European pharma market overview

The European pharmaceutical market is attractive due to its size. The European market accounts for almost a quarter of global pharmaceutical sales and is forecast to grow at a compound annual growth rate of four per cent. This presents a compelling opportunity for growth-oriented biotech companies. In this report, a biotech is defined as a pharmaceutical company with a market capitalization of less than $10 billion at the time of European Medicines Agency (EMA) regulatory approval.

Europe's influence on the global pharmaceutical market extends beyond its market size. Its agencies, such as the EMA and national Health Technology Assessment bodies, hold significant sway in regulatory approvals and pricing decisions across other global markets. Securing pricing and patient access within Europe can therefore be pivotal for biotech companies, paving the way for broader global market access.

Choosing an expansion model

A biotech must decide how to commercialize a product in Europe. Among the four expansion models – go-alone, co-develop & co-commercialize, out-license, and sell – the go-alone approach offers the highest potential financial rewards, but also carries the greatest business risk. This model requires the biotech to handle all aspects of commercialization independently, either in-house or through third-party collaborations.

A biotech company's decision to go-alone in the European market will depend on circumstances. Products addressing significant unmet clinical needs can command premium pricing, boosting revenue and overall portfolio value, especially when followed by subsequent launches. A go-alone decision must consider the prospects for the product: the patient population, the prescriber base, and supply chain complexity. Additionally, a stable revenue stream from existing markets outside of Europe can provide the financial security needed for a successful European launch. Ultimately, a go-alone strategy is best supported by a combination of portfolio value, product feasibility, and entity financing.

Since 2017, over 100 biotech companies have navigated the European market with their first product launch. Analysis of these launches reveals a distinct shift in expansion model preferences. While the pre-pandemic era saw a strong inclination towards go-alone strategies, the uncertainty of 2020-2023, marked by the pandemic and subsequent economic volatility, led to a decline in preference for this approach. Biotechs, facing unprecedented challenges, opted for lower-risk options like out-licensing or selling. In 2024, better access to financing, a fall in the costs of development in real terms, and improvements in outsourcing options are reducing the risks associated with go-alone. Data indicates a resurgence of go-alone product launches. This suggests a return to pre-pandemic norms as companies once again set their sights on achieving the rewards from launching in Europe through go-alone.

Choices to consider for go-alone

A biotech needs to establish a business in Europe that can support the launch, whilst staging investments to avoid incurring too much upfront cost.

Key areas to consider include, but are not limited, to:

1. Market access and launch sequencing: Establishing the priority markets and launch sequencing, while considering reference pricing implications, is key to maximizing revenue and enabling patient access across Europe. Additionally, a well-planned launch sequence considers not only the immediate European markets, but also future expansions into other geographies such as Asia and the Middle East. 
2. Commercial readiness: European markets differ from the US. To avoid costly surprises post launch, biotechs should invest early in targeted market research to understand local nuances. At the same time, engaging key stakeholders early will help secure buy-in from payers and key opinion leaders to enable product adoption.
3. Supply chain and distribution strategy: A robust and compliant supply chain is a necessity. Product-specific complexities (e.g., cold chain logistics) and regulatory requirements must be factored in from the start. It is crucial to discuss supply chain strategy early and bring in tax and finance stakeholders to these conversations. This will minimize any surprises or the re-work of strategies.
4. Digital and IT infrastructure readiness: To operate seamlessly in new markets, biotechs must assess the strength of their current systems, applications and infrastructure and plan for quick deployment while maintaining general data protection regulation (GDPR) compliance. Prioritizing GDPR compliance will allow biotechs to mitigate legal and financial risks while building customer trust.
5. Other enabling functions: Setting up finance processes and ensuring regulatory compliance across all aspects of operations is a must. Additionally, outsourcing of non-core functions can provide flexibility and efficiency. Outsourcing will allow a biotech to shift additional resources to strategic priorities.
6. Global tax strategy: Biotechs can optimize their tax structure by analyzing withholding tax implications and exploring the benefits and complexities of offshore intellectual property (IP) holdings. It is crucial to align tax strategy with operational realities, such as considering the impact of IP migration on inventory flows, title transfer, and intercompany agreements.
7. Building a global organization: Strategic choices on location, talent acquisition and cultural integration are essential for success. Choosing locations with strong pharmaceutical ecosystems (e.g., the UK or Switzerland) can attract top talent and optimize operations. Furthermore, there needs to be a focus on streamlining hiring processes to secure initial leadership in a timely manner, as delays in hiring create operational risk. Finally, creating a cohesive global culture, instead of treating international markets as secondary to the home market, is crucial for retaining talent and avoiding duplication of work.