Global Life Sciences

A recent KPMG analysis of site selection criteria in LS (PDF, 3MB) globally shows Ireland has relatively few products in development relative to competitors, and hosts a smaller share of global and regional HQs than we might assume. It also lags competitors on medicines and trials approval times, as well as start-up funding. 

An example of how Ireland (#13 for competitiveness globally) ranks across key metrics against Switzerland (#1) and Belgium (#24) is outlined below; 

*Ireland has signed up to the OECD minimum global taxation rate of 15% for certain businesses, which has not yet been implemented.
**Higher scores represent stricter regulation and employment protection 

Outside of Europe, India has huge ambitions to become a global LS hub for both R&D and manufacturing, and recent years have seen increasing numbers of LS knowledge-based roles shifting eastwards, with Hyderabad amongst the world’s most cost competitive locations for LS R&D. 

Ireland’s competitive advantage in LS to date has been built on a handful of well-understood factors: 

• Excellence in manufacturing and regulatory compliance 
• Highly qualified workforce 
• Low corporate tax rates 
• Competitive R&D tax credits and IP supports 
• World-class research landscape 
• Strong and transparent regulatory framework  

However, in the increasingly competitive global environment, past success will not guarantee future investment. Irish subsidiaries will need to be clear on what they have to offer to encourage continued investment from global parent companies. From our analysis, we think there are at least seven strong themes for Irish companies to focus on when developing a strategy to articulate their value-add to parent organisations:

At the core of global LS companies is the desire to improve the lives of patients through the development and delivery of highly effective medicines and medical devices. Local Irish based affiliates contribute enormously to global patient outcomes via the manufacture of innovative treatments. This footprint should be highlighted to demonstrate the global impact of the local subsidiary within the larger parent organisations’ therapeutic strategy. 

Ireland is a favoured global location for tech giants as well as LS, with seven of the world’s top ten tech companies having operations here. Ireland boasts a vibrant tech sector spanning analytics, hardware, software, and cloud, which makes it a perfect environment for collaboration and cross pollination between tech and other sectors. This is a major selling point in LS, where the growing dependence on patient data and its associated integrity/security, digital therapeutics, co-packaged or integral digital devices to accompany medicines and diagnostics is a clear trend. 

The erosion of Ireland’s tax advantage by global agreements, industry consolidation, and mounting challenges from emerging markets, will all place relentless pressure on Ireland’s competitiveness as a LS destination in the coming decade.

For Ireland to remain a leader, all industry stakeholders will need to take decisive steps to capitalise on the trends that will shape the future of the industry, and with a substantial portion of the EU’s €750bn post-pandemic stimulus package earmarked for LS and healthcare, there has never been a better time. 

We believe that local LS subsidiaries should look to aggressively position their Irish operations as an innovative and future growth centre within their global parent organisation. Irish subsidiaries can become key leaders in digital health, advanced manufacturing, CGTs and other cutting edge treatments, as opposed to a simply a “manufacturing hub”, all while highlighting the regions ability to meet ESG goals.

This will require, among other things, investing in skills development, training, R&D capability, and next generation manufacturing capability, all of which needs to be clearly articulated and demonstrated to be aligned with the parent organisation’s wider strategy. 

Irish subsidiaries looking to ensure continued investment for products, manufacturing sites/technologies, service centres, or human resources will need to be acutely aware of all sources of current and future competitive advantage, in order to stretch their value-add messaging with parent companies and articulate the actual value of local operations in Ireland in a communicable and compelling format. 

In summary, when vying for additional parent investment within a multinational, stakeholders should consider for example: 

• Financial, commercial, economic and operational benchmarking, both within the group and against external datasets. Data analytics on the cost competitiveness of a site across operations and supply chain should be standard, with value optimisation undertaken prior to pitching for further investment. Relevant metrics could include distribution centre footprints analysis, direct/indirect procurement costs and efficiency and full site profitability analysis. These metrics enable a fact-based dialogue with parent organisations on the allocation of funding and additional investment. Our proprietary benchmarking tool, built on aggregated and anonymised client data, for example, covers over 8000 LS companies globally, 610 of which have annual turnover in excess of €500m to quickly benchmark against peers. 
• The comparison of headline figures such as Irish labour costs versus competitor regions in the global network often lacks adequate granularity to highlight the true competitiveness of each individual location. Underlying metrics for the region such as product defect rates and employee absenteeism should be captured. The end impact of these metrics on overall site return on investment should be measured, quantified and articulated. 
• Geographical nuances should be highlighted and leveraged to increase the attractiveness of a region, such as the largely untapped regional differences in labour costs and the cost of living particularly in the border countries and Northern Ireland. 

Outside of local life science affiliates, inward investment stakeholders, regulators and policy makers all have a part to play to encourage growth of the ecosystem, by considering for example: 

• Additional fiscal levers which could be deployed to offset any changing sentiment due to the OECD minimum global taxation rates. Analysis of Ireland’s current offerings such as the R&D tax credit and the Knowledge Development Box should be benchmarked for attractiveness versus global locations for FDI flows which offer angel tax credits, investment tax allowances and special incentives such as “Pioneer status” offering above average tax exemptions. 
• Ireland’s regulator is a leader on the European stage, but enhanced engagement with life science companies could be facilitated via enhanced formal and in-formal regulatory advice to assist navigation of the increasingly complex regulatory ecosystem. Specific advanced supports to life science companies seeking to establish in the EU for the first time could be created. 
• Policy makers should take note of Ireland’s lagging availability of advanced therapies in the form of cell and gene therapies. These treatments will drive the next decades of innovation across life sciences and Ireland is at risk of loosing out. A clear policy outlining how these treatments will be made available and reimbursed should be created. 

KPMG’s Strategy Group works with private, public and not-for-profit organisations to develop and implement strategy from ‘Innovation to Results’ helping clients achieve their goals and objectives.

KPMG Global Strategy professionals develop insights and ideas to address organisational challenges such as growth, operating strategy, cost, deals, digital strategy and transformation. In Ireland, we are the largest deal and corporate strategy house, working across sectors including healthcare and life sciences, financial services, aviation, manufacturing, food & agri and technology, media and telcom sectors.