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Ukraine War Revives Supply Chain Crisis

Ukraine War Revives Supply Chain Crisis

By Maartjie Wijffelaars and Erik-Jan van Harn of Rabobank


The Ukraine war has sparked another…



Ukraine War Revives Supply Chain Crisis

By Maartjie Wijffelaars and Erik-Jan van Harn of Rabobank


The Ukraine war has sparked another supply chain crisis, just as pandemic-related disruptions had started to ease.

  • Europe depends on Russia, Ukraine and Belarus for its energy imports, but also for some chemicals, oilseeds, iron and steel, fertilizers, wood, palladium and nickel, amongst others.
  • Especially the energy dependency is a vulnerability, now that Russia is demanding ruble payments for its exports. It is unlikely that Europe would be able to fully replace Russian gas in the short term, whilst most of the Russian oil and solid fossil fuels could be replaced.
  • Besides energy goods, disrupted supply of pig iron and several other iron and steel products, nickel and palladium will likely have the largest impact on EU industry.
  • EU supply chains could also be distorted via war-related production disruptions in third countries. The EU could face challenges in importing e.g. electronic circuits from third countries, as these require inputs such as nickel and neon gas sourced from the warzone.
  • Germany and Italy are relatively vulnerable to the crisis because of their relatively large industrial sectors, strong reliance on Russian energy, and in case of Italy strong reliance on Russia and Ukraine for certain iron and steel imports and gas in its total energy mix

Will we ever catch our breath?

Just as supply chain issues caused by the pandemic were starting to ease (Figure 1), the next crisis has presented itself. The war in Ukraine is making clear that large parts of the world depend on Russia, Ukraine and Belarus for basic necessities such as food, energy and other commodities.

Trade with Russia, Belarus and Ukraine (referred to as the warzone in the remainder of this piece) has come close to a halt due to a wide range of sanctions, self-sanctioning (mainly by western companies), and strongly disrupted production and transport in Ukraine. Although the overall share in world trade is limited for those countries, trade disruptions can have large implications for both specific firms and industries as well as entire economies. Disruptions (both actual and feared) to imports from the warzone will hurt the EU more than less exports to the warzone. Not only because the warzone accounts for a larger share in the EU’s imports than exports (Figure 2), but especially because less imports of commodities and intermediate products can have knock-on effects on multiple production processes in the EU.

In Part I of this research note we will zoom in on the EU’s direct and indirect dependence on non-food commodities and goods imported from the warzone. We will assess which EU industry subsectors are most vulnerable for the disruptions caused by the war. In Part II we compare the vulnerability of the largest Eurozone countries.

The revival of supply chain disruptions

On top of oil and gas, Russia, Belarus and Ukraine are producers of a number of key commodities that are used in everyday items or in the production thereof– such as pig iron, palladium and neon. Next to commodities, certain industries also depend on these countries for intermediate products. A striking example is the dependence of several German car factories on certain car parts produced in Ukraine. This has already led to the closure of several German car factories.

We can split up the effects on supply chains into first order and second order effects. First order effects are caused by a reduction in direct trade between the warzone and the European Union. There are two types of second order effects. The first is less trade between the warzone and third countries that results in fewer supply of products to the EU from those third countries. The second 
is less EU production of intermediate goods due to higher energy prices -or even shortages- as a result of the war and, consequently, less production of downstream goods for which these intermediates serve as inputs (Figure 3).

Part I: EU dependence on goods from the warzone

We start our analysis by looking for products for which the EU27 depends heavily on Russia, Ukraine and Belarus. We then omit those products that can easily be imported from other parts of the world and those which do not play a vital economic role. For example, Germany is quite dependent on Russia for raw fur skins, but it is safe to say that Germans and the German economy will survive without fur coats.

Table 1 lists the most exposed vital economic goods based on these principles, with a minimum net import volume of EUR1bn. In the table we have aggregated certain product lines that came out on top in this analysis, to prevent getting lost in too much detail. Note that the row ‘chemicals’, for example, does not encompass all chemicals, yet only those that fulfil the above criteria. A list of the specifics for each product group can be found in the appendix. Apart from food products, the EU extensively depends on the warzone for several energy goods, chemicals, fertilizers, and metals – such as iron, nickel and palladium. And apart from, perhaps, chemicals, it seems rather difficult for the EU to find alternative suppliers for these goods and will likely at least cause price rises.

Below we will elaborate on usages and the consequences of reduced availability of the non-agri products listed in table 1 and where necessary, on specific products within those product groups. We also give some indication on the relative ease or difficulty to substitute these products.

All in all, we find that many sectors are likely to face disruptions to the supply of inputs and/or higher prices thereof. Most vulnerable seem to be production of basic metals and fabricated metal products. Other sectors that will certainly be impacted as well are construction, machinery and equipment, and transport equipment.

EU dependence on Russian energy

The most obvious link with Russia is on the part of energy commodities. The EU relies on Russia for 21% of its oil imports, 37% of its gas imports and roughly 45% of its solid fossil fuels imports. Energy imports are not yet subject to outright sanctions in the EU and are still flowing, but the possibility of sanctions is talk of the town. In any case, fear of reputational damage and of accidently breaching sanctions has already led to some reduction of Russian oil imports in the EU. Meanwhile, Russia is demanding ruble payments for its exports, which the EU is currently refusing to pay. For the time being, Gazprombank will help European companies to convert their euro payments to rubles, but it is still possible that gas deliverance will be weaponized. Finally, the EU has presented a plan to cut back on Russian energy dependence over the coming year(s). In other words, it is useful to dive into the EU’s dependence on Russian energy, to grasp if we could do without. Not surprisingly it appears that it won’t be easy to get rid of Russian energy altogether and it would certainly lead to a shock effect in the short run if energy trade with Russia came to a sudden standstill. It would lead to energy shortages, possibly requiring rationing of energy consumption for the industry, leading to a substantial drop in industrial production. Special thanks to our energy strategist, Ryan Fitzmaurice, for providing us with the much needed background on energy markets.


It is unlikely that Europe could replace Russian gas with alternative gas in the short run.

The most obvious way to cope with a halt of Russian gas imports, would be to replace Russian gas with non-Russian gas imports. Yet as we have already explained in a recent research note, there probably isn’t enough available gas to, suddenly, replace Russian supply. Moreover, switching to different gas suppliers also faces technical constraints. Much of Europe’s gas is supplied through pipelines in Central- and Eastern-Europe from the east to the west, which are not suitable for sending gas the other way around -at least not on a short notice.

It is also unlikely that LNG imports will fill the gap in the short run. Apart from a lack of availability -certainly in the short run-, some EU countries lack the infrastructure needed to import LNG. LNG needs to be converted to a gas state in LNG terminals before it can be transported through a network of pipelines. Germany, for example, does not have any LNG terminals and neither do landlocked countries such as Czech Republic.

Were it to come to gas shortages, switching to alternative fuels, like coal, is potentially necessary to avoid an energy shortage in the winter. But it goes without saying that increasing coal consumption is not in line with Europe’s green ambitions.

A full report on Europe’s gas dependency can be found here.


Replacing oil could be somewhat easier than replacing gas, although it would come at a higher cost. Even though some oil is transported via pipelines, it can also be transported via ship or railway, without the need to liquify it first (as is the case with gas). This means that, if Europe can get its hands on oil of a similar grade, Russian oil that is transported through pipelines in central and eastern Europe, could be replaced, albeit at a higher price. Europe would have to compete with countries that currently rely on those types of oil, potentially pushing those countries, such as India or China, to importing the (cheaper) oil from Russia.

That is a big if however. Oil can differ strongly depending on its origin. Usually different oils are characterized by their sulphur content and density. Ural oil is a medium sour crude oil (figure 6). The closest replacement crudes are from Saudi Arabia, Iran and Oman. In addition, the medium sweet barrels from the North Sea, West Africa and the United states would also be suitable alternatives, with less need to desulfurize the crude (a process that is very natural gas intensive). Refineries are usually tailored to a specific kind of oil, but could switch their operations to accommodate other types of oil in a relatively short period of time, but testing and blending of the new crudes are required to ensure smooth operations.

Solid fossil fuels

Friday 8 April, the EU announced a ban on Russian solid fossil fuel imports from August. While this has induced the price for coal to increase and can hurt specific factories, in our view, the omittance of Russian coal won’t be a major problem on a macro scale.

The EU also gets about one-third of its imported solid fossil fuels -mainly coal- from Russia. At first sight, this seems to imply the EU is rather dependent on Russia for this part of its energy consumption too. But the figure overstates the importance of Russian coal  imports for the EU. First, coal is not as important to most European countries as gas or oil. On average, solid fossil fuels -mostly coal- are good for 11% of total EU energy consumption (Figure 4). Second, while a couple of countries, especially in the eastern part of Europe, still rely on coal for a significant part of their energy consumption (Figure 9), most of these countries are either pretty self-reliant or mainly import their coal from countries other than Russia. Major consumer Poland for example, produces around 98% of its coal consumption domestically. Moreover, although clearly in contradiction with the green ambitions of the European Union, the EU could decide to produce more coal if push comes to shove.

Halted EU production due risen energy prices

As mentioned, gas and oil imports are not yet subject to outright sanctions in the EU. Yet energy prices have jumped (Figure 7) upon uncertainty over the future of Russian energy imports in the EU, a ban on Russian oil in the US, and a voluntary drop in purchases of especially Russian oil by European buyers, amongst other things -data on the coal price is from before the announcement of the ban on Russian coal imports. Despite a drop since their war-peak, energy prices are still higher than at the start of the year and just prior to the start of the war. These higher energy prices, in turn, have led to production cuts of energy intensive products in the EU such as aluminium, zinc, steel, ceramics, concrete, bricks, glass, asphalt, paper and fertilizers - especially large gas consumers had also already taken a hit from surging prices last year. This will not only hamper the production of these specific products, but also frustrate downstream production for which these goods serve as inputs.

