In the past, biotech startups have sought to partner with big pharmaceutical companies. However, the market is changing — in 2019 it may be better to license directly in Europe.
For a US-based pharmaceutical company, the prospect of taking a new drug to market in Europe can be daunting. Many young biotech companies decide to out-license for royaltyor milestone payments instead of navigating the tricky path to commercializing their own product. However, this strategy may be a mistake. Let’s examine why...
Drug licensing in Europe vs. the US
Europe and the US dominate theglobal biotech market(although China and Japan are important growth markets of their own). This trend is not likely to change, a2019iQviareportpredicted that global pharmaceutical spending will exceed $1.5 trillion by 2023 with market leaders in the US ($625-665 billion, up 4-7%) and Europe ($195-225 billion, up 1-4%).
However, the US and Europe have verydifferent requirementsfor clinical trials and new drug applications. Historically, theUS Food and Drug Administration (FDA) has been seen as acentralized consumer protection agency— with the critique that it slows approval with safety considerations. In contrast, theEU European Medicines Agency (EMA)was designed tostandardize commercial rules— with the critique that it primarily preserves commercial interests. There is a debate as to which system approves drugs quicker, a2015 analysisindicates that the US is likely the faster of the two approval processes (304 days as compared to 478 in Europe).
Small companies may not want to invest in two very-different approval processes. Traditionally, licensing has been regarded as a good exit strategy for biotech and small pharmaceutical companies to helpmanage risk, which is why licensing, royalties, mergers and acquisitions are such major drivers of the biotech and pharma industries.
But is European licensing really the best exit strategy for US companies in 2019?
Data Supporting European Launch over License
A2013 analysispublished in the Business and Medicine Report examined companies facing the launch-vs-license dilemma.
Using public data from theEMA databasethe study examined US-based companies who had chosen to market their primary drug in theUS,but were then facing the European launch-or-license decision. From 2003-2013 the study identified 25 companies fitting this criterion, 9 of whom chose to launch directly in Europe and 16 of whom chose to license for royalty and/or milestone payments. The study found that the “launch companies significantly outperformed their licensing peers” and that “launching a drug alone may lead to significant financial reward and success”. To put numbers behind this claim, in a two-year window (one year prior to EMA approval to one year post-approval) the median share price of the launch companies increased by 46%, as compared to 2% for the out-licensing companies.
Now this study had small numbers and a wide range of variation in the companies performances. But it gives an important insight into the benefits of navigating European regulatory structures.
While there are likely many factors contributing to this data, it's possible that we’re simply seeing a direct result of the EU's new centralization. Before 1995 there were15 different national bodies regulating drugs in the European Union. Since the formation of the EU,whatused to be a country-specific launch in Europe has become a centralized review leading to efficient access to Europe’s population of741 million people.
Regardless, the data suggests that the conventional wisdom is no longer true. Biotech companies should strongly consider launching directly in Europe.
Traditionally biotech companies have sought to be acquired by, or partner with large pharmaceutical companies. However, this model is changing. Now companies may have more success going straight to market in Europe.
EPM Scientific has a strong presence in both the US and Europe. We ensure the best talent is in the right place at the right time to help promising products reach the market. Our process is fast, safe, and efficient. If you area USor Asian biotech company considering a European launch let us help you find the right connections. Please feel free to reach out directly at Contact.Us@epmscientific.com.
EPM Scientific is a leading specialist recruitment agency for the Life Sciences industry. We were founded in 2012 to give companies and candidates peace of mind that the recruitment process is in experts hands. Today, we provide contingency, retained search and project-based contract recruitment from our global hubs in London, Berlin, Switzerland, New York and Chicago.
We pride ourselves in keeping our professional network up-to-date with any changes that will shape the future of work or affect the hiring process. Visit our website to discover more invaluable insights, including exclusive research, salary guides and market trends.