In Vivo: strategic insights for life sciences decision-maker...
By Deanna Kamienski 06 May 2021
During Q1, biopharma merger and acquisition value reached $34.8bn and drew in $35bn in potential deal value (PDV) from alliances...
Europe’s patchwork of reimbursement agencies make it a daunting place for a small US biotech to do business. Traditionally large pharma partners or CMSOs have provided an experienced hand to hold, but as a new wave of gene therapies and orphan drugs get the EMA green light, smaller drug developers are applying innovation to commercialization and choosing to go solo.
> The traditional route to European commercialization for a young US company is to partner up with a large pharma partner that will effectively become that company’s eyes and ears for a share of the profits.
> But with a wave of rare disease and gene therapy companies hitting their stride, there have been some high profile biotechs choosing to take the path less trodden and go it alone.
> So what? There are several barriers for a US biotech to overcome for a successful launch in Europe. In Vivo explores some of the lessons learned so far by come of those companies that have departed from tradition.
The call of Europe for US biotech is certainly enticing. More than 500 million people live in the EU, while the continent has a combined annual health expenditure of $145bn per year according to KMPG’s 2018 Site Selection Report for Life Sciences Companies in Europe. However, the barriers to entry – such as the different languages, many different reimbursement systems and time zone challenges – mean the path to Europe is not without the odd ditch to fall into.
A biotech that specializes in cardiovascular therapeutics, for example, may struggle to roll out a commercialization and market access strategy in the primary care markets alone. Alex Grosvenor, a consultant with the market access organization Precision Xtract, told In Vivo that companies working in this space do need a commercial partner in Europe to put weight behind sales and promotional aspects. “The in-market knowledge and contacts are the biggest factors to making that a success. Primary care markets are very competitive. You need a big infrastructure, particularly with sales and marketing [operations], in place to make that launch a success,” he said.
Investor sentiment for a small US biotech to commercialize alone in the EU would be “’For the love of God don’t do it,’” said David Nierengarten, managing director and head of Healthcare Equity Research at Wedbush Healthcare told In Vivo. “I talk to plenty of investors and plenty of companies, and its nearly universal that a biotech investor would prefer to see a biotech company partner or license out,” he explained. Europe, in particular, is seen to be time consuming and distracting with expensive regulatory approval roll outs and pricing negotiations in each territory. “You’ve got to talk to 10 different people in each country and the general investor sentiment is that it is not a productive use of time in the lower reimbursed environment,” he said.
Investors do not want the distraction. . “European commercialization for a young biotech company that doesn’t have a presence there is seen by investors as a high risk, high cost and low reward proposition,” he said. Adding that the view from investors was often, “’Don’t do it, especially not with my money. Do it with a pharma company’s money.’”
The health care industry is moving away from the “dying” primary care model, Grosvenor said. Around 50% of approvals are now for products with orphan designations, as such industry is seeing a new wave of targeted and personalized medicines that impose a new way of thinking about commercialization.
Grosvenor is working with many gene therapy companies which, by the nature of their products, do not need the kind of scale and infrastructure a traditional marketing roll out would require. “They just have a handful of people in Europe, you probably need a representative in each country, someone that will handle the pricing and reimbursement negotiations and maybe two or three people that will handle the regulatory and sales side of things. It’s on a much smaller scale,” he said.
As a general rule, its easier for these kinds of organizations to commercialize on their own but by extension it means these very specialized biotechs need to have market access expertise in-house. “We have observed gene therapy companies hiring market access experts in the different European countries, people for instance with orphan drug backgrounds who have that very specialized knowledge and they’re now applying it to the next wave of innovation,” said Grosvenor.
Nierengarten agreed that rare disease and cell and gene therapy companies may be the exception that proves the rule. He mentioned Amicus Therapeutics as a “different prospect” for investors. “The differences are even stronger between the US and EU for oncology reimbursement, whereas rare disease therapies are priced roughly the same. There’s more willingness in Europe to reimburse for some rare diseases, and gene therapy might be another example of that going forward,” he told In Vivo.
