Innovation in the Swiss pharmaceutical industry | Severin Schwan | Innoscape Talk #1

I really believe that creative people need space and freedom. That's not only true in our industry, it's true everywhere. If you ask an artist what kind of environment they need to be creative, and I've discussed this with them, at some point they talk about freedom and not having constraints. I think that's very important. In an environment like ours, that means you have to delegate decision-making as much as you can. I believe autonomous, smaller units work better than very centralized big organizations. Beyond that, it has a lot to do with courage. If you try something new, the risk of failure is huge. More often than not you will not succeed. So if you have a culture where failure is a problem, you don't get innovation. It's not only about giving people freedom to create something new, it's also about accepting failure. I would go so far as to say sometimes you even have to celebrate failure, because it signals to people that it's okay to fail and that it's part of true innovation.

There's a change happening in Switzerland, and a lot of innovation comes from Switzerland, Japan, and the US. For a global company like us, it's important to preserve the different cultures in different places. If you enter a research facility in Tokyo, San Francisco, or Basel, you feel a different atmosphere. Innovation is about enabling diversity of thinking. The Japanese look at the same problem very differently than the Americans, and the same is true for people in Switzerland. By looking at a problem from different perspectives, you enhance the chances of innovation because you don't know from the start what will work. For example, in Japan, a molecule—an antibody—was developed. It didn't work the first time, but the team had stamina and developed 10,000 different molecules, trying over and over, and eventually got the right one. Today it's an important medicine for hemophilia. I talked to our research head in the US, and he said this would never have worked in the US because the culture there would consider trying something over and over without success as stupid. In Japan, they have enormous stamina. That shows we probably would never have developed that molecule in the US, and enforcing one culture on another would be wrong. Respecting cultural diversity helps you be innovative.

Why is Switzerland an attractive location? First, we can attract great people. There are qualified people, renowned academic institutions, good research. All that attracts the best talent in the world, and we can tap into that pool. The big pharmaceutical R&D clusters are typically where you have great universities, healthcare infrastructure for clinical trials, because that attracts people. In these clusters, there's an interdependence with universities, start-ups, big companies, venture capitalists. Switzerland is very attractive. We collaborate with the best people because it's about talent, people, cutting-edge research done in other companies and academic institutions. Collaborations often start with two or three people who know each other and work on the same problem. Spin-offs might come from that, and we work with them or acquire them. At the core is the best talent in the world.

One big concern I have is that healthcare and the industry are getting more digital and rely on big data. That's a big weakness in Switzerland. We are lagging behind. We are good in traditional analog disciplines like biology, chemistry, and engineering, which remain important, but increasingly they are converging with digital capabilities to analyze big data, machine learning, AI. Switzerland is lagging, specifically in the healthcare system, because we don't have access to big data here. As a result, projects are going to the US and increasingly to China. I'm concerned about Switzerland losing ground with the digitalization of healthcare. For example, if you talk to a hospital about working with real-world data from clinical practice, they say it makes sense but they're afraid to touch it. There's fear of dealing with patient data. Data privacy and security are extremely important, but the pharmaceutical industry has been dealing with patient data in clinical trials for decades—Roche for 100 years—in a regulated environment. Data privacy has never been an issue. We deal with aggregated, anonymized, deidentified data, unlike consumer tech companies that want individualized IP addresses for advertising. We need aggregated patient data to know which medicines work or not. It's difficult to communicate the difference between identified and deidentified data. Underlying this is a lack of trust.

We still depend on great biologists, chemists, engineers, but we now employ thousands of people with digital backgrounds—data scientists, people who can code. Most of these people are in the United States. Over the last few years, we've recruited thousands on the East Coast, partly because that's where the talent is, but also because we can implement projects there. We've made acquisitions in the US that we couldn't in Switzerland because there are no such companies. As a result, there is a shift away from Switzerland to other locations, mainly the US and increasingly China. It doesn't happen overnight; it's a slow process. Projects go elsewhere one by one, and then you look back and a big portion has gone. The danger is real. If these disciplines become interdependent, you not only lose opportunities in new fields, but you get spillover effects into traditional strengths. If a biologist, chemist, and data scientist have to work together and Switzerland is no longer the right place for the data side, then there will be less work for biologists and chemists. So you're endangering what is already here.

The first thing we need is an obligatory standardized patient record. Look at what the US did successfully. In the public healthcare system, the Obama administration said that if you want to be reimbursed for medical services, you have to provide data in a standardized format: diagnosis, treatment, outcome. If you don't deliver the data, you don't get money. That triggered an electronic health record via the back door. As a result, a whole industry developed, and we have a business now in the US based on those standardized data. So the first basic step is a true electronic health record, obligatory, with anonymized deidentified data.

What we do as a company in Switzerland is keep new technologies and upscaling in-house here. It's about talent and know-how, not cost. It would be counterproductive to subsidize production or artificially keep it in Switzerland. Low-level packaging has already gone; it's too expensive. The government should focus on basic research, where industry doesn't have the time horizon. Basic research attracts the best people, which attracts industry for applied research and innovation. Switzerland has a liberal economy and has focused on basic research, like well-funded universities and ETH. That's where we should invest, not in old manufacturing technologies.

During COVID-19, we saw increased partnerships within the industry and with regulatory authorities at a completely different level. Traditionally, clinical trials take years to get approval. With COVID-19, we did rolling filing: sharing data immediately, discussing it with authorities in real time. Decisions came in weeks or days. A year ago I would have said that was impossible. Now we know it's possible, and it makes a big difference. We should adapt such processes for other life-saving medicines. The collaboration was excellent. We have to keep that momentum and not fall back into old habits. Also, I hope this finally gives digitalization more momentum. We've experienced the downsides of not having data available, even using fax paper. Hopefully, this wakes people up to the potential of digitalization for healthcare and for remaining an attractive location for the life science industry.