By Hanno Ronte, life sciences and healthcare partner at Deloitte.
Examining the various go-to-market strategies deployed by emerging biotech companies when launching their first product into Europe reveals how the frequencies of these strategies changed from 2015 to 2022.
Instead of building their own infrastructure, the study European Expansion: How emerging biotechs are exploring the opportunities of out-licencing, found that emerging biotechs are primarily commercialising their products through out-licencing, partnerships or global biopharma buy-outs.
The European market offers a lucrative option to global biopharma and emerging biotech companies. In 2021, Europe accounted for over 20 per cent of the global pharmaceutical market, making it the second largest market behind North America.
However, entering the European market is challenging for emerging biotechs. The healthcare systems are fragmented with different regulatory requirements, country specific health technology assessment (HTA) processes, and health system funding policies which require deep understanding and resources to address.
Drug commercialisation is costly – including launch
There is significant cost associated with launching a drug, from research and development (R&D) all the way through to product launch. In 2022, average cycle times – the time it takes for a new drug to progress from starting clinical trials to approval – was more than seven years for the 20 leading biopharma companies. The average cost of bringing an asset to market was $2.3 billion last year.
Following regulatory approval, commercialising the drug requires management of emerging biotechs to make many new types of decisions. Going-alone involves setting up infrastructure to manufacture, distribute, market, and sell the product. These all come with significant costs. Another choice many companies make is instead to partner with a global biopharma company – through joint ventures or out-licencing agreements. And in some cases, emerging biotechs are acquired instead of pursuing these decisions.
2021 saw the highest number of drugs gain approval
2021 saw 52 new active substances receive approval from the EMA – the highest number of approvals from the eight years that were analysed. This was driven by the conditional marketing authorisation of seven COVID-19 related medicines.
In the past two years, emerging biotechs have launched 42 drugs into the European market. More than two-thirds of these emerging biotechs originated from the USA. Europe has historically been and continues to be a popular next step for American biotechs. From 2007 through to 2017, 75 per cent of new drugs that gained FDA approval also gained EMA approval. Europe has remained a popular next step due to the large commercial potential of the pharmaceutical market.
The power of partnerships
When analysing the EMA drug approval data for emerging biotech companies launching their first drug into Europe, it becomes apparent that there has been a shift in the most popular go-to-market strategy. Instead of companies going-alone and building the infrastructure to launch their drug, they were selling the rights to their products through out-licencing agreements. In 2021 and 2022, more than 40% of emerging biotechs opted for this route with 14 drugs launching via out-licencing agreements. The popularity of out-licencing agreements has grown nine-fold since 2019. In contrast to this, go-alone has stayed relatively constant at a low baseline of two launches annually.
Out-licensing deals benefit biotech execs by allowing them to eliminate drug launch costs – such as manufacturing, sales, marketing, and distribution – and accelerate market entry by utilising the licensee’s capabilities. Both lead to reduced risk which has made these deals a popular choice.
The pandemic disrupted borders, workforces, and supply chains. The attention of contract development and marketing organisations was, understandably, focused on vaccine and therapeutic manufacturing which limited the capacity available to emerging biotechs. As a result, many chose to partner with established global biopharma companies due to the pandemic-related complications.
Since then, other uncertainties have emerged in Europe and globally, including increased inflation and the reduced availability of biotech financing due to the higher cost of capital. The trend towards licensing/partnership or even acquisition is likely to continue in the next two to three years.
Choosing the best strategy
When it comes to commercialising a drug in the most effective way, each emerging biotech requires a specific strategy. The best emerging biotechs are considering three key steps:
Firstly, assess potential – where management agrees on the guiding principles for the European business, and assesses the commercial opportunity, route-to-market options, and associated costs across the European markets.
Secondly consider alternative options – select the most appropriate GTM options using a set of strategic criteria (e.g., investment required, time to value, complexity to manage, resources required), align on the priority factor(s) for decision-making and define the cut-off points for a go/no-go decision.
Thirdly establish a presence – choose the best route to successfully establish presence in Europe, which could either be via a partnership or out-licensing route, or the company choosing to go-alone. Alternatively, the best route could be to allow the company to be acquired by a global biopharma.