The disruptions will certainly hit the construction sector, a sector that was already dealing with lengthy delivery times for several inputs. Furthermore, higher input prices will likely hit margins of construction companies and project developers, raise consumer prices of construction projects, and lead to delays and cancelations of projects.

Other sectors that will see the costs of their non-energy inputs rise are for example machinery and equipment, consumer  appliances, and transportation due to less steel and aluminium production. Meanwhile, less production of paper -or higher prices- will be felt across many sectors that need packaging material. And finally, lower fertilizer production in the EU adds to less supply from the warzone countries (see below), impacting especially the agricultural sector.

EU dependence on chemicals, fertilizers and wood imports

Apart from energy commodities, the EU quite extensively depends on the warzone for certain chemicals, fertilizers, certain types of wood, rubber and several types of metal.

Chemicals include carbon (black) which is used, to strengthen rubber in tires for example, and ammonia which is mostly used to produce fertilizers. Combining the former with the EU’s dependence on Russia for the ‘end product’ rubber (12% import market share), there could be an impact on the car sector. That said, based on world market shares it should not be too difficult to shift to other suppliers if importers are ready to pay a somewhat higher price. Limited availability of fertilizers due to lower imports from the warzone and less production in the EU poses a challenge for agriculture and hence ultimately the food sector. Meanwhile, Russia is the world’s largest exporter of lumber and is an important supplier of different types of wood for the EU’s construction sector and fuel wood. Although we do not expect any shortages here, due to the wide availability of wood from other parts of Europe, we do expect higher prices.

EU dependence on metal imports

Table 1 also shows a large dependence on the warzone for different metals with in some cases limited diversification possibilities. Should the prices of products mentioned below rise, delivery times are likely to lengthen as it usually takes time to find alternative suppliers. In some cases actual shortages could arise -although it is difficult to get a grip on the timing thereof due to missing details on the size of stocks.

Most vulnerable in this respect are sectors making use of iron and steel, nickel, palladium and aluminium: basic metals and fabricated metal products, machinery and equipment, transportation, computer and electronic products, and construction.

Iron and steel

To illustrate, more than 50% of EU imports of pig iron -used to make steel-, ferrous ore products, semi-finished iron and non-alloy steel products, and waste from iron and steel production comes from the warzone. Especially for pig iron and waste there are few alternatives as the warzone has a world export market share of respectively 63% and 52%. But also for the ferrous and semi-finished products diversification will be difficult, given the world market share of 30% and 40%. Fewer steel imports from the warzone adds to pressure in the market from less production in the EU itself due to the risen energy prices. Iron and steel have a broad range of destinations. They not only end up in the basic and fabricated metal industry, but also construction, production of machinery, equipment (that obviously includes ‘military’) and automotive.

Nickel and aluminium

Another important metal with availability at risk is nickel. Nickel is essential for rechargeable batteries, medical devices, automotive, and electrical and electronic equipment. It is also used in construction and to make stainless steel. The EU gets 90% of its nickel mattes’ imports from the warzone and 20% of its unwrought nickel. Russia is in the top three of global exporters of nickel -playing musical chairs with the US and Canada- and has a global export market share of 15%. Moreover, it’s a very tight market, especially due to nickel being required in rechargeable batteries, with ever growing demand due to the world’s push for electrification. Hence it is likely to be challenging -at best- to replace nickel imports from Russia and will for sure induce higher costs. With regards to aluminium, Russia is the steady number 2 exporter in the world, with a market share of 10%. Some 12% of EU imports of unwrought aluminium is sourced from Russia. Fewer aluminium imports from Russia adds to pressure in the market from less production in the EU itself due to the risen energy prices. Aluminium has a broad range of applications and is used for, for example, wires and cables in electrical equipment, in construction, transportation, machinery and equipment and electronic products, e.g. consumer appliances.

Palladium and platinum

The final metal we will highlight is the rare metal palladium. EU import dependence on Russia is 27%, with Russia having a world export market share of 23%. Palladium is a by-product of nickel and platinum mining, amongst others, and hence it is tough to ramp up production. In other words, the EU is both very dependent on Russia and it won’t be easy to get a grip on alternative supplies -at least not at favourable costs. Importantly, palladium is used as a catalytic converter in cars: in both gas engine cars to reduce the emission of polluting gasses and as a catalyst in hydrogen fuel cell vehicles. It is also used in multilayer ceramic capacitors and hard disks, which in turn can be found in laptops and phones for example. Other uses of palladium are in sensors, chips, surgical instruments and dentistry. For most applications there are alternatives such as platinum, although opinions on the quality of substitutes differ. Currently, the EU gets 9% of its platinum imports from Russia, and the latter’s world export market share is 7%. Yet, if palladium is being replaced by e.g. platinum, clearly the price of the latter would likely explode as well -unless the world’s largest platinum producer South Africa more or less doubles its platinum production.

To sum it all up

So, in short, the EU -and also the world- depends heavily on Russia, Ukraine and Belarus for several key inputs to its industrial sector. Among those commodities are gas, oil, iron and steel products, nickel, palladium, several chemicals and aluminium. Combined, the products in table 1 only account for some 1% of EU GDP. Yet their value alone does not give the full picture of their importance to lengthy industrial value chains -and food security as far as the agri-related commodities are concerned.

Gas and oil are still flowing, but a sudden stop in Russian gas imports would clearly have significant ramifications for the entire industrial sector. Risen energy prices have already curtailed EU production of energy intensive products. Meanwhile, halted or limited inflows of the non-energy commodities certainly has an impact on the price of these products and lengthens delivery times, which will be felt by multiple industrial subsectors.

Topping the list of most exposed sectors are basic metals and fabricated metal products. Thereafter we find construction, chemicals, coke and refined petroleum products, wood and paper, machinery and equipment, and transport equipment with more or less the same impact score. Whereas risen energy prices have a higher impact on some, commodity shortages and higher prices of non-energy goods are more problematic for others.

Second order effects via non-EU countries

Apart from vulnerabilities due to direct trade links between the EU and the warzone, the EU will likely also be impacted via trade with third countries. In this respect, vulnerable product groups are motorcycles, electronic circuits, batteries and electronics and electrical machines.

To get a feeling for second order effects that run via non-EU countries, we adopt a two-step approach. First, we look at the product categories for which the European Union is not self-sufficient. Unfortunately, it is hard to find any consumption data on this level of detail, so we look at the average ratio of imports to exports over the last couple of years. Second, we filter the data to exclude product groups with a trading volume smaller than EUR 1bn. Third, we have excluded the goods that already popped up in the analysis of direct trade links between the EU27 and Russia, Belarus and Ukraine.

The second step is to look at whether these products -are likely to- consist of inputs coming from the warzone and/or include inputs which have experienced large price rises due to the war. Due to the globally intertwined supply chains and data gaps in this respect we have to resort to proxies in some cases. We start by listing products for which the warzone countries have a significant world market share. The larger their combined market share, the larger the chance that producers depend on the warzone countries. And even if producers don’t rely on the warzone themselves, they are likely to be confronted with price increases if manufacturers in other countries start looking for alternatives for their inputs from the warzone. For products where the warzone countries have a combined world market share above 10%, we check whether these products are commonly used in the production process of the goods in table 2.

We also have to take into account whether the dependency relies on goods and commodities from Russia or Ukraine. China, for example, has not yet joined the west in imposing sanctions on Russia, and thus for now Russian goods will continue to flow to China. For Ukraine it is different, however, given that production has (partially) come to a standstill.

Some of the product groups listed in table 2 are vulnerable due to the current sanctions or the production fallout in the warzone. This mainly holds for motorcycles, electronic circuits, batteries and electronics and electrical machines.


Motorcycles production is dependent on long, optimized supply chains and is therefore vulnerable to any disruption whatsoever. Moreover, most new motorcycles are packed with chips (see below) and other electronics (which were already in short supply before the war started!) and are built using steel, aluminium, plastics and rubber. Russia is a global player when it comes to steel and aluminium production, but China as well. Japan depends on imports when it comes to aluminium and articles thereof, yet has a major steel industry itself.

Electronic circuits and diodes

(Electronic) circuits and diodes are mostly made of purified silicon. Silicon is the second most abundant element on earth after oxygen, so silicon is not the constraint for circuits. The production process also requires an inert gas, for which neon, krypton and xenon gases are often used- in fact, these gases are said to be essential for the semiconductor manufacturing industry. With some 70% of world supply, Ukraine is the world’s largest producer of the required purified form of neon gas. It also supplies respectively 40% and 30% of global demand for krypton gas and xenon gas. Two major Ukrainian producers of purified neon gas in Odessa and Mariupol have already halted production. Meanwhile, Russia is a major player when it comes to the production of the crude version of neon gas, given that the latter is a by-product of the steel industry. China, with its large steel industry, is another major player in both the crude and refined production, although it would need to increase its activities to be able to fulfil domestic demand and it is uncertain at what pace it could expand production -China currently also imports neon gas from Ukraine. At the start of the invasion, stocks at major semiconductor manufacturers worldwide were estimated to be enough for some 6 months of chip production.


Batteries are currently in high demand since they pay a vital role in the energy transition. Batteries are mostly made from steel and nickel. We have already touched upon the former above. Especially the latter could prove to be an issue. Nickel is currently in a really tight spot, given that Russia supplies roughly 18% of the worldwide nickel exports and high demand due to the world’s push for electric vehicles. Whilst buying nickel from Russia could be an issue for Japan, for now it is unlikely to be an issue for China, however. Other materials used in batteries, such as zinc, manganese, and graphite are mainly produced in China, whilst again others such as cobalt are produced in Congo, but are directly controlled by China.

