The pharmaceutical sector in Italy: not only Big Pharma

July 14, 2017

alessandra.benedini@prometeia.com

The pharmaceutical industry is the only Italian manufacturing sector currently above the pre-crisis levels. Growth, supported by the strong increase of foreign sales, is widespread across all company class sizes. Pharma’s turnover consistently ranks second in Europe, behind Germany, and ahead of France, UK, and Spain

 

A € 30 billion worth turnover sector, Italian pharma recovered above its pre-crisis peak in 2007, at the end of 2016.

The Italian pharmaceutical sector over the last decade has been supported by a resilient domestic demand, despite the constraints to healthcare public expenditure imposed by fiscal consolidation. 

In addition, Italian companies have gained significant market shares in foreign markets: exports increased at very high rates between 2007 and 2016 (+77% in current euro, see Figure 1) bringing foreign sales share to more than 70% of the total turnover of pharma companies in Italy. 

 
Fig. 1 Evolution of production and export (turnover and exports deflationated; Index 2007=100)
Source: Analisi dei Settori Industriali May 2017
 

Italy’s leading role as a European productive hub

The sector’s competitiveness grounds in the fruitful coexistence of national and multinational companies which are successfully operating in a communal and mutually beneficial environment that favors Italy’s leading role as a European productive hub, positioning our industry steadily at the second place in terms of turnover, behind Germany but ahead of France, United Kingdom and Spain.

The analysis carried out by Prometeia on the balance sheets of pharmaceutical companies in the main continental European countries, have highlighted a widespread growth among all class sizes [1], with excellence even among small firms. During 2010-2015, the cluster of small pharma companies operating in Italy have shown the highest growth rate, recording a 30% increase in turnover, performing even better than German large companies (Figure 2). The growth of Italian medium enterprises was strong too (+25.6%); weaker, but also positive, the growth of the cluster of Italian large companies (slightly below  20%), which, however, reached a leadership role in terms of sales profitability.

These results reflect the productivity of our firms, guaranteed by the quality of human capital and the production efficiency, supported by investment that didn’t stop even during the deepest crisis years. The factors outlined have driven the success of most of the “manufacturing” sector within the Italian pharmaceutical industry: the Contract Development Manufacturing Organisation (CDMO). 

 
Fig. 2 Growth of pharmaceutical companies in Europe by size class (cumulated turnover 2010-’15)
Source: Prometeia calculations on Orbis BvD data
 

Italian leadership was reached thanks to a network of small-medium enterprises

The CDMO has been developed since the early 1990’s – when a Legislative Decree [2], adopting a European framework, allowed contract work activity – and has strongly grown since the mid 2000’s, thanks to structural changes that involved the world’s pharmaceutical industry. In this segment, Italy, with a turnover of € 1.7 billion in 2015, equivalent to 23% of total turnover [3] is the undisputed European leader, ahead of Germany.

Italian leadership was reached thanks to a network of small-medium enterprises, hightly specialised and able to combine excellence in production with very high flexibility, supported by the ability to offer high value added services. These factors are pivotal to boost Italian competitiveness and to attract foreign investment, crucial to develop more and more this niche of excellence of the Italian manufacturing industry.

 
 

[1] The analysis - presented at the last Trento Festival of Economics with the title “La salute disuguale” - has been developed on the balance sheets of capital companies dealing with drugs production with registered office in Italy, Germany, France and Spain, divided into three size classes: large enterprises (turnover > €50 million), medium enterprises (turnover between €10-50 million) and small enterprises (turnover between €2-10 million).
[2] Lgs. D. 29 May 1991, n. 178
[3] Farmindustria-Prometeia Survey 2017.