DACH, Ultragenyx

Rüdiger Schulze

I recently saw an announcement for a conference entitled ‘The billion dollar question: to launch or out-license in Europe.’ A few years ago, nobody would even have asked that question. Europe was considered a no-brainer; everybody would launch their new product in Europe as it was considered to be the second most attractive place for commercialising innovations after the USA.

In the past two decades, the share of small biotech companies in the development and commercialisation of pharmaceutical innovation has increased dramatically – particularly for orphan drugs – and many newcomers have successfully established themselves in Europe. But the exit of Bluebird from Europe in 2021 following unsuccessful price negotiations in Germany for their gene therapy Zynteglo, approved for ß-thalassemia, has sent a shockwave through the industry. Even before that, many newly launched drugs failed to reach their commercial targets - particularly those launched by companies who launched a product for the first time, according to a McKinsey analysis. Following higher interest rates, the number of biotech IPOs has dwindled in the last 18 months, and share prices have fallen to an extent that threatens many companies’ existence. It is so difficult today to bridge the gap to profitability that biotechs need to think even more carefully about if, when, and how to approach Europe.

In the past, for most biotechs, ‘Europe’ meant a focus on the five biggest markets, Germany, France, Italy, Spain, and the UK, even though these represent less than 50 percent of the European population. Now, the proposed new EU pharmaceutical regulation demands equal access in every member state and makes full data exclusivity contingent on launching in every member state within two years after marketing authorisation. The introduction of a joint European HTA for ATMPs from 2025 and for all orphan drugs from 2028 has the potential to simplify and accelerate access in small countries that do not maintain their own HTA, whereas it will not make things easier in large markets because the JCA verdict will not be binding for local authorities.

 Similarly, joint procurement can put more pressure on prices but also reduces the number of parties to negotiate with and hence has the potential to accelerate market access.

The complexity of European pricing and reimbursement systems has always been daunting.

The multitude of changes in the EU market access environment increases the insecurity of newcomers and represents a formidable entry barrier, which certainly was not intended by the European Commission. Therefore, it seems likely that more and more biotech companies will make use of distributors: service providers to take care of logistics, market access, marketing, medical affairs, and sales on their behalf in Europe rather than establishing their own operations. This business model, which is already used by many biotechs in Central and Eastern Europe and other geographies that biotechs tend to deprioritise, is now spreading to Western Europe. Unfortunately, these services come at a high price to OEMs.

After 3 to 5 years, the commissions that distributors ask lead to inferior profitability compared to the upfront investment that comes with establishing your own operations. Since it is always hard to sever relations with a distributor and manage the transition period, biotechs should evaluate both options, challenge former best practices in the industry, and forego unnecessary costs. What investment is really needed? Evidence generation is definitely the last place to cut costs, though clinical trials can arguably be run much more efficiently by leveraging new technologies. But do you really need that creative agency? Is that market research really providing insights? When addressing small customer audiences, is the investment in that CRM adding value? Does your headquarters really have to be in Switzerland? Qualified staff and a tax-friendly environment can also be found in the Czech Republic or Poland at much lower costs.

The unmet medical need in many therapeutic areas is still substantial – and it is the purpose and the duty of our industry to address unmet medical needs. Patients in need cannot wait for a change in the interest policy of Central Banks that may revitalise investors' excitement for biotech. And with creativity and flexibility, it is still possible to establish a sustainable business. History will reward bold companies with a competitive advantage over others who hesitate.