Life Sciences as a Financial Pillar — a part of the book Basel as an International Financial Centre by Dr Alexander Ressos.
Part G turns from the international institutions of Basel to the industry that pays for much of the city's prosperity. Basel is a financial centre in more than one sense. Its banks, its insurers and the Bank for International Settlements form the visible financial institutions, yet the largest flows of money that pass through the city are generated by the pharmaceutical and life sciences groups whose headquarters stand on both banks of the Rhine. Their profits fund a large share of the tax revenue of Basel-Stadt, while their exports make up a substantial part of the Swiss trade surplus and their wage bill sustains the regional labour market. Their shares, together with those of Nestlé, carry a heavy weight in the Swiss Market Index. Every Swiss pension fund, every Swiss equity fund and most private banking portfolios with Swiss equities therefore hold Roche and Novartis, whose dividends form one of the most reliable income streams of Swiss institutional investors.1
The life sciences are therefore a financial pillar of Basel in a literal sense. They support the public finances of the canton, the balance sheets of the banks that serve them and the employees who live in the region while shaping the capital markets in which the pension funds invest the savings of the Swiss population. The relationship works in both directions. The industry depends on a tax regime that the canton designs with its needs in mind, on a university and research institutes that the public finances, on banks and capital markets that supply finance and on a legal system that protects its intellectual property. Part D has described how the dye makers of the nineteenth century became the pharmaceutical groups of the twentieth.2 Part G examines what these groups are today and how they interact with the financial centre.
The five chapters of Part G follow this relationship from several angles. Chapter I describes the industrial base: the large groups Roche, Novartis, Syngenta and Lonza, the second tier of listed companies and the research institutions around them, as well as the Schweizerhalle disaster of 1986, whose consequences for regulation and liability still shape the industry. Chapter II examines the corporate finance of the pharmaceutical groups, from their bond issues and share buybacks to their mergers, spin-offs and treasury operations. Chapter III turns to taxation, from the cantonal holding and mixed company privileges to the Federal Act on Tax Reform and AHV Financing and the implementation of the OECD minimum tax. Chapter IV examines intellectual property, licensing and the financing of biotechnology start-ups. Chapter V concludes with compliance: anti-bribery rules, sanctions and export control as they apply to globally active life sciences groups.
This part belongs to Basel as an International Financial Centre by Dr Alexander Ressos, published here in full, section by section.
Roche, Novartis, Syngenta, Lonza: the Industrial Base — conclusion
The industrial base of the Basel life sciences consists of two global pharmaceutical groups, Roche and Novartis, an agricultural science group in Chinese state ownership, Syngenta, a contract… Read more Basel · Life Sciences as a Financial PillarFrom chemical companies to life sciences groups
At the end of the Second World War, the Basel chemical industry consisted of four large companies, Ciba, Geigy, Sandoz and Hoffmann-La Roche, each of which produced dyes, chemicals, pharmaceuticals… Read more Basel · Life Sciences as a Financial PillarThe merger of 1996 and the birth of Novartis
On 7 March 1996, Ciba-Geigy and Sandoz announced their intention to merge into a new company called Novartis, a name derived from the Latin novae artes, new skills. Read more Basel · Life Sciences as a Financial PillarThe logic of spin-offs: Clariant, Ciba Specialty Chemicals, Syngenta, Alcon, Sandoz
The history of the Basel industry since the 1990s is a history of spin-offs. A spin-off, or demerger, separates a business from its parent company and distributes the shares of the new company to the… Read more Basel · Life Sciences as a Financial PillarThe Novartis Campus
The physical expression of the Novartis transformation is the Novartis Campus in the St. Read more Basel · Life Sciences as a Financial PillarRoche: family control and a biotechnology bet
Roche differs from Novartis in its ownership structure and in its strategy. While Novartis is a widely held company without a controlling shareholder, Roche is controlled by the descendants of its… Read more Basel · Life Sciences as a Financial PillarThe Roche Towers
If the Novartis Campus is the horizontal expression of pharmaceutical wealth in Basel, the Roche Towers are its vertical expression. Read more Basel · Life Sciences as a Financial PillarSyngenta: a Basel company in Chinese ownership
