in Sweden over the last 5-6 years. Much of the activity takes place in the very early stages of drug development, which requires tailored solutions and thus a matching, high level of internal competence. Cobra also runs several collaborative projects with Swedish universities. Several of the successful biotech deals that have taken place in Sweden in recent years, such as Aprea, Alligator Bioscience and Cormorant pharmaceuticals, have received help from Cobra with their product development. These examples show how important it is for smaller growth companies to have this expertise close at hand, concluded Carl-Johan Sundberg.

Government wants to work closely with businesses

Before the final discussion, Oscar Stenström, State Secretary to Minister for Trade Ann Linde, gave the government’s view of the Swedish life science industry. He said that Swedish companies are more present in connection with export ventures and interest from abroad is increasing. One example is Saudi Arabia, where relations between the two countries are better than ever and they are very interested in both Swedish products and services and in learning from our systems in terms of research and education. The government is keeping its ears open to understand the complexity of the life science industry and is working to ensure that the framework conditions are good for the overall ecosystem along the entire value chain. A key message from Oscar Stenström was that the government wants to be close to companies to understand the industry, for example in terms of capital or skills needs. This is also why life science is one of the government’s 5 cooperation programs.

Skills, corporate tax and open innovation

The final discussion began with Oscar Stenström being asked whether he is reassured or worried by what he has heard from companies. The answer was that he was reassured. But the industry did not agree that he should feel reassured.

“I think you should be quite worried all the time if you are doing business in a global market. Now that we have good growth, we should take the opportunity to think about how we can work smarter, it is now that we have to think fast and smart in order not to be overtaken in the future” said Margareta Ozolins from AstraZeneca.

All the panelists agreed on the importance of a long-term supply of skills for the industry. And it is urgent. “We are already seeing a shortage of trained staff,” said Margareta Ozolins. Erneberg was hopeful that the new hub now being developed in Uppsala will help to build a new generation of experts with such important cutting-edge skills. Carl Johan Sundberg suggested that the state could provide a stimulus package to universities so that new, targeted master’s programs can be launched.

“To talk about opportunities, there is an important difference between biologics and traditional medicines,” said Jan Erneberg. “Biologics are described by their production process which means that once you have established the process and got it approved, it is difficult to move that business. You then have regulatory problems”.

Kirsti Gjellan reminded that there are several initiatives at the moment and that there are quite few players in a small country. Kirsti argued for even more collaboration and more openness, with everyone sharing and helping each other to create depth and breadth in terms of skills and experience. “Open innovation has been successful for us at Sobi and will continue to be important”.

On the question of how to actively engage with the government, Kerstin Falck of Pfizer, stand-in for Christopher Siegmund in this panel discussion conducted in Swedish, said that “there is a great deal of responsiveness, for which the government is to be commended”. However, Kerstin Falck sees that the Swedish mentality of marketing very carefully needs to be replaced by a different approach. “Sweden needs to market itself more and also engage with the headquarters of global companies.”

To conclude, the panel was asked what should be done next to make Sweden a world leader in life science production. Oscar Stenström sees a potential in making better use of the Nobel Prize and the new Nobel Center in the marketing of Sweden. The business representatives said they will work to increase their own productivity to remain competitive, but they also want to see more open innovation, investment in skills and a reduction in corporate taxes.

Facts: Some current investments and initiatives

  • AstraZeneca: new plant for the production of biological drugs in Södertälje, SEK 2.3 billion.
  • GE Healthcare: doubling of manufacturing capacity in Uppsala, SEK 870 million.
  • Government: Research program for development and production of pharmaceuticals, 320 million SEK.
  • Research Center for Protein Drug Development, SEK 510 million (Wallenberg Foundation + University + AstraZeneca).
  • New hub for biopharmaceutical development, SEK 90 million (GE + government)

The report is compiled by Ola Björkman, Let ’em know.