Innovation In Commercialization
Some US-based biotechs that have proved to be exceptions include Vertex Pharmaceuticals Inc., Intercept Pharmaceuticals Inc. and Alnylam Pharmaceuticals Inc. And a recent example of this independent route to market is the strategy taken by the specialist gene therapy company bluebird bio Inc., headquartered in Cambridge, MA.
Bluebird bio was granted conditional marketing approval in May 2019 by the European Medicines Agency for Zynteglo (autologous CD34+ cells encoding βA-T87Q-globin gene) its first gene therapy, for a subset of patients with transfusion dependent thalassaemia.
In an exclusive interview with In Vivo, Andrew Obenshain, head of Europe for bluebird bio, said that the decision to enter Europe alone was “not only about our first product but the entire portfolio. We see ourselves as a long-term player in gene therapy and want to establish ourselves from the beginning and this requires unique capabilities.”
He continued: “We are developing a market access model for one-time treatment, looking for payment over time based on outcome, which has not been done before. At the same time, our treatment network is also unique.” The therapy will only be provided in a limited number of centers per country. In this unprecedented model the supply chain is integrated, while it is not usually visible as part of the overall model.
“While a partner should bring capital and knowledge, we are conscious that there are some aspects that a partner cannot bring, hence we would rather invest in these areas ourselves,” Obenshain said.
Bluebird bio is currently filing its pricing and reimbursement dossiers, and expects to launch first in Germany, followed by France, Italy, the Nordics and the UK. Obenshain said the company’s investors were “supportive” of the company’s strategy to date, particularly the value-based payment model, but they are still “waiting to see the outcome.”
Making The Decision
Nazira Amra, founder of the consultancy Bee-Spoke Strategy, was Intercept’s vice president of global commercial strategy at the time it launched liver disease drug Ocaliva (obeticholic acid) for primary biliary cholangitis in the EU without a partner. She highlighted the three main considerations a biotech should weigh up before deciding on the solo route:
> speed to cash;
> cost of entry; and
> tax implications.
“A company needs to decide what its appetite is for all of those things,” advised Amra. “What is the cash position of the company at the point in time that they’re making the decision to enter Europe? Does it think that its revenue/profit potential is going to be large enough, and the payback fast enough, for them to be able to fructify cost of entry investments?”
Companies in gene therapy or orphan disease were more likely to successfully roll out a European go-it-alone strategy purely because of patient numbers, said Amra. “You can do it in a very targeted way, and you don’t necessarily have to have a massive presence in every major market. By making strategic choices about which markets to enter, placing only key competencies such as market access and sales in country, you can achieve cost-effective solutions for market entry which will be profitable in a shorter time frame,” she said.
The heady enthusiasm of rare disease and gene therapy companies, buoyed by the significance of bringing life changing therapies, possibly cures, to a new market of patients is intoxicating. But realistic challenges are very apparent.
“It has been a challenge to launch a product and build a company at the same time. And a challenge in realizing that no-one had successfully launched a large-scale gene therapy in Europe before,” admitted bluebird bio’s Obenshain. “With this comes the managing of many steps involved in the technique and payment procedures, since gene therapy is a one-time treatment it does not fit with the current funding methods for medicines. Hence, we are working to recode the system and change the way in which governments think about delivering and reimbursing their therapies. We’re trying to create a new business model for gene therapy.”
In general, “the benefits do outweigh the challenges,” said Amra. “But for them to outweigh the challenges it is about the management of expectations. You get regulatory approval in the US and your product is on the market two days later. It’s a fast turnaround. The uptake curve is slower in Europe due to varying market access timelines. The benefits do outweigh the challenges if you are conservative with ramp up of personnel and manage the size of the organization in Europe from the get-go.”
For bluebird bio the advantages massively outweigh the challenges. The company is realistic about the long road ahead but believes its inroads into the reimbursement system in Europe will blaze a trail for future gene therapies. “Gene therapies are disruptive to a system that is set up primarily to manage chronic diseases. We are at the beginning of this process but believe that this is the right model in order to provide access to gene therapies to those who need new treatment options,” Obenshain said. “Our mission is to lay down a set of tracks on which future gene therapies can travel. We want to create a model now that we can recreate.”
Options And Alternatives
Of course, