“The innovation in big pharma doesn’t happen inside big pharma.”
Balz Hösly is chairman of the board of Greater Zurich Area AG, the public-private investment promotion agency for 10 of Switzerland’s 26 cantons, and a partner at MME Legal | Tax | Compliance in Zurich. A lawyer by training, he spent 14 years in international insurance and led Switzerland’s export promotion agency (now Switzerland Global Enterprise) before returning to law.
We talked to Balz Hösly at NLSDays about the differences in how tech companies and pharmaceutical companies scale. We also discussed US drug pricing policy and Europe’s trade defenses, and the value of talent and culture.
Pharma Consolidation Vs. Tech Independence
Balz advises both the tech and pharma industries in the Greater Zurich Area’s investment mandate, and compares the two. “Pharma is very much concentrated on very big companies,” he says. “Of course, they have startups, they have smaller companies. But as soon as they have reached a certain level, they are basically swallowed by the big pharma companies through M&A.”
In contrast, he says, tech startups keep “a longer independence,”. Even when an AI company eventually merges with “one of the big ones, like the Googles or the Microsofts or the Metas,” it happens “in a later stage.” The reason, he argues, is cost of proof. A software company can ship, test with users, and iterate. A drug candidate has to survive phase three trials before it reaches a single patient. “If you have to test a product with patients and do phase three trials, this is something a smaller company can hardly afford. So you need to get big or to become a part of a bigger organization very quickly.” Add a separate regulatory system in the EU, Switzerland, and the US, each requiring its own approval before a molecule can be sold, and complexity and cost add further.
Competition for Talent
Balz explains how pharma is competing for a small, concentrated pool of scientific talent, and he thinks that the talent now calls the shots. “We have seen a paradigm shift in the last, I would say, 15 years,” he says. “15 years ago, the talents went where the companies were. Nowadays, the companies go where they know the talent wants to be. This is a completely different point of view as it used to be.”
He points to Zurich as a case study in what that means for site selection. “We have two excellent universities, ETH Zurich and the University of Zurich, and whenever you have a cluster of highly scientific development, they cluster around universities that produce offspring for these fields of business.”
Switzerland’s labor rules compound the effect: “The freedom of persons between Switzerland and EU” means “Switzerland can employ talents from the EU,” which matters because, in his words, “the Swiss industry in diverse fields is much too big for the country. So we need talents from abroad.” And once scientists arrive, quality of life keeps them there. “A lot of former international managers cease to be international once they have arrived in Switzerland because they don’t want to leave. Particularly, the families.”
His conclusion: “The countries that have a very good living environment… have a competitive advantage now.”
Money is Moving, but Not Towards Pharma
“In the last two years, the hype of AI basically swallowed away all the money which was previously also used for biotech investments and for life science investments,” Balz says, pointing to conversations with university researchers as evidence: “If you talk to professors at Stanford University, which I have done, or at Harvard, they really have to struggle for funds, which was not the case some years ago.” He doesn’t think the shift is permanent — “the pendulum can also swing back again” — but for now, capital is chasing AI ahead of biotec.
The MFN Policy: EU Perspective
Then there’s pricing. The Trump administration’s Most Favored Nation framework ties US drug prices to the lowest price a manufacturer charges across a basket of comparator countries — Switzerland and Denmark among them — and the White House projects it will save Americans roughly $600 billion over ten years. Balz is skeptical of that figure: “I don’t think that it’s $600 billion saved in the US because of this new system. I rather believe that this new system has the danger of affecting innovation in drugs and medicaments in the US.”
Historically, the US paid more because it was the first market a new drug reached. “The high price had a revenue, and the revenue was the US was the first market to be supplied with these new drugs. Now, if the US says, we don’t want these high prices anymore… they will not be one of the first markets to be supplied with these drugs. The consequence for Europe and the European companies is that the prices for drugs will rise.” The underlying cost doesn’t disappear, in his view — it moves. “Why are drugs so expensive? You have perhaps 99 pipelines of drugs and of these pipelines, one or two succeed. But these one or two have to bear the cost of the 97 that don’t succeed.”
PharmaSource’s coverage from CDMO Live Europe found the same tension playing out on the supply side, with European legislation arriving faster than manufacturers can absorb it.