Electronics and electrical machines

Electronics and electrical machines will likely be impacted indirectly through a crunch of the already tight market for electronic circuits. Additionally, some of the appliances make use of rechargeable batteries, which in turn are affected by shortages and/or higher prices in nickel markets. Other inputs for these type of products with tighter world supply are aluminium, palladium and steel. But, again, for the time being China -which is the EU’s major supplier of electronics and electrical machines-, need not to be harshly impacted as it is still refraining from sanctioning Russia and is one of the largest global aluminium and steel producers itself.

To conclude, the EU might be confronted with lengthened delivery times or higher prices of some final goods imports from third countries, such as motorcycles and electrical machines. Yet also intermediate imports from third countries such as chips and batteries could become more difficult to get by. This, in turn, could hamper EU production of transport equipment, machinery, and electronic products and electrical equipment.

Conclusion part I

Even though the imports from Russia, Ukraine and Belarus only make up a small share of the total imports and exports of the European Union, it is clear that the war in Ukraine is wreaking havoc in supply chains. The most obvious impact is from higher energy prices, and maybe, if sanctions escalate, an outright energy shortage. Sanctions on gas imports are the most likely catalyst for such a crisis, whilst oil and coal imports are easier to replace.

As we will show in the second part of this publication, Germany and Italy are worst suited to deal with such a crisis because of their relatively large industrial sector and heavy reliance on Russian energy, gas in particular. France and Spain on the other hand, are better equipped to deal with such a crisis, although it needs to be said that no country will be left unscathed.

But it’s not just energy that is posing a serious threat to supply chains. As we have shown in the report, there are plenty of other materials and products, such as nickel, palladium, iron, wood and neon (and agri-commodities of course!), that threaten supply chain disruptions in some industries, especially in the short run as it takes time to find supply elsewhere. Some supply chains will be directly impacted through their dependence on Russia, Ukraine and Belarus, whilst others may be impacted indirectly, through second order effects.

Part II: Which member state is the most vulnerable?

In the second part of this publication, we compare the exposure of the five largest EU economies to distortions caused by the war. We find that the German economy is most exposed, followed by the Italian economy.

Direct trade linkages between member states and the warzone

Just looking at the macro picture for the EU27 might understate some of the problems in specific member states. Since, even if there is a surplus in timber in Poland for example, that doesn’t necessarily mean that that surplus can be exported to Spain easily if the infrastructure isn’t there. Additionally, it would be naïve to assume it can be done at a similar price and ease. As such it is useful to zoom in on member states to see for what goods they rely on the warzone the most.

To compare member states we adopt a similar methodology as we did to create table 1 for the EU 27, but use z-scores to compare the relative vulnerability for the five biggest economies in the EU. Table 3 presents the relative vulnerabilities related to non-energy products for which at least one of the five large member states strongly depends on the warzone, via direct trade linkages. Given the importance of energy security we will dedicate a separate section to the reliance on Russian energy. The products in table 3 are ranked based on the combined z-scores of the member states for that product group.

Semi-finished products of iron or non-alloy steel top the list, due to Italy’s strong links with the warzone in this respect. Maize, sunflower-seed and oil, and pig iron are other products that stand out.

Out of the five largest member states, Italy seems most exposed to the war through direct trade linkages with the warzone. It relies heavily on the warzone for pig iron and semi-finished products of iron or non-alloy steel. Some 84% of its imports of the former come from the warzone and 77% of the latter. Italy also gets 82% of its ferrous products imports from the warzone, yet the (net) trade value of this category is substantially smaller. Finally, its dependence on warzone sunflower seeds and oil stands out.

Spain is relatively dependent on the warzone for agri-commodities, like maize and sunflower seeds. Respectively, some 32% and 66% of Spain’s imports of these products comes from the warzone at relatively large net-volumes. It also substantially relies on the warzone for pig iron and ferrous products.

The Netherlands is especially dependent on the warzone for ‘maize or corn’. Roughly half of Dutch maize/corn imports are from the warzone. This could severely impact the price and availability of animal fodder, as is evident from the fact that Dutch farmers have already begun to hoard animal fodder.

For Germany, the biggest vulnerabilities (next to energy) are unwrought nickel and copper, metals that are vital to German industry. Roughly 45% of Germany’s nickel imports and 24% of its copper imports come from the warzone.

France seems least vulnerable to the war-induced supply crunch. Yet it is exposed to a halt in oilcake imports; oilcake can be used as fodder and fertilizer.

Energy dependence of member states on Russia

In order to gauge the vulnerability of European countries to a potential collapse in Russian energy exports, we have gathered data on the consumption, trade and domestic production of oil, gas and solid fossil fuels. Based on this data, we can compute the share of energy consumption for which alternative sources would need to be found if imports of Russian energy come to a halt.

Looking at figure 8 it is evident that especially countries in Eastern and Central Europe are set to lose in case of an energy boycott. These countries have been able to acquire Russian fossil fuels for attractive prices in the past decades, partially because of the large network of pipelines that run through Eastern and Central Europe. This has given them no incentive to diversify their energy mix or decrease the reliance on Russia. Yet also, Finland, Germany, Italy and Greece get more than 20% of their energy consumption out of Russia, while in the Netherlands it is only slightly less.

Meanwhile, Scandinavian countries rely on Norway for gas and oil imports, whilst they simultaneously have relatively large shares of renewable energy; the Iberian Peninsula relies on Algeria for gas and France but also Belgium are relatively large producers and users of nuclear heat (Figure 9).

As we have argued before in the section on Europe’s energy dependence, replacing all of these fossil fuels will not be easy. Replacing Russian oil and solid fossil fuels may be possible, albeit at a higher price, but replacing Russian gas will not be as easy. Simply supplying more LNG, if this is even possible, will not do the trick in the short run. Whilst some countries, such as Spain, the Netherlands and Italy, have the terminals to convert LNG to regular gas, landlocked countries such as Czechia, but also Germany do not. Currently, the infrastructure is lacking to transport freshly converted gas to those countries and hence those countries are even more vulnerable to a stop in Russian gas imports than others -which explains Germany’s most outspoken resistance to banning such imports. For the full report on Europe’s gas dependency, we refer to this publication.

Importantly, this analysis is primarily focussed on the availability of energy, but even if we don’t get to the point where energy availability is an acute issue, high energy prices impact all countries, whether they are dependent on Russia or not. Especially member states with a large share of gas in their energy consumption such as Italy and the Netherlands have seen their energy bills rise substantially -already last year. Relatively large coal consumers also seem to have a cost disadvantage compared to those consuming more oil. If current prices would be sustained until the end of the year, gas, coal and oil bills would on average be about, 9, 4 and 1.7 times larger this year than in 2019, respectively. Compared to last year, bills would increase less, but still be 1.6 times larger in case of gas and oil and 2.5 times in case of coal.

How about the sectoral composition?

Next to the vulnerability related to certain key commodities and (intermediate) products, the economic impact of the war in Ukraine is also determined by the economic composition of a country. Basically every sector in an economy is impacted by the higher energy prices, but some are more than others3. Additionally, some sectors rely heavily on commodities that are currently in tight supply and are unable to transfer some of the higher commodity prices to consumer prices.

Most service sectors are left relatively unscathed, whilst the industrial sector is feeling the pinch. Based on the energy intensity, exposure to commodities for which prices have risen, and exposure to commodities that are in short supply, we have ranked industrial subsectors from most to least likely to be impacted (Table 4).

It needs to be said that while it is clear that basic metals and fabricated metal products rank at the top and textiles at the bottom, there is a broader ‘middle’ group with more or less the same impact score. In table 4 this group ranges from construction to electrical equipment. Whereas risen energy prices have a higher impact on some, commodity shortages and higher prices of non-energy goods are more problematic for others. If we combine the ranking with the relative size of the industrial subsector per country, we can compare the relative vulnerability for the industries of the five biggest Eurozone member states.

Based on their composition, industries in Germany and the Netherlands seem most vulnerable, but the differences are small. The fact that Germany has a relatively large transport and machinery sector for example, is compensated for by the fact that the German food industry is relatively small.

Conclusion part II

The economic fallout of the Ukraine war is felt by the entire EU, with higher volatility in commodity markets, lengthened delivery times and higher prices for a range of commodities. Highly intertwined supply chains make it difficult to isolate the exact economic impact of the war on different member states, but we explored a method to grasp the relative vulnerabilities of the five largest EU member states.

According to our analysis the German economy is most at risk to face headwinds caused by the war due to the composition and size of its industrial sector, and its dependence on Russian energy. Next in line is Italy. Italy’s industrial composition seems slightly more favorable, but it is relatively large as well. Furthermore, Italian industry extensively depends on Ukraine and Russia for certain industrial steel inputs and energy. Finally, Italy is a large gas consumer, and hence relatively more impacted by the increase in energy prices so far.

Tyler Durden Thu, 04/14/2022 - 21:10

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Major typhoid fever surveillance study in sub-Saharan Africa indicates need for the introduction of typhoid conjugate vaccines in endemic countries

There is a high burden of typhoid fever in sub-Saharan African countries, according to a new study published today in The Lancet Global Health. This high…



There is a high burden of typhoid fever in sub-Saharan African countries, according to a new study published today in The Lancet Global Health. This high burden combined with the threat of typhoid strains resistant to antibiotic treatment calls for stronger prevention strategies, including the use and implementation of typhoid conjugate vaccines (TCVs) in endemic settings along with improvements in access to safe water, sanitation, and hygiene.

Credit: IVI

There is a high burden of typhoid fever in sub-Saharan African countries, according to a new study published today in The Lancet Global Health. This high burden combined with the threat of typhoid strains resistant to antibiotic treatment calls for stronger prevention strategies, including the use and implementation of typhoid conjugate vaccines (TCVs) in endemic settings along with improvements in access to safe water, sanitation, and hygiene.


The findings from this 4-year study, the Severe Typhoid in Africa (SETA) program, offers new typhoid fever burden estimates from six countries: Burkina Faso, Democratic Republic of the Congo (DRC), Ethiopia, Ghana, Madagascar, and Nigeria, with four countries recording more than 100 cases for every 100,000 person-years of observation, which is considered a high burden. The highest incidence of typhoid was found in DRC with 315 cases per 100,000 people while children between 2-14 years of age were shown to be at highest risk across all 25 study sites.


There are an estimated 12.5 to 16.3 million cases of typhoid every year with 140,000 deaths. However, with generic symptoms such as fever, fatigue, and abdominal pain, and the need for blood culture sampling to make a definitive diagnosis, it is difficult for governments to capture the true burden of typhoid in their countries.


“Our goal through SETA was to address these gaps in typhoid disease burden data,” said lead author Dr. Florian Marks, Deputy Director General of the International Vaccine Institute (IVI). “Our estimates indicate that introduction of TCV in endemic settings would go to lengths in protecting communities, especially school-aged children, against this potentially deadly—but preventable—disease.”


In addition to disease incidence, this study also showed that the emergence of antimicrobial resistance (AMR) in Salmonella Typhi, the bacteria that causes typhoid fever, has led to more reliance beyond the traditional first line of antibiotic treatment. If left untreated, severe cases of the disease can lead to intestinal perforation and even death. This suggests that prevention through vaccination may play a critical role in not only protecting against typhoid fever but reducing the spread of drug-resistant strains of the bacteria.


There are two TCVs prequalified by the World Health Organization (WHO) and available through Gavi, the Vaccine Alliance. In February 2024, IVI and SK bioscience announced that a third TCV, SKYTyphoid™, also achieved WHO PQ, paving the way for public procurement and increasing the global supply.


Alongside the SETA disease burden study, IVI has been working with colleagues in three African countries to show the real-world impact of TCV vaccination. These studies include a cluster-randomized trial in Agogo, Ghana and two effectiveness studies following mass vaccination in Kisantu, DRC and Imerintsiatosika, Madagascar.


Dr. Birkneh Tilahun Tadesse, Associate Director General at IVI and Head of the Real-World Evidence Department, explains, “Through these vaccine effectiveness studies, we aim to show the full public health value of TCV in settings that are directly impacted by a high burden of typhoid fever.” He adds, “Our final objective of course is to eliminate typhoid or to at least reduce the burden to low incidence levels, and that’s what we are attempting in Fiji with an island-wide vaccination campaign.”


As more countries in typhoid endemic countries, namely in sub-Saharan Africa and South Asia, consider TCV in national immunization programs, these data will help inform evidence-based policy decisions around typhoid prevention and control.




About the International Vaccine Institute (IVI)
The International Vaccine Institute (IVI) is a non-profit international organization established in 1997 at the initiative of the United Nations Development Programme with a mission to discover, develop, and deliver safe, effective, and affordable vaccines for global health.

IVI’s current portfolio includes vaccines at all stages of pre-clinical and clinical development for infectious diseases that disproportionately affect low- and middle-income countries, such as cholera, typhoid, chikungunya, shigella, salmonella, schistosomiasis, hepatitis E, HPV, COVID-19, and more. IVI developed the world’s first low-cost oral cholera vaccine, pre-qualified by the World Health Organization (WHO) and developed a new-generation typhoid conjugate vaccine that is recently pre-qualified by WHO.

IVI is headquartered in Seoul, Republic of Korea with a Europe Regional Office in Sweden, a Country Office in Austria, and Collaborating Centers in Ghana, Ethiopia, and Madagascar. 39 countries and the WHO are members of IVI, and the governments of the Republic of Korea, Sweden, India, Finland, and Thailand provide state funding. For more information, please visit



Aerie Em, Global Communications & Advocacy Manager
+82 2 881 1386 |

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Pharma and biotech’s top R&D spenders in 2023: a $153B total with M&A as a focus

At a time when biotech is still counting its losses as a thaw gradually sets in after the long market winter, pharma has been on a tear. M&A took off…



At a time when biotech is still counting its losses as a thaw gradually sets in after the long market winter, pharma has been on a tear. M&A took off in Q4 as the industry’s biggest R&D spenders either rolled the dice on the back of their blockbuster bonanzas, were forced to address gaping holes in the pipeline in the face of looming patent expirations, or simply had no choice in the face of repeated setbacks.

Bioregnum Opinion Column by John Carroll

For some, it was all of the above.

As a result, Merck flipped into the lead position generally occupied by Roche with an M&A-inflated expense line for research. The companies joined a hunt for new drugs frequently focused on Phase III; premiums are in — heavy preclinical risks are out of favor. The majors followed some well-worn paths into immunology and oncology. And 2024 kicked off with a new round of buyouts and licensing deals.

The sudden end of Covid as a vaccine, drug and diagnostic market left the likes of Pfizer scrambling to convince investors that they had an exciting new plan. (It’s not working so far.) Eli Lilly has become one of the most valuable companies on the planet as obesity drugs go mainstream. Leaders like Takeda kept upping the ante on the R&D budget as the numbers frayed, with all but Pfizer and Bristol Myers Squibb — two of the most deeply off-balance biopharmas — spending more in 2023. Across the board, we saw $153 billion accounted for in R&D budget lines for last year — which would have registered as a record even without the sudden bolus of spending at Merck.

New, promising drugs at biotechs aren’t getting cheaper. And some of the blockbusters pharma has to cover as the patent cliff approaches will demand multiple replacement franchises.

The Big 15 have the money, desire and need to do much, much more in R&D. And all signs indicate that we’ll see more through 2024.

  • Merck
  • Roche
  • J&J
  • Novartis
  • AstraZeneca
  • Pfizer
  • Eli Lilly
  • Bristol Myers Squibb
  • GSK
  • AbbVie
  • Sanofi
  • Gilead
  • Takeda
  • Amgen
  • Novo Nordisk

1. Merck: The BD team is remaking the pipeline, and they are moving fast

  • R&D spending 2023: $30.5 billion
  • R&D spending 2022: $13.5 billion
  • Change: +125%
  • Revenue: $60.1 billion
  • R&D as a % of revenue: 51%
  • R&D chief: Dean Li
  • Ticker: $MRK — up 16% in the past year

The big picture: Merck moved up to the top of the list this year by bundling a mother lode of M&A and drug licensing deals into the R&D expense line. Otherwise, the top slot would have gone to Roche, the traditional top title holder in the R&D 15.

Merck has been parlaying its unchallenged position as number one in the PD-1 game with Keytruda — a drug that earned $25 billion last year but will face a loss of exclusivity as patents start to expire in 2028 — into a host of big deals in 2023. Keytruda, meanwhile, has cruised to 39 approvals, leaving Bristol Myers’ Opdivo in its wake.

Too much commercial success, though, doesn’t translate into unending praise. Analysts had been grumbling for some time that Merck wasn’t doing enough to diversify its pipeline bets. But that’s been changing.

Merck tallied $5.5 billion upfront for its Daiichi Sankyo deal — picking up rights to three ADCs in the move — along with the across-the-slate hikes in costs for clinical programs, bigger payrolls and benefits. There was another charge for the $11.4 billion that went to buying Prometheus and Imago. Prometheus accounted for $10.8 billion of that — one of the biggest deals that followed the $11.5 billion Acceleron buyout in 2021. With $690 million in cash for a group of partners that includes Moderna, Orna and Orion.

Merck kicked off the new year with a $680 million buyout of Harpoon Therapeutics, underscoring its enduring interest in the oncology market. And it’s leaving no popular stone unturned, capturing attention with its expressed interest in GLP-1 combos as the next generation of weight loss drugs takes shape.

Merck CEO Rob Davis also recently made it clear that the pharma giant can afford more $1 billion-to-$15 billion deals, making it a top candidate for more deals in 2024.

Merck’s firepower on the deals side, though, is needed after some deep wrinkles marred the pipeline plan, like the FDA’s back-to-back CRLs for chronic cough drug gefapixant. The data, however, never matched up to Merck’s rhetoric. Failures in Alzheimer’s and depression underscored Merck’s traditional ill fortunes in neuro.

Merck has a few years to plan for its next big thing. They show every sign of remaining focused on the big prize ahead.

2. Roche: 2023 was a tough year. Will 2024 be any better on the R&D side?

  • R&D spending 2023:  $16.1 billion/group — pharma and diagnostics (14.2 billion CHF)
  • R&D spending 2022: $16 billion/group (14.1 billion (CHF)
  • Change:
  • Revenue: $67 billion (58.7 billion CHF, -7% from 63.3 billion CHF in 2022)
  • R&D as a % of revenue: 24%
  • R&D chiefs: Hans Clevers (pRED), Aviv Regev (gRED), CMO Levi Garraway
  • Ticker: $RHHBY — down 4.8% in the past year

The big picture: It’s not easy being Roche. The behemoth has long had a near-omnivorous approach to R&D, buying up and down the pipeline at all stages with a big appetite for oncology ahead of neuro, ophthalmology and immunology. This year, it’s had to contend with the elimination of its Covid revenue, once a big player on the diagnostics side as testing soared during the pandemic. They’ve had to lower investors’ expectations of 2024 sales to an embarrassingly modest level and saw their stock price slide.

It’s surprising they have any growth, given the corresponding knockoff competition building for Lucentis and Esbriet, but you can’t play with market expectations. They’ll kill you every time you’re off.

Roche found some silver linings in the Vabysmo franchise and they’ve been a significant player on the M&A side, scoring the Carmot buyout for $3 billion after bagging Telavant for $7.1 billion back in October, paying a price for something Pfizer all but gave away to Roivant. James Sabry and the BD team, meanwhile, have kept up their globetrotting ways, uncorking a slate of deals for JP Morgan.

Sabry moved to global BD chief at Roche after winning his spurs at Genentech, and he’s been in the game for quite a long time. His résumé includes a stint as a biotech CEO. He’s the doyen of dealmakers and isn’t sitting on the sidelines. Hope grows eternal at Roche, and to keep it growing, Sabry has to stay busy.

“We have in total 12 NMEs that could potentially transition into a Phase III during this year,” CEO Thomas Schinecker told analysts hopefully during their Q4 call.

On this scale, Roche tends to do things on a wholesale basis. So when execs recently unveiled a pipeline review, they mapped 146 programs covering 82 new molecular entities. That can be hard to keep up with. If raw numbers like that were a good indicator of future success, though, Roche wouldn’t have these troubles.

It’s less difficult to follow the culls. That includes a slate of neurology drugs, with several axed from the oncology area. The write-offs include the longtime disappointment crenezumab, which had been partnered with AC Immune in Alzheimer’s. Roche recently handed back crenezumab as well as semorinemab after working with AC Immune for close to an R&D generation. Some analysts gave up long ago.

We’ve also been hearing complaints about a lack of upcoming pivotal clinical data to arouse enthusiasm. But Roche has two big R&D groups at work trying to counter those impressions, with gRED (Genentech) and pRED (the traditional Roche research group) at bat. They now have a straight-up GLP-1/GIP drug in the clinic for obesity, with oral therapies in the works alongside many others. It may be late to the obesity game with the Carmot buyout, but Roche still sees opportunities worth paying for.

Execs are promising to play a better R&D game, prioritizing their best assets and piling on resources. But Roche has always been willing to invest heavily in R&D. Now the company needs to see some clinical cards fall its way. This has not been a patient market.

3. J&J: Under new management, J&J doubles down on the innovative side of R&D. Can they still surprise us?

  • R&D spending 2023: $11.96 billion in meds
  • R&D spending 2022: $11.64 billion in meds
  • Change: Up 3%
  • Revenue: $54.7 billion (pharma side)
  • R&D as a % of spending: 21.8%
  • R&D chief: John Reed
  • Ticker: $JNJ —  up 5.3% in the past year

The big picture: J&J typically has weighed in heavy on R&D, particularly if you add its medtech work to the total. Even after splitting that out, though, it’s still in the top five, hoovering up large numbers of early-stage licensing deals while occasionally nabbing something major in the $1 billion-plus category.

Last year the pharma giant punted its consumer division, following the footsteps of many major industry outfits, and shut down its work in infectious diseases and vaccines. RSV, a highly competitive field now, went out the window with a host of smaller programs and alliances. Its major fields of interest zero in on oncology, immunology, cardio and retinal disorders. And they chipped in close to $2 billion to join the ADC hunt in January with its acquisition of Ambrx.

J&J earned a rep for out-of-the-box thinking in oncology under former oncology R&D chief Peter Lebowitz, striking a deal with China’s Legend that delivered an approved drug — Carvykti — and following up with a $245 million pact to gain worldwide rights to another CAR-T from CBMG, a low-profile Chinese biotech that erupted into mainstream view with its Big Pharma deal.

Now the big questions about J&J focus on its new leadership after Joaquin Duato moved into the CEO’s role in 2022 and John Reed — leaping into his third Big Pharma R&D posting in 10 years, following Roche and Sanofi — takes command of the global R&D side of the company.

They have plenty of motivation to hustle up major new approvals. Stelara — raking in more than $10 billion a year — will see its patent protection erode in the US in 2025, with Europe moving first this year. That will take a few big wins to cover.

But J&J has been making big promises for years. Just a few months ago, it touted 20 drugs in the pipeline that could fuel 5% to 7% growth through 2030. One of the prime candidates is a drug they picked up from Protagonist: JNJ-2113, an IL-23 they believe can bring in blockbuster revenue in immunology. J&J, though, is likely far from done when it comes to new deals. Oncology R&D has been changing rapidly in the wake of the Inflation Reduction Act, with researchers moving up OS as a primary initial focus in Phase III. And it’s going to take a behemoth effort to deliver on these numbers, with likely failures and shortfalls along the way.

Don’t look for J&J to cut R&D anytime soon. They have a big agenda.

4. Novartis: Another streamlining move is wrapping up as Novartis vows to get back to basics in R&D — again

  • R&D spending 2023: $11.37 billion
  • R&D spending 2022: $9.17 billion
  • Change: Up 24%
  • Revenue: $45.44 billion
  • R&D as a % of revenue:  27%
  • Development chief: Shreeram Aradhye, NIBR chief: Fiona Marshall
  • Ticker: $NVS — up 31% in the past year

The big picture: Novartis CEO Vas Narasimhan has been crystal clear about the Big Pharma’s M&A strategy. He’s sticking with the industry sweet spot now in favor: picking up late-stage assets below the $5 billion range. A few weeks ago, that led Novartis to MorphoSys, where they have been partnered for years while distancing themselves from rumors of a pricey Cytokinetics play.

And it springs right off another $3 billion acquisition — for Chinook — that went straight to positive Phase III data for the kidney drug atrasentan, which likely wasn’t much of a surprise inside Novartis.

These days, Narasimhan and Novartis are all about focus. They want to make a deeper impact where they emphasize their priorities — cardio, immunology, neuroscience and oncology. And they also want to be leaders where they are centered, slashing oncology while emphasizing at every opportunity that they jumped out front in radioligands, now a hot commodity in R&D.

Lest anyone forget, Novartis was a pioneer in autologous CAR-T and has held on as it slowly works through all the challenges a cutting-edge technology can inspire.

Narasimhan had been five years before the mast as CEO, after being promoted from development chief, and he’s revising a pipeline strategy away from something he describes now as akin to everything everywhere all at once. Downsizing in 2023 was the big focus, dropping programs, reassigning scientists and promising a swifter pace — a never-ending problem in Big Pharma land. Narasimhan has also been pushing “seamlessness,” projecting a new era of cooperation among scientists and sales.

There’s nothing new about streamlining at Novartis, though. Narasimhan had a billion dollars of cuts in mind back in the spring of 2022. And periodically, the company has been well-known for going in and ironing out budgets. Changes have included an exit for development chief John Tsai, now a biotech CEO, who was replaced by Shreeram Aradhye. Fiona Marshall took the helm at NIBR in the fall of 2022, taking the place of Jay Bradner, who left and later wound up running R&D at Amgen.

The recent cleanup at Novartis included the end of the deal for BeiGene’s PD-1, an area that proved enormously frustrating to Novartis. Their TIGIT pact ended last summer. Phase II for GT005, a gene therapy it picked up in the $800 million Gyroscope buyout, didn’t end well. That program got the axe. And their anti-TGFß antibody, picked up in a small deal with Xoma nine years ago, failed after execs once billed it as a high-risk, high-reward play. Other setbacks include Adakveo, which faced global regulatory challenges following the failure of the Phase III confirmatory study. At the beginning of this year, there was a snafu in Phase III for ligelizumab, once billed as a top asset for peanut allergies.

Warning clouds have also formed around their top-selling drug Entresto, as Novartis fights a battle against the IRA and price negotiations.

The CEO, though, has been able to transition while the stock price was headed up, with a few big drugs driving revenue growth as a struggling Sandoz finally got the heave-ho in a spinout. Their franchise drug Kisqali, for example, is now billed as a $4 billion earner at the peak. As a result, their story has played well on Wall Street. Investors want to see the money and the trajectory. R&D follows sales in priority when it comes to the majors.

5. AstraZeneca: Pascal Soriot never takes defeat lying down. And that stubborn attitude has delivered big dividends as another big R&D test takes shape

  • R&D spending 2023: $10.93 billion
  • R&D spending 2022: $9.76 billion
  • Change: Up 12%
  • Revenue: $45.8 billion
  • R&D as a % of revenue: 24%
  • R&D chiefs: Sharon Barr (biopharmaceuticals); Susan Galbraith (oncology)
  • Ticker: $AZN — up 1.8% in the past year

The big picture: Back in 2018, AstraZeneca reported R&D expenses just under $6 billion. In the past five years, that big line item has grown 85%, and investors have seen the stock price grow 56%.

The R&D leaders at AstraZeneca have changed, but CEO Pascal Soriot has become a longtime fixture at the company. During his stint he took the weakest pipeline in biopharma and turned it into one of the strongest, building a slate of blockbuster oncology franchises while building a research machine based in Cambridge, UK, that consumes about $1 out of every $4 in revenue. He bet the ranch on Enhertu and won, with some analysts bullishly projecting peak sales that will break $10 billion. And he’s kept many of the promises he had to fire out to investors to keep an unwanted Pfizer takeover at bay in the way back when.

So what’s next?

That’s a question that’s vexing quite a few analysts. AstraZeneca is a restless player and the company takes a lot of chances — which means it racks up a lot of setbacks.

A major initiative aimed at protecting its revenue involves its legal fight against the IRA, which AstraZeneca has so far lost. Its next big ADC with Daiichi Sankyo, Dato-DXd, has sparked a running debate on its potential approval and some analysts have doubted if it can live up to the hype following weak PFS results for the TROP2 ADC. Last summer an early-stage GLP-1 went down in flames, unable to take the heat in a kitchen currently controlled by the commercial chefs at Novo Nordisk and Eli Lilly. Lokelma, picked up in a 2015 buyout, got hit when R&D decided to quash two Phase III studies, denting once-big hopes for blockbuster status. And Soriot has recently been forced to finally give up on one old failure when he finally punted roxadustat’s US rights.

