IBSA Institut Biochimique SA Pharma Company CS Success Story

IBSA Institut Biochimique SA: A Fruitful Company

Five years ago, IBSA, the biggest pharmaceutical company in Ticino, ran into difficulties for a short time owing to the strength of the Swiss franc, but got back on course thanks to its great innovativeness. Since then, the company has continued to rise on the list of the Swiss pharmaceutical companies with the highest turnover and, in terms of fertility medication, occupies fourth place worldwide.

Early morning in a small village on the east coast of China: As always at this time, a middle-aged woman hands over a full container to a courier engaged by IBSA and is given an empty one in exchange. The two bid each other a friendly good-day. The same procedure is repeated every day at the front doors of many Chinese houses.

A Very Special Raw Material

What is the reason for daily collections like this? The containers hold the urine of post-menopausal women. A hundred thousand liters of this valuable raw material are collected every day in the densely populated villages on the east coast of China and driven to two IBSA production plants. This has to be done quickly because the urine becomes unusable once it is a day old. IBSA’s CFO, Antonio Melli, explains the background: “These women’s urine contains hormones that are used in medically assisted reproduction.” Every day in the two Chinese plants, one kilo of the raw ingredient is extracted daily from the 100,000 liters through ultrafiltration. The next step is purification at the laboratories in Lugano, and what remains at the end is the active ingredient that is packed into vials to be used as a drug. IBSA has been present in China since 1998. But while it is almost commonplace to run a factory in China these days, 16 years ago considerable pioneering spirit was needed to expand to that country.

An Idea in His Luggage

There has so far been absolutely no shortage of pioneering spirit in the small Ticino pharmaceutical business, as its history shows. Founded in Lugano in 1945, and for decades a small business, IBSA was bought by the current CEO Arturo Licenziati in 1985. “We started in those days with 40 employees and found ourselves ranked 160th among Swiss pharmaceutical companies in terms of turnover,” Melli explains. “Nowadays, almost 30 years later, we’re in 24th place and have 1,800 employees in 20 countries, mostly in Switzerland, Italy, France, and China,” the CFO adds with a certain pride. The fertility drug already mentioned is not the only medical field in which IBSA operates. Other important areas include rheumatology, dermatology, and endocrinology, as well as drugs for reducing pain and inflammation. IBSA’s most famous product is the Flector plaster. “Perhaps you have had occasion to stick the plaster on a painful tennis elbow,” Melli says as he spreads a whole range of products with the same active ingredient out in front of him. This is because, depending on the pain, it may be better to use gel applied to the skin, swallow a capsule or inject an ampoule. The company’s own research department not only investigates new products, but also innovative applications of a drug in order to exploit its effect even more efficiently. However, the idea of the popular Flector plaster did not come from that department, says Melli: “It was our CEO Arturo Licenziati himself who had the idea of the plaster on a business trip to Japan, when he happened to see something similar there.”

Emerging Stronger from the Crisis

IBSA’s progress wasn’t always so smooth. In 2009/10, the euro crisis hit the company hard. “The Swiss National Bank’s decision to set the exchange rate at 1.20 played a crucial part in the company beginning to grow again quickly,” Melli recalls. But other measures needed to be taken quickly in different aspects. Firstly, the management decided to bypass the exchange rate problem as far as possible by increasing production in the eurozone. “We had already had a production facility in Italy since 1996, a second one followed in 2001, and a third in 2010, in the middle of the currency crisis,” Melli explained. “That was a coincidence because we had made the decision a long time before that when we had a chance to take over a company near Milan with production technologies we had been looking for.” And yet this new location in the eurozone came at just the right moment. Other measures included improved cost control and rationalized production processes. Without having to dismiss a single employee, the company was back on track again after a year. “The banks, especially Credit Suisse, really proved to be true, fair partners during this difficult period,” Melli says, adding: “No mention was ever made of reducing our loans. On the contrary: Credit Suisse’s attitude demonstrated its confidence our measures would enable us to withstand the crisis.”

The Ideal Moment to Invest

Since then, IBSA has been rigorously continuing its strategy, i.e. ongoing investment in production, innovation, and employees. The company has invested a total of 400 million Swiss francs in this way since 1985. Just recently, the company built and took over new production facilities in Italy and Ticino respectively, for 50 million Swiss francs. “It was the ideal moment given the current low interest rates,” Melli says. IBSA has no plans to build in Ticino in the near future. But they are considering constructing two further production facilities in rural parts of China owing to the changing demographic conditions. The heavily populated villages on the coast are becoming increasingly urbanized which means that the village structures that worked in IBSA’s favor are disappearing. Incomes are also increasing and the women’s readiness to donate their urine is declining. Many western couples who fulfill their wish to have children thanks to IBSA’s drug probably have no idea what complex stories lie behind the unremarkable fertility ampoules.