Syngenta, created in 2000, developed into the world's largest producer of crop protection chemicals and one of the largest seed companies. Read more Basel · Life Sciences as a Financial PillarLonza: from Visp to the contract manufacturing model
Lonza has a different origin from the other Basel groups. It was founded in 1897 in Gampel in the Valais as an electricity company, named after the Lonza river, whose water powered its hydroelectric… Read more Basel · Life Sciences as a Financial PillarThe second tier: Bachem, Idorsia, Basilea, Straumann and the chemical successors
Below the large groups, the Basel region hosts a number of listed life sciences companies of medium size. Read more Basel · Life Sciences as a Financial PillarThe weight of the industry in exports and output
The pharmaceutical industry is the largest exporting sector of Switzerland. According to the foreign trade statistics of the Federal Office for Customs and Border Security, the chemical and… Read more Basel · Life Sciences as a Financial PillarEmployment and the regional labour market
The life sciences employ tens of thousands of people in the two Basel cantons, with further employment at sites in Aargau, Valais and the neighbouring regions of Germany and France. Read more Basel · Life Sciences as a Financial PillarWeight in the capital market
Roche and Novartis are, together with Nestlé, the three largest companies of the Swiss stock market. Read more Basel · Life Sciences as a Financial PillarResearch institutions: University, Biozentrum, Friedrich Miescher Institute, ETH
The life sciences cluster of Basel rests on a dense network of public and private research institutions. Read more Basel · Life Sciences as a Financial PillarThe cluster organisations
The promotion of the life sciences cluster is a task of the cantonal economic policy. Read more Basel · Life Sciences as a Financial PillarSchweizerhalle, 1 November 1986
The night of 1 November 1986 marks the most serious environmental disaster in the history of the Basel chemical industry. Read more Basel · Life Sciences as a Financial PillarThe regulatory consequences of Schweizerhalle
Schweizerhalle transformed the regulation of chemical risks in Switzerland. The Federal Act on the Protection of the Environment of 1983 had already provided a legal basis for measures against major… Read more Basel · Life Sciences as a Financial PillarLiability and insurance after Schweizerhalle
Schweizerhalle also changed the law of liability. At the time of the fire, the liability of the holder of an industrial installation for environmental damage was governed by the general rules of the… Read more Basel · Life Sciences as a Financial PillarThe risk of dependence
The concentration of the canton's economy on a small number of life sciences groups creates a risk of dependence that the political authorities of Basel-Stadt openly acknowledge. Read more Basel · Life Sciences as a Financial PillarCorporate Finance of the Pharmaceutical Groups — overview and summary
The previous chapter described Roche, Novartis, Syngenta and Lonza as industrial enterprises, with their research centres, production sites and product portfolios. Read more Basel · Life Sciences as a Financial PillarThe financial profile of a Basel pharmaceutical group
The financial profile of a large research-based pharmaceutical company differs markedly from that of a bank or an industrial manufacturer. Read more Basel · Life Sciences as a Financial PillarCredit ratings and conservative leverage
Roche and Novartis have long belonged to the small group of European industrial companies with credit ratings in the double-A range. Read more Basel · Life Sciences as a Financial PillarFinancing Genentech: the bond issues of 2009
The most instructive episode in the financial history of the Basel pharmaceutical groups is the acquisition of the minority shareholding in Genentech by Roche in 2009. Read more Basel · Life Sciences as a Financial PillarBond programmes and the issuing vehicles
Both groups finance themselves through several issuing entities whose location follows the market concerned. Roche has used Roche Holdings, Inc. Read more Basel · Life Sciences as a Financial PillarRoche's capital: bearer shares and non-voting equity securities
The equity capital of Roche Holding AG has a structure that is unusual among large listed companies. Read more Basel · Life Sciences as a Financial PillarThe family pool and voting control
The bearer shares of Roche are controlled to a large extent by the descendants of the founder Fritz Hoffmann-La Roche and of the Oeri family, who have bound their holdings in a shareholder pool. Read more Basel · Life Sciences as a Financial PillarNovartis: registered shares and the American listing