Soriot, though, is a weathered player when it comes to setbacks. Every loss is an opportunity to do better the next time, and no one can be more stubborn. You could see that play out over Covid when its vaccine came in for some undue criticism that blighted its impact in the face of the mRNA stars. That spurred some angry responses as execs dug in. But there was an unexpected upside. The giant didn’t have to readjust as the Covid market went pfffffft.

Their next step: A couple of months ago AstraZeneca touted its new vaccine platform, buying Icosavax for $838 million in cash while contributing an RSV vaccine to the pipeline — a field where GSK has made major headway — and a virus-like particle platform that the company intends to build on.

Volrustomig, a PD-1/CTLA-4 bispecific antibody, has been accelerated into Phase III, with Soriot claiming a leadership spot in bispecifics: “Our portfolio of bispecifics has the potential to replace the first-generation checkpoint inhibitors across a range of cancers.”

And that GLP-1 fail? Last November AstraZeneca paid $185 million to gain a Phase I GLP-1 drug out of China’s Eccogene. And now they’re mapping combo studies with some of their other drugs in a play at creating the next wave of obesity therapies with an edge.

Word in biopharma is that Soriot has been devoting a considerable amount of face time to China, where he committed the company years ago. That’s another one of those market promises that has seen plenty of ups and downs. But Soriot tends to win the big gambles more than he loses, and in this industry, seeing it through can be a major long-term advantage.

6. Pfizer: What the hell happened to the Covid king?

  • R&D spending 2023: $10.57 billion
  • R&D spending 2022: $11.4 billion
  • Change: -7.3%
  • Revenue: $58.5 billion (down 42% from $100.3 billion)
  • R&D as a % of revenue: 18%
  • R&D chief: Mikael Dolsten
  • Ticker: $PFE — down 29% in the past year

The big picture: There was one brief, shining moment — or two — when Pfizer could seemingly do no wrong. It had taken a leading role in breaking through scientific barriers to create a new Covid vaccine in record time, harvested a bumper crop of cash and CEO Albert Bourla was the darling of the world’s favored pharma industry.

That was then.

Now, Bourla and his team are having a tough time convincing Wall Street that the company can do even simple things right. They paid $43 billion to bag Seagen and mount a major new campaign on the cancer front, but its stock has been blighted and the focus turned to cost-cutting as revenue plunged. There was fresh humiliation when Roivant flipped a drug it had grabbed from Pfizer for lunch money and sold it to Roche for $7.1 billion a year later. And Pfizer has lost the narrative in convincing investors it can get back to growth.

That somewhat hapless rep was burnished considerably when Pfizer reported that its first try at an oral GLP-1 obesity drug had flopped. It’s still working to move the dial in the hottest new field in pharma, but so is a long list of rivals. Instead of spurring renewed faith in Pfizer, the obesity play turned into another example of getting it wrong, and the focus at Pfizer shifted squarely to downsizing and cost-cutting in acknowledgment of the new reality that set in.

Bourla, though, is committed to pushing the story that a new period of growth lies ahead. And it’s not proving easy.

At the end of February, Pfizer made its best pitch for oncology, underscoring plans to seize the leadership role in genitourinary and breast cancer while making promises for eight-plus possible blockbusters in the next six years. R&D promises, though, are easy to make and hard to keep. Right now, the clarion call in pharma is “show me the money.”

With Covid and the mRNA revolution forgotten like last season’s hit show, there’s an enormous gap now that will be devilishly hard to bridge. But don’t expect anyone at Pfizer to stop trying anytime soon.

7. Eli Lilly: Built for the long term, Lilly’s day has arrived — and they don’t want to let go

  • R&D spending 2023: $9.31 billion
  • R&D spending 2022: $7.2 billion
  • Change: +30%
  • Revenue: $34.1 billion
  • R&D as a % of revenue: 27%
  • R&D chief: Dan Skovronsky
  • Ticker: $LLY — up 126% in the past year

The big picture: Historically, Eli Lilly has been known as a ponderously slow pharma outfit that often slowly cruised its way into Phase III squalls. But that view is so 2017. In 2024, Lilly has rebranded itself as the Big Pharma engine that could, and did, blow out expectations. And if it’s still not quite as nimble as some analysts might like, its ability to deliver in massively expensive late-stage studies for drugs aimed at big populations has made it a darling of quite the investor crowd.

Lilly, for example, was thwarted at getting an accelerated approval for its Alzheimer’s med, but that didn’t really cut expectations, with blockbuster peak sales projections — even as Biogen/Eisai’s Leqembi suffers from dimming prospects as their high hopes are lowered by the reality of limited sales in the face of limited efficacy.

That pales, though, in comparison to the bright rainbow that’s emerged in obesity. Lilly continues to work up manufacturing capacity to meet demand for its new obesity version of tirzepatide, the GLP-1/GIP drug building up the diabetes franchise, where neither of the two leaders has been able to meet a seemingly limitless demand.

Lilly attracted considerable attention for its vow to build out manufacturing capacity ahead of Phase III data for its next-gen oral version, orforglipron, while clearly so unhappy about Novo’s decision to muscle in and snap up Catalent that CEO Dave Ricks is grousing about the antitrust implications of their rival’s move. Lilly, though, has bragging rights to solid pivotal data in a market that is nowhere close to saturation point.

Like a lot of the big spenders on the list, Eli Lilly has been hunting new immunology drugs and plunked down $2.4 billion for Dice last summer. That was part of a full slate of acquisitions, including a pair of small ADC companies. Following yet another hot trend, there was a $1.4 billion deal for Point, which put them into radiopharmaceuticals.

Lilly nabbed two new drug approvals last year as it waited on the 2 big franchises in obesity and Alzheimer’s. That’s a testament to the progress that Dan Skovronsky spurred after the global player made him R&D chief 6 years ago. Eli Lilly execs still may not always be first, in an industry where first can be tremendously important to commercialization. But they’ve been right where it counts big in drug development, and it will take a therapeutic earthquake to alter that perception anytime in the near term.

8. Bristol Myers Squibb: A rough year spurs a cut in R&D spending and some major late-stage R&D deals

  • R&D spending 2023:  $9.299 billion
  • R&D spending 2022: $9.5 billion
  • Change: -2%
  • Revenue: $45 billion
  • R&D as a % of revenue: 20.6%
  • Development chief: Samit Hirawat; Research chief: Robert Plenge
  • Ticker: $BMY — down 18% in the past year

The big picture:  This is a terrible time to try and explain why your Big Pharma company has structural issues that flattened or eroded sales revenue. Pfizer understands that and Bristol Myers got a bad taste of it as its shares slid 18% in the last year.

In both cases, the CEOs stepped up with a transition plan. The companies did some deals, but the late-stage stuff wasn’t cheap. And in Bristol Myers’ case, a new CEO was able to draw a line between its aging franchises and the new arrivals on the market, which saw some growth. The company line now: Just wait for the big pipeline hits to come and give us some time to weather the decline of these legacy drugs and you’ll love what you see.

Investors may not be cheering, but Bristol Myers’ stock did get some traction out of it in the last few weeks.

It was clear well before 2023 arrived that Bristol Myers understood it was facing some of those dreaded headwinds. That 2% drop in R&D spending highlighted the tight rein on spending for what remains a top 10 player in the pharma R&D world. Major figures in R&D, headed by Rupert Vessey, exited the company — in Vessey’s case, later making the flip to biotech at Flagship. And there was an unusual spat with Dragonfly after the pharma giant walked away from its $650 million investment.

New CEO Chris Boerner spotlighted the immediate strategy at hand: M&A. Mirati and KRAS came their way for $5.8 billion. RayzeBio happily landed a premium on top of the premium they had just scored in an IPO, as Bristol Myers followed rivals into radiopharmaceuticals. The $14 billion Karuna buyout put them into a late-stage race on Alzheimer’s, another R&D category that’s been enjoying a renaissance some years after pharma fled the scene.

Boerner’s bottom line in the Q4 review is that the company will steer more into bolt-on plays — rather than big buyouts — and licensing deals like the SystImmune alliance. That sets the stage for a “transition” period that will last until 2028, four long years ahead, when it’s promising “top-tier” results. It will also be looking at lower-priced competition for Opdivo.

Even before 2028, though, BMS will start losing patent protection on Eliquis. They’ve already begun price negotiations with Medicare. And Eliquis earned $12.2 billion in 2022, making it their number-one franchise. That’s left Bristol Myers and Pfizer, both under huge pressure to perform and do more late-stage deals, backing a full-court press in the courts to keep generics at bay.

Bristol Myers has had an active dealmaking arm for years, including in the wake of its big $74 billion buyout of Celgene, which also delivered Vessey to the pharma giant. That was just five years ago after Celgene had fallen on some troubled times. Celgene had been a standout in the licensing field, known for sampling a wide variety of drug plays in the industry pipeline. One of Bristol’s big failures, though, was ceding the high ground in PD-1 to Merck’s Keytruda, which has been buoying its rival for years. Bristol needs major drug franchises to make a difference in this world, and any future setbacks on the leading drugs it’s been buying now will not be welcome by investors.

There is a path forward for Bristol, of course, even as it vows to pay down debt. But it’s fairly narrow, and this field is known for some treacherous results.

9. GSK: After picking up some badly-needed revenue steam, what’s next for R&D?

  • R&D spending 2023: $7.9 billion (£6.22 billion)
  • R&D spending 2022: $7 billion (£5.5 billion)
  • Change: +13%
  • Revenue: $39 billion (£30.3 billion)
  • R&D as a % of revenue: 20.5%
  • R&D chief: Tony Wood
  • Ticker: $GSK — up 28% in the past year

The big picture: Tony Wood is still shy of his second anniversary as the CSO at GSK, but with an RSV vaccine riding high as a new blockbuster franchise and Shingrix looking every bit the long-distance franchise player GSK needs, he has a reassuring revenue foundation to work with. ViiV’s steady work in HIV — where GSK is a majority owner — also offers a confidence-building revenue stream. And the departure of the consumer unit is well into the rearview mirror now.

