Experts say that the Swiss private biotech ecosystem is recovering from the economic instability of 2023, but the country’s public sector still remains underdeveloped. Credit: AlexLMX / Getty Images

In 2023, the Swiss Biotech Association reported that the life sciences sector—pharmaceuticals, vitamins and diagnostics—became the country’s largest export industry. Swiss biotech revenues reached CHF 7.3bn ($8.06bn), as per a report by the same association. 

However, whilst the Swiss private biotech ecosystem is flourishing, experts say there is space for growth in the country’s public markets. 

As the country where pharma giants like Novartis and Roche first started, Switzerland has long been a stronghold for pharmaceutical companies. However, the country was not unaffected by the stiff biotech ecosystem that affected the rest of the world in 2023. Geopolitical tensions from conflicts such as the Ukraine-Russia war, and the residual effects of the Covid-19 pandemic kept interest rates high in 2023, making several dealmakers more risk averse. 

The Organization for Economic Cooperation and Development (OECD) reports that Switzerland has a projected global gross domestic product (GDP) growth of 3.2% by 2025, coinciding with a 3.4% rise in inflation in the same period. 

In recent times, several Swiss companies wound down their operations, began restructuring efforts, or closed down completely. For example, the Swiss biotech ObsEva laid off all its employees in February 2024, after dismissing its Boston executives, including its former CEO Brian O’Callaghan in February 2023. In March 2023, Saint Prex- headquartered Swiss company Ferring Pharmaceuticals closed down its US-based research institute after over 25 years of operations, letting go approximately 89 staff members. 

Despite last year’s setbacks, experts at the recent two-day Swiss Biotech Day conference, which started on 5 May, remained optimistic about the Swiss biotech sector’s ability to bounce back.

Sirpa Tsimal, director of investment promotion at Switzerland Global Enterprise (SGE), particularly highlights the presence of a highly skilled life sciences workforce in Switzerland as a strength. Tsimal says several companies choose Switzerland as their base due to its central location, and easy access to the European market. Furthermore, she also emphasised the importance of collaboration between Swiss pharma and other biotech markets.

This can be observed in the 2023 dealmaking environment. Major Swiss transactions included Roche’s $7.1bn agreement with Telavant Holdings in October, and Novartis’ $3.5 billion acquisition of Chinook Therapeutics, which took place earlier that year in June.

Frederik Schmachtenberg, a life sciences partner at EY says that due to the dry capital markets of 2022 and 2023, companies have been financing their operations through alternative means such as out-licensing agreements, choosing these over the typically preferred financing rounds. In March 2023, Zug, Switzerland-headquartered CRISPR Therapeutics closed a $330 million licensing deal with Vertex for hypoimmune cell therapy development. Through this deal, Vertex gained non-exclusive access to the company’s gene editing CRISPR/Cas9 technology platform to develop type 1 diabetes therapies. The Geneva, Switzerland-based Relief Therapeutics also declared a $46.5 million license agreement for Olpruva (ACER-001) for urea cycle disorders with the US company Acer Therapeutics. Dr. Michael Altorfer, the CEO of the Swiss Biotech Association, explains that such deals reduce the risk associated with some financing efforts as the transaction is often linked to future milestones.

Despite successful financing for some companies, the public market saw little movement, with only one biotech company, Oculis, listing on the Swiss exchange in 2023. Schmachtenberg explains that many companies chose to stay private to reduce the impact of the stiff public market, meaning that venture capital funding remained strong in Switzerland last year.

The Swiss Biotech Association reports that 95% of Swiss biotechs are private rather than public companies listed on exchanges. Schmachtenberg explains that the private sector is less affected by waves of global economic insecurity compared to public companies. At the conference, Altofer explained that the biotech sector is generally less suited for capital markets due to the long periods without news, when companies wait for key data readouts and other milestones. Schmachtenberg gives a hypothetical example where if a biotech company does not have any data readouts for a year, that would cause it to lack “positive inflection points” to present to investors.

Several Swiss companies depend on US funding, said Francesco de Rubertis, a cofounder at Medicxi Ventures, at the “Decoding Swiss Biotech – the Investors perspective” panel. The public sector is underdeveloped compared to the private sector, said De Rubertis, reflecting a trend largely seen in Europe compared to the US. Moreover, excluded from the EU and the European Medicines Agency (EMA), Switzerland does not benefit from several pan-European public funds. Thus, public support from European projects such as Horizon 2020 remains elusive for Swiss companies.

Switzerland also lacks institutions such as the National Institutes of Health (NIH) to support clinical development for several companies. NIH is the largest public funder for biomedical research, in the US and worldwide, investing nearly all its $45bn budget on life sciences research. SGE reports that 20% of European life sciences companies have placed their headquarters in Switzerland.

Thus, Swiss companies rely on a “strong venture financing” ecosystem in its public market, said Nicholas Riddle, the managing director of healthcare investment banking at JP Morgan, at the investment panel. The SGE is unconcerned by actions from companies such as listing on external stock exchanges, seeing it as a “win” for the Swiss pharma ecosystem, says Tsimal.

However, Schmachtenberg says lesser government involvement and a lack of “overzealous regulation” in the Swiss pharmaceutical sector, give many companies more freedom in their operations in the Swiss private sector. Still, while such a model may be doable in a small country like Switzerland, it may be less applicable in areas such as the US