Novartis has a conventional capital structure with a single class of registered shares, each with one vote. Read more Basel · Life Sciences as a Financial PillarThe weight of pharmaceuticals in the Swiss indices
The size of Roche and Novartis has consequences that reach far beyond Basel. Together with Nestlé, the two companies have for many years accounted for a large part of the market capitalisation of the… Read more Basel · Life Sciences as a Financial PillarDividends as a tradition
Dividends are a core element of the financial identity of both groups. Roche has increased its dividend in Swiss francs every year for several decades, according to its own investor information for… Read more Basel · Life Sciences as a Financial PillarShare buy-backs, the second trading line and withholding tax
In addition to dividends, both groups return capital to shareholders through share buy-backs. Read more Basel · Life Sciences as a Financial PillarThe Novartis stake in Roche and its unwinding
The most remarkable episode in the relationship between the two Basel groups is the stake that Novartis held in Roche for twenty years. Read more Basel · Life Sciences as a Financial PillarAcquisitions at Novartis
Mergers and acquisitions are the area in which the corporate finance of the Basel groups becomes most visible to the outside world. Novartis has used acquisitions repeatedly to reshape its portfolio. Read more Basel · Life Sciences as a Financial PillarAcquisitions at Roche
Roche has followed a somewhat different pattern. Its most important acquisitions were the majority stake in Genentech in 1990, the full acquisition of Genentech in 2009 and the majority stake in… Read more Basel · Life Sciences as a Financial PillarSpin-offs as a form of distribution: Alcon and Sandoz
Alongside acquisitions, Novartis has used spin-offs to distribute value to its shareholders. Read more Basel · Life Sciences as a Financial PillarTreasury in Basel: cash pooling and in-house banking
Behind the large transactions stands a permanent organisation in Basel that manages the daily finances of the groups. Read more Basel · Life Sciences as a Financial PillarCurrency risk and the strong franc
Currency management is one of the most important tasks of a Basel treasury. Roche reports its results in Swiss francs, Novartis in US dollars, while a large share of their revenues is earned in US… Read more Basel · Life Sciences as a Financial PillarThe pension funds of the groups
The pension funds of Roche and Novartis belong to the largest corporate pension funds in Switzerland, with assets of many billions of francs each. Read more Basel · Life Sciences as a Financial PillarBanks, arrangers and the Swiss capital market
The relationship between the pharmaceutical groups and the banks has changed considerably over the decades. Read more Basel · Life Sciences as a Financial PillarSustainability-linked finance
In September 2020 Novartis issued a sustainability-linked bond of EUR 1.85 billion, which it described as the first such bond in the healthcare sector. Read more Basel · Life Sciences as a Financial PillarThe corporate law reform of 2023
The revision of Swiss company law that entered into force on 1 January 2023 introduced several instruments relevant to the finance of large listed companies. Read more Basel · Life Sciences as a Financial PillarSay-on-pay and shareholder engagement
Executive remuneration in the pharmaceutical groups has been a subject of public debate in Switzerland for many years. Read more Basel · Life Sciences as a Financial PillarSyngenta: finance under Chinese ownership
Syngenta presents a different financial history. The agrochemical company, formed in 2000 from the agribusinesses of Novartis and AstraZeneca and headquartered in Basel, was acquired in 2017 by China… Read more Basel · Life Sciences as a Financial PillarLonza: capital expenditure and portfolio pruning
Lonza, which moved its headquarters from Visp to Basel, follows a capital-intensive business model as a contract development and manufacturing organisation for pharmaceutical and biotechnology… Read more Basel · Life Sciences as a Financial PillarTax: from Holding Privileges to STAF and Pillar Two — overview and summary
Taxation is the point at which the pharmaceutical industry of Basel meets the state most directly. Read more Basel · Life Sciences as a Financial PillarFederalism and the three levels of company taxation
Swiss company taxation rests on three levels. The Confederation levies a direct federal tax on the profit of legal entities at a single proportional rate of 8.5 per cent. Read more Basel · Life Sciences as a Financial PillarThe old cantonal regimes
Before 2020, the harmonisation act allowed the cantons to grant special status to certain companies. Article 28 of the act distinguished three categories. Read more Basel · Life Sciences as a Financial PillarPrincipal companies and finance branches
Two further practices completed the picture. Both rested on administrative practice of the Federal Tax Administration and were therefore applicable at the federal level as well. Read more Basel · Life Sciences as a Financial PillarWhat the regimes meant for Basel pharma
For Roche and Novartis, the cantonal regimes had a different significance from that which they had for a trading company in Zug. Read more Basel · Life Sciences as a Financial PillarEuropean pressure: the state aid dispute from 2005
The first sustained external challenge came from the European Union. Switzerland is not a member of the Union and is not bound by its state aid rules in general. Read more Basel · Life Sciences as a Financial PillarThe OECD, harmful tax practices and BEPS
The OECD added a second line of pressure. Its report on harmful tax competition of 1998 defined criteria for preferential regimes that were considered harmful, such as low or zero effective rates,… Read more Basel · Life Sciences as a Financial PillarCorporate Tax Reform III and its defeat
The Federal Council presented its first answer in the form of Corporate Tax Reform III, the third major reform of company taxation after those of 1997 and 2008. Read more Basel · Life Sciences as a Financial PillarSTAF: the federal architecture
The Federal Act on Tax Reform and AHV Financing, known in German as STAF and in English often as TRAF, was adopted by Parliament on 28 September 2018. Read more Basel · Life Sciences as a Financial PillarBasel-Stadt's compromise
Basel-Stadt did not wait for the federal vote. After the defeat of Corporate Tax Reform III, the cantonal government negotiated with the political parties, the trade unions and the business… Read more Basel · Life Sciences as a Financial PillarBasel-Landschaft and the regional pattern
The neighbouring canton of Basel-Landschaft faced a different situation. Its economy is more diversified in terms of company size, but it hosts important pharmaceutical and chemical sites, notably… Read more Basel · Life Sciences as a Financial PillarTransfer pricing of pharmaceutical intellectual property
Beyond statutory rates, the tax position of a pharmaceutical group depends above all on the allocation of profit among the countries in which it operates. Read more Basel · Life Sciences as a Financial PillarWithholding tax and capital contribution reserves
Distributions to shareholders raise a separate set of tax questions. Switzerland levies a withholding tax of 35 per cent on dividends paid by Swiss companies. Read more Basel · Life Sciences as a Financial PillarRulings practice
Swiss tax practice has long relied on advance rulings. A taxpayer describes a planned transaction or structure to the cantonal tax administration, or to the Federal Tax Administration for federal… Read more Basel · Life Sciences as a Financial PillarThe United States reform of 2017
The most important external influence on the tax position of the Basel groups after 2017 came from the United States. Read more Basel · Life Sciences as a Financial PillarPillar Two: the Swiss implementation
The global minimum tax is the most recent stage of the international reform. In October 2021, more than 130 member jurisdictions of the OECD/G20 Inclusive Framework agreed on a two-pillar solution. Read more Basel · Life Sciences as a Financial PillarThe Basel location package
The question was what to do with the money. Several cantons with large multinational groups argued that the minimum tax, while preserving revenue for Switzerland, would weaken its attractiveness… Read more Basel · Life Sciences as a Financial PillarThe dependence of the cantonal budget
Basel-Stadt has one of the highest per capita revenues from company taxation in Switzerland. Read more Basel · Life Sciences as a Financial PillarCorporate taxation as an expression of cantonal sovereignty
The history traced in this chapter can be read as a contest between cantonal sovereignty and international standards. Read more Basel · Life Sciences as a Financial PillarIntellectual Property, Licensing and Biotech Venture Finance — conclusion
The history of Basel's life-sciences industry can be told as a history of intellectual property. Read more Basel · Life Sciences as a Financial PillarFrom the imitator's licence to the patent as an asset
Part D described how the Basel dye industry grew up in a country without patent protection for chemical inventions. Read more Basel · Life Sciences as a Financial PillarThe Swiss Patents Act
The Federal Act on Patents for Inventions of 25 June 1954 is the basis of the Swiss patent system, although it has been revised many times since its adoption. Read more Basel · Life Sciences as a Financial PillarThe European Patent Convention and the Unitary Patent