Its stock has done well, too, up 28% in the past year.

That’s quite a changed picture from the early days of his predecessor, Hal Barron, who came in with deep oncology experience and a big need to demonstrate a broad-based pipeline reorganization to overcome a well-earned rep for underperformance. Wood’s first moves in R&D were largely defensive, giving up some major alliances — such as a partnership with Adaptimmune — that looked shaky.

GSK has made a lot of early bets, and the risks involved naturally portend that many of its deals won’t survive. You can see that in play right through its recent decision to dump a pair of Vir partnerships in infectious diseases.

In their place, GSK has been inking major new development deals with the likes of China’s Hansoh, for ADCs. Oncology, though, is still only a small performer overall. And it’s been a focus for a while.

GSK spent a billion dollars upfront to bag a mid-stage asthma drug at Aiolos in a rare M&A deal. There was also the $2 billion Bellus buyout last fall, with an eye to creating a new franchise for chronic cough. But there’s been a notable absence of any splashy deals at GSK, with a reorg in research that offers GSK’s latest take on improving efficiency.

We’ll see how that goes.

In the meantime, GSK is doing what it can to stir up some excitement for late-stage drugs like depemokimab (again in asthma), camlipixant (from Bellus) as well as the antibiotic gepotidacin for UTIs/gonorrhea. It’s an uphill fight, though, without much megablockbuster razzmatazz built in. But GSK is a careful player.

After getting stuck with the rep for having one of the worst pipelines in pharma, though, reliable and steady progress with a high-profile launch in RSV will suit just fine. At least for now. It’s likely that investors will keep pressing for something big in Phase III, and that could cost CEO Emma Walmsley a considerable amount of BD money.

10. AbbVie: The slow-motion collapse of Humira keeps them focused on the bottom line while growing R&D spending

  • R&D spending 2023: $7.67 billion
  • R&D spending 2022: $6.51 billion
  • Change: Up 18%
  • Revenue: $54.3 billion
  • R&D as a % of revenue: 14%
  • CMO: Roopal Thakkar
  • Ticker: $ABBV — up 18% in the past year

The big picture: As Rick Gonzalez finishes his final run as CEO, he’s able to look back on a year that saw AbbVie complete its revamp period as the long-awaited — long, long-awaited — arrival of generic Humira bites into its old cash cow.

The great split at Abbott that created AbbVie set up a scenario where the company would pull out every stop to milk Humira for every conceivable dollar possible, delivering mega-returns while Gonzalez became the poster child of patent reform. The bottom line for AbbVie’s team: What’s repeated waves of congressional criticism with the stock price on the line?

Now AbbVie is able to boost expected revenue on the two big drugs developed on Gonzalez’s watch — Skyrizi and Rinvoq — with two new acquisitions to feed future sales projections. The buyout of Botox created a new, highly reliable franchise for AbbVie’s commercial team to lean on.

AbbVie is skilled at acquiring and building revenue. It had its eyes set on the ADC drug Elahere when it acquired ImmunoGen for $10 billion. Initially approved in 2022 for ovarian cancer, the drug is now being positioned for earlier lines of therapy.

Less than a week after the ImmunoGen deal was announced, AbbVie was back for a late-stage acquisition with the $8.7 billion for Cerevel’s neuro play. The deal will bring in clinical-stage assets for schizophrenia, Parkinson’s and dementia, as CNS moves back into a warmer phase in Wall Street circles. Both buyouts underscore Big Pharma’s considerable appetite for new products, with premiums in play for de-risked drug programs.

Gonzalez’s departure barely caused a murmur on the markets, which is a testament to his success in delivering for shareholders a secure, long-term rebuild. His legacy is a company with a ruthless rep for shepherding drug revenue while building a big interest in curtailing patents for pharma. But looking only at the numbers, he proved the winner at the company as the game was played during his tenure.

11. Sanofi: Paul Hudson is still out to make a great first impression in R&D

  • R&D spending 2023: $7.09 billion (6.509 billion euros)
  • R&D spending 2022: $7.08 billion (6.503 billion euros)
  • Change:  flat
  • Revenue: $41.3 billion (37.9 billion euros)
  • R&D as a % of revenue: 17.1%
  • R&D chief: Houman Ashrafian
  • Ticker: $SNY — up 2.8% in the past year

The big picture: When Paul Hudson showed up in San Francisco for JP Morgan in January, ready to talk up plans for the road ahead, he noted: “It feels like a lot longer than four years that we’ve been on this journey.”

But Hudson has always been more comfortable sounding like a newly-coined CEO, plotting a turnaround. And in the last few months, he’s played every card in that deck. The announcement late last year that Sanofi is bumping its R&D budget is central to that theme, though the news of its impact on profitability led to a rout of the stock price. And he delights in spotlighting late-stage assets, even though a slate of his early bets failed or have yet to prove themselves.

In what is now standard in pharma, Hudson made what he could out of the news he was spinning out the consumer division. Again, though, investors were less than thrilled by the gambit.

This time around the PR track, Hudson has boasting rights to the recently approved RSV drug Beyfortus, which comes with some big peak sales projections from Jefferies and much, much less from others. We’ll know soon enough if this is a winner or the latest disappointment at Sanofi. And, as always, there’s the Sanofi touchstone: Its megablockbuster Dupixent, which the pharma giant was able to partner on with Regeneron years ago — keeping the franchise fresh and expanding. Dupixent is the cash cow that gives Sanofi the financial strength needed to move ahead.

And that means there’s capacity for more dealmaking.

Not long after the San Francisco appearance, Hudson followed up on his M&A assurances with a $1.7 billion drug buyout, carving out a Phase II drug for a rare disease called alpha-1 antitrypsin deficiency, or AATD. It fits right into the zone for 2024, where pharma can only get positive attention for something within sight of an approval.

Like others on this list, Sanofi’s R&D rep will ultimately rest on its ability to deliver on the 12 would-be blockbusters the company is betting on. That includes three “products in a pipeline“: amlitelimab, frexalimab and SAR441566 (oral TNFR1si). They’re followed by tolebrutinib, lunsekimig, rilzabrutinib, an anti-TL1A in IBD, an IRAK4 degrader and itepekimab for COPD.

Behind it all, Hudson has also been promising to make Sanofi a leader in AI-assisted pharma operations. Sanofi, though, has been promising a makeover in innovation for well over a decade and has done nothing to prove it’s worked beyond staying on track with the megablockbuster it got from Regeneron. One breakout franchise delivered on Hudson’s watch would change that in a heartbeat.

We’re waiting.

12. Gilead: The CEO gambled on big innovation — and often lost. But the wagers keep coming

  • R&D spending 2023: $5.72 billion
  • R&D spending 2022: $4.98 billion
  • Change: +14.6%
  • Revenue: $27.1 billion
  • R&D as a % of revenue: 21%
  • CMO: Merdad Parsey
  • Ticker: $GILD — down 5.3% over the past year

The big picture: Daniel O’Day jumped into the CEO job at Gilead five years ago and hit the ground running. He hasn’t stopped, even though some of his biggest bets have run into brick walls.

That was apparent weeks ago with the news that Gilead would ice its work on blood cancer involving magrolimab, the CD47 drug picked up in a $5 billion buyout back in 2020. Their mid-stage work on solid tumors ground to a halt shortly after.

Rehashing and refocusing their deal with Arcus, putting in significantly more money while axing one of the Phase IIIs, didn’t help.

Gilead’s rep was built around HIV, where it has remained dominant, though more than a bit taken for granted. The old regime’s follow-up — after a cloudburst of cash for curing hep C that quickly dried up — was to buy out Kite and take a pioneering position in CAR-T, which hasn’t lived up to the financial hype that attended its arrival, despite the clear scientific innovation it brought to the field.

The stock was hammered hard in January after Trodelvy — acquired in the 2020 Immunomedics buyout, which achieved blockbuster status last year — failed a Phase III in second-line lung cancer.

But when you raise doubts and see your stock sinking, counter with a late-stage buyout. That’s clearly what O’Day had in mind when he plunked down more than $4 billion to buy CymaBay after the biotech unveiled late-stage data on seladelpar. Gilead bought a would-be blockbuster with a PDUFA date. And that’s a sign of some desperation at a company that badly needs a breakout.

13. Takeda: Moving up another notch on the top 15, as profitability wobbles, Takeda execs are still reaching for the golden ring in R&D

  • R&D spending 2023: $4.93 billion
  • R&D spending 2022: $4.49 billion
  • Change: +10%
  • Revenue: $29.54 billion
  • R&D as a % of revenue: 17%
  • R&D chief: Andy Plump
  • Ticker: $TAK — down 8.4% in the past year

The big picture: Takeda has been aggressively taking chances in R&D right from the time CEO Christophe Weber and R&D chief Andy Plump teamed up to remake the aging Japanese pharma company into a global drug player back in 2015. That meant steadily upping the ante in R&D — now up another slot in this year’s rankings — and investing in deals like the Shire buyout, which gave Plump his base in the Cambridge/Boston hub, along with a big stake in rare diseases.

For Takeda, that mission meant a broad effort to develop a major pipeline, from collaborations through Phase III. More recently, it’s been about concentrating their new work around a pair of key deals, particularly the $4 billion acquisition of Nimbus’ TYK2. It likely wasn’t much of a surprise, but their drug — which also has a $2 billion rider for milestones — cleared a Phase IIb hurdle in psoriatic arthritis.

