U.S. biopharma companies could face the shock of a $100 million investment when launching their products in Europe.
Many American companies are unaware of the cost and complexity involved in commercializing drugs in the E.U., according to an expert consultant, and don’t realize the extent of the launch costs until it’s too late.
The European market is important for U.S. firms as it makes up more than a fifth of the world pharmaceutical market, putting it second only to North America in terms of size. However, the way that drugs are launched in Europe is very different from the way they are launched in North America.
If biopharma firms opt to ‘go it alone’ and launch their product by themselves in the European Union, then it’s likely to involve an investment of around $100 million, according to Anna Casse, managing partner for Alacrita—a life sciences firm with bases in the U.S. and Europe.
That cost represents the funds needed to chart a course through the patchwork of different national agencies engaged in the reimbursement, distribution, and marketing of products for the European market. With no comparable processes in the U.S., companies don’t realize the cost until they’re well into the process.
Casse commented, “One of the problems you have is that companies don’t really know how much it is going to cost in the first place. They don’t know what they don’t know.”
One alternative to this sort of investment, which could leave businesses waiting up to five years to break even, is to find a large company to license their product to.
However, while this can cut a big bulk of the $100 million cost, companies going down this route often give up 60-70 percent of their product’s value, dramatically reducing the money they can make at the same time as reducing their chance to build an infrastructure for future launches in a new market.
Casse added, “It’s a trade-off between cash and control.”
Something to be considered are the virtues of a ‘third way’ for U.S. companies, which attempts to strike a balance between the two positions.
This would involve companies teaming up with a fee-for-service partner that has expertise of the European market. They’d pay for assistance in charting a course through the regulatory framework of E.U. countries and seeking and hiring the senior leaders they might need to lead their presence on the continent.
However, companies would retain both the control of their asset and its long-term value. It’s estimated that using a strategic partner in this way could shave $25 million off the launch bill, and reduce the value of the product conceded to around 25-30 percent.
Casse said that if one or two companies took this path they could set the trend for this alternative option and lead others to follow.
Given that Bain & Company recently found that almost 50 percent of new drug launches have failed to meet forecasts—and more than a quarter didn’t even manage half of the predicted external revenue—companies will be on the lookout for cost effective launch solutions.
About the Author:
Jessica Foreman is a Durham University graduate specializing in business and lifestyle based writing. She has developed her skills on projects surrounding The British Broadcasting Company, and running a print and online based magazine while at university. She is currently looking to start her Masters in Mobile and Personal Communications as well as broadening her horizons through traveling.
Filed Under: Drug Discovery