The Convention on the Grant of European Patents was signed in Munich in 1973 and entered into force in October 1977. Read more Basel · Life Sciences as a Financial PillarThe Federal Patent Court
Until 2011 patent disputes in Switzerland were heard by the cantonal courts, which rarely dealt with them and often lacked judges with technical expertise. Read more Basel · Life Sciences as a Financial PillarSupplementary protection certificates and paediatric extensions
A medicine rarely reaches the market until many years after the patent on its active substance has been filed, because the clinical trials and the authorisation procedure take a long time. Read more Basel · Life Sciences as a Financial PillarData exclusivity under the Therapeutic Products Act
Patent protection is supplemented by a separate right that is often of equal commercial importance: the protection of the documentation submitted to obtain marketing authorisation. Read more Basel · Life Sciences as a Financial PillarThe price of a medicine in Switzerland
Once Swissmedic has authorised a medicine, its reimbursement by the compulsory health insurance depends on its inclusion in the list of specialities, a positive list maintained by the Federal Office… Read more Basel · Life Sciences as a Financial PillarConfidential price models
The most significant change in Swiss pricing practice of the last decade has been the spread of confidential price models. Read more Basel · Life Sciences as a Financial PillarAmerican pricing pressure since 2025
For the Basel groups, the decisive market is the United States, which accounts for close to half of the global sales of Roche and Novartis. Read more Basel · Life Sciences as a Financial PillarGenerics and biosimilars
The value of a patent becomes visible when it expires. After loss of exclusivity, sales of a small-molecule medicine can fall by most of their volume within months as generic manufacturers enter the… Read more Basel · Life Sciences as a Financial PillarCompulsory licences, TRIPS and the waiver debate
The Agreement on Trade-Related Aspects of Intellectual Property Rights, concluded as part of the Uruguay Round in 1994, obliged all members of the World Trade Organization to grant patents for… Read more Basel · Life Sciences as a Financial PillarLicensing as the currency of the industry
Few medicines sold by the Basel groups today were discovered entirely in their own laboratories. Read more Basel · Life Sciences as a Financial PillarMilestones, royalties and the structure of deals
The financial terms of a pharmaceutical licence reflect the uncertainty of drug development. Read more Basel · Life Sciences as a Financial PillarIP holding companies and the patent box
The location of intellectual property within a group has major tax consequences, as chapter III of this part shows in detail. Read more Basel · Life Sciences as a Financial PillarValuing intellectual property
The valuation of a pharmaceutical patent or of a development project is one of the most demanding tasks in corporate finance. Several methods are used, often in combination. Read more Basel · Life Sciences as a Financial PillarThe Actelion story
The most important biotech success in the history of the Basel region is Actelion. Read more Basel · Life Sciences as a Financial PillarBasilea, Santhera, Polyphor and the listed biotechs of the region
Actelion was not the only biotech company founded in the Basel area around the turn of the century. Read more Basel · Life Sciences as a Financial PillarVenture capital in Basel
The venture capital landscape in Basel is closely linked to the large groups. The Novartis Venture Fund, founded in 1996, is one of the oldest corporate venture funds in the pharmaceutical industry… Read more Basel · Life Sciences as a Financial PillarThe Swiss venture capital gap and the Zukunftsfonds debate
Although Switzerland is one of the most innovative countries in the world according to international rankings, its venture capital market is small relative to the size of its economy and its research… Read more Basel · Life Sciences as a Financial PillarInfrastructure for start-ups: the innovation park and BaseLaunch
The Basel region has invested in infrastructure to support young life-sciences companies. Read more Basel · Life Sciences as a Financial PillarUniversity spin-offs and technology transfer
The University of Basel and the Department of Biosystems Science and Engineering of the Swiss Federal Institute of Technology in Basel are important sources of new companies. Read more Basel · Life Sciences as a Financial PillarLegal structuring of financing rounds
A Swiss biotech start-up is usually organised as a company limited by shares under the Code of Obligations. Read more Basel · Life Sciences as a Financial PillarEmployee participation and tax rulings