For Takeda, it’s a clear indication of just how popular it is these days for pharma players to zero in on late-stage therapies in search of relatively near-term approvals.

Want more evidence of that?

Takeda bet $400 million in cash and more than a billion dollars in milestones to gain rights to Hutchmed’s fruquintinib and then was rewarded with an approval for treatment-naive cases of colorectal cancer in the fall. And they demonstrated its continued appetite in the rare disease space with the recent $300 million deal for Protagonist’s late-stage drug rusfertide, designed to treat a rare blood disease called polycythemia vera (PV).

The risks it’s taken on have been readily apparent to Takeda’s leaders, with its decision to drop Exkivity after flunking the Phase III NSCLC confirmatory trial, a Phase II fail for its key metachromatic leukodystrophy program, as well as a decision to drop Theravance as a partner after a seven-year alliance. The late-stage setbacks cost Takeda a $770 million write-down. Add in a loss of exclusivity for Vyvanse in 2023 — a $3 billion blockbuster in fiscal 2022 — and you have the outlines of unsteady performance for the pharma player, with Weber promising to do better in the near term.

Takeda is unusual in the Big Pharma world for winding up its fiscal year at the end of March. In order to do an apples-to-apples comparison, they prepared a summary of their R&D expenses and revenue for all of 2023 for Endpoints News.

14. Amgen: Capitalizing on a history of striking high-profile deals, Amgen stays in the spotlight

  • R&D spending 2023: $4.8 billion
  • R&D spending 2022: $4.4 billion
  • Change: Up 9%
  • Revenue: $28.2 billion
  • R&D as a % of revenue: 17%
  • R&D chief: Jay Bradner
  • Ticker: $AMGN — up 18% over the last year

The big picture: Amgen is a considerable distance from spending on research like the top 10 players in our R&D 15, but it frequently finds ways to box competitively in the biggest heavyweight category. It had done that with KRAS, taking a legit scientific advance that couldn’t quickly move the dial in a major way on the commercial side. That happens a lot in oncology. And now it’s in the spotlight with an obesity drug — branded as MariTide now — with hopes to take on the likes of Eli Lilly and Novo Nordisk.

The chutzpah originates with longtime CEO Bob Bradway, who has parlayed his Wall Street cred as a former banker at Morgan Stanley into major league status with a savvy understanding of the numbers and investors. He skillfully navigated the $28 billion Horizon buyout last year, bagging a lineup of commercial therapies as the company looks for the approaching patent cliff on Enbrel, a reliable blockbuster that has kept the revenue flowing in.

Amgen may not do a lot in M&A or Phase III, but what it does do, it does with style.

To complete the Horizon deal, Bradway had to orchestrate a deal with the FTC to skirt its objections to price bundling, which essentially leaves the pharma company on commercial probation with regular reporting to the federal agency. That took skill and boldness while maintaining the CEO’s rep for delivering on the bottom line. Its stock is up 18% over the past year.

Analysts will be watching carefully to see how Jay Bradner does in the top R&D post after the Harvard prof-and-former-NIBR chief assumes the seat of David Reese, now chief technology officer. Reese seems truly energized in his new role heading up tech, and Bradner is a die-hard research enthusiast who loves nothing better than jumping into conversations about the details of target degeneration.

Amgen is all about message.

15. Novo Nordisk: The longtime diabetes franchise player has a breakout run going in obesity — with vows to stay in front

  • R&D spending 2023: $4.7 billion (32.4 billion Danish Krone)
  • R&D spending 2022: $3.5 billion (24 billion Danish Krone)
  • Change: 34%
  • Revenue: $22 billion (232.2 billion Danish Krone)
  • R&D as a % of revenue: 14%
  • R&D chief: Marcus Schindler
  • Ticker: $NOVO — up 87% in the past year

The big picture: R&D spending as a percentage of sales has edged up a bit in the last few years, but the key driver here is GLP-1, where Novo has capitalized on its first-in-class leadership position in obesity. After decades spent in the shadow of chronic R&D failure, safety issues and a recent swarm of largely ineffective drugs, the obesity field is crushing it. That has swelled sales revenue as semaglutide glowed, so Novo’s research spending has boomed at a fast pace.

Now that the good times are rolling, and Novo already has a well-earned rep as a realistic and committed player in diabetes, which didn’t come cheap or easy, the new player on the R&D 15 is promising to stay out front — no easy task with Eli Lilly gunning for it. Novo has been snapping up new obesity tech at a furious pace, determined to stay out front.

Its one limiting factor here has been manufacturing capacity. Novo can’t satisfy the demand for a drug that is now a staple of public conversation, as the field gets a boost from a wide range of celebrities, including Oprah Winfrey. That’s marketing you could buy, but don’t have to. It’s coming for free.

With uncharacteristic bravado, Novo doubled down by striking a deal to acquire the global CDMO giant Catalent for $16.5 billion, and Lilly has been fuming about the antitrust aspects as CEO Dave Ricks complains that worldwide manufacturing capacity has either been maxed out or is not easily converted from its existing uses.

Novo’s commitment to growing R&D has international implications that far exceed the limits of its home country of Denmark, extending to hubs in Oxford, Seattle and Beijing. Most recently, Novo has committed to boosting its Boston-area research hub. And it’s likely to remain a key player in its dominant fields — unless some other tech can topple the megablockbuster that is remaking this company.

Novo may be at the end of this list in terms of R&D spending, but it has overachieved with its success for semaglutide. It has the capacity to do more and should continue to climb for several years to come as it makes a case for continued growth.

Postscript: Regeneron, with $4.44 billion in research spending — up 23% over $3.6 billion in 2022 — deserves an honorable mention in the competitive 16th spot. This year, Regeneron expects R&D spending to top up at or close to $5 billion. The company’s value has swollen on the success of its high-profile founders, Len Schleifer and George Yancopoulos, who continue to build the company — hitting a market cap in excess of $100 billion with the stock up 29% over the past year. Regeneron will likely find its way into the top 15 at some point, and we’ll be watching for it.

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Spread & Containment

SoCal Industrial Prioritizes Speed, Power and Sustainability 

Movement is key in the SoCal industrial space. Industrial real estate occupies some 200 million square feet of space in the SoCal region, with much of…



Movement is key in the SoCal industrial space. Industrial real estate occupies some 200 million square feet of space in the SoCal region, with much of the activity driven by the Ports of L.A. and Long Beach. The swift movement – not storage – of goods from the port to their destinations, is priority. Currently, the industrial vacancy rate sits at 4%. While the increase in e-commerce during the COVID-19 pandemic caused industrial volume in the region to surge, volumes have declined 30% over the past year, returning to more normal, though still high, levels comparable to 2019.  

Attendees of I.CON West in Long Beach, California, had the opportunity to visit three impressive industrial properties in the SoCal region. The projects by Goodman, Watson Land Company and Bridge Industrial are in three different phases of completion and range in size from 165,000-500,000 square feet. 

The I.CON West group toured a 90-acre site in Long Beach purchased by Goodman, a globally traded real estate company, five years ago. The Goodman Commerce Center Long Beach was previously a Boeing manufacturing center with 100-foot clear heights that made it well suited for the current tenant Relativity, a company that makes 3-D printed rockets.  

Power is a major consideration for tenants in the region. Tenants are also asking for clear heights that are increasingly taller; the typical height in 2012 was closer to 32 feet, but buildings in the area are inching closer to the 40-foot range.  

Environmental concerns are top of mind in California. Long Beach requires a methane mitigation system and Boeing also required a vapor barrier to be added to the site as part of their land use covenant. The area was previously heavily comprised of oil fields, so vapor barriers are common. The state is working toward a 2035 goal of having 100% of new cars and light trucks sold in California be zero-emission vehicles, so sites are considering the current usage and future expansion of EV charging stations. Goodman’s site is equipped with 26 EV-charging stations but has the capability to expand to 100 more, as needs require. 

Watson Land Company’s site in Carson, California, is located in the South Bay, an area that includes many 1980s-era Class B buildings that are being redeveloped to meet modern usage and demand.  

One of the main challenges faced in this area is the heavy clay soil; Watson had to install an underground storm drain system to allow for percolation.  

One of the main advantages of the area is that it’s within the “Overweight Container Corridor” that allows for heavier vehicles – up to 95,000 pounds – to pass through with containers from the port.  

Watson Land Company is pursuing U.S. Green Building Council LEED Gold certification for this site; they were able to reuse or recycle 98.6% of the material crushed from the previous buildings. The company aims for LEED Silver or Gold in many of their buildings in California, part of its early legacy dating to the founding of Watson Land Company in 1912 with a commitment to serve as “good stewards of the land.” 

Another feature of the Watson Land Company’s building: ample skylights – a 3% skylight to roof ratio – and clerestory windows to bring in maximum natural light. 

For the final stop of the tour, attendees visited a former brownfield site in Torrance, California, developed by Bridge Industrial. Bridge Industrial considers their team problem solvers who can tackle sites like this one that require significant remediation. They have transformed the brownfield site into a modern, airy industrial facility with two stories of office space.  

Power, again, came up as a critical concern for tenants. Bridge Industrial used to provide 2,000 amps as the standard but now provides 4,000 amps as the new standard in response to tenant needs. One of Bridge Industrial’s buildings in Rancho Cucamonga (roughly a two-hour drive east from Long Beach) offers 4,000 amps with provisions for additional future service up to an astonishing 8,000 amps.   

With the dual ports and the LAX airport nearby, SoCal is poised to continue its strong industrial presence. Port activity, environmental regulations and evolving tenant demands – including for increasing power capabilities – are critical considerations for developers, owners and investors operating in this bustling region.

This post is brought to you by JLL, the social media and conference blog sponsor of NAIOP’s I.CON West 2024. Learn more about JLL at or

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