Equity participation is an essential part of the remuneration of employees in biotech start-ups, because these companies cannot pay salaries comparable to those of the large groups. Read more Basel · Life Sciences as a Financial PillarCrowdfunding and tokenised equity
New forms of financing based on digital technologies have also reached the life sciences, although they remain marginal compared with venture capital. Read more Basel · Life Sciences as a Financial PillarCompliance: Anti-Bribery, Sanctions and Export Control — overview and summary
The preceding chapters of Part G have described the life sciences industry of Basel as an industrial base, as a borrower and issuer on the capital markets, as a taxpayer and as an owner and licensor… Read more Basel · Life Sciences as a Financial PillarCompliance as a headquarters function
In the large Basel groups, compliance is organised as a central function with a reporting line to the executive committee and to a committee of the board of directors. Read more Basel · Life Sciences as a Financial PillarSwiss anti-bribery law
The Swiss Criminal Code (StGB) has contained a modern set of bribery offences since 2000, when the provisions were revised in preparation for the ratification of the OECD Anti-Bribery Convention. Read more Basel · Life Sciences as a Financial PillarCorporate criminal liability under Article 102 StGB
Swiss criminal law has recognised the liability of companies since 2003. Under Article 102 paragraph 1 StGB, a company is liable for a felony or misdemeanour committed in the exercise of commercial… Read more Basel · Life Sciences as a Financial PillarThe OECD Convention and the Working Group on Bribery
Switzerland signed the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions in 1997 and ratified it in 2000. Read more Basel · Life Sciences as a Financial PillarExtraterritorial regimes: the FCPA and the UK Bribery Act
The Foreign Corrupt Practices Act of 1977 is the oldest and most influential law against foreign bribery. It contains two sets of provisions. Read more Basel · Life Sciences as a Financial PillarThe Novartis resolutions of 2020
The most significant enforcement cases involving a Basel group in recent years concerned Novartis. Read more Basel · Life Sciences as a Financial PillarHealthcare compliance: integrity and transparency
The sale of medicines differs from the sale of most other goods because the person who decides on the purchase is often not the person who pays for it. Read more Basel · Life Sciences as a Financial PillarData protection and clinical trials
Clinical research generates some of the most sensitive data that a company can hold. Read more Basel · Life Sciences as a Financial PillarSanctions law: the Embargo Act and SECO
The legal basis for Swiss sanctions is the Federal Act on the Implementation of International Sanctions of 2002, usually called the Embargo Act. Read more Basel · Life Sciences as a Financial PillarRussia 2022 and the humanitarian exemption
Medicines, medical devices and agricultural products occupy a special position in almost every sanctions regime. Read more Basel · Life Sciences as a Financial PillarIran and the Swiss Humanitarian Trade Arrangement
The case of Iran shows how secondary sanctions of the United States affect companies outside its territory. Read more Basel · Life Sciences as a Financial PillarExport control: goods control and dual-use items
Export control law regulates the export of goods and technologies that can be used for military purposes or for the production of weapons of mass destruction. Read more Basel · Life Sciences as a Financial PillarChemical and biological weapons conventions
The Chemical Weapons Convention of 1993, which entered into force in 1997, prohibits the development, production, stockpiling and use of chemical weapons. Read more Basel · Life Sciences as a Financial PillarInvestment screening and the Syngenta question
The acquisition of Syngenta by ChemChina, which was announced in February 2016 and completed in 2017 for more than 40 billion US dollars, was one of the largest foreign acquisitions in Chinese… Read more Basel · Life Sciences as a Financial PillarSupply chain due diligence after the Responsible Business Initiative
On 29 November 2020 Swiss voters decided on the Responsible Business Initiative, which would have made Swiss companies liable for human rights and environmental violations by companies they control… Read more Basel · Life Sciences as a Financial PillarWhistleblowing
Most compliance cases begin with information from inside the company. Employees who observe misconduct are often the only source that can reveal it, which is why enforcement authorities in the United… Read more Basel · Life Sciences as a Financial PillarCompliance practice in Basel
The legal fields discussed in this chapter are rarely separate in practice. A bribery investigation in a foreign subsidiary may reveal sanctions risks, because the distributor involved belongs to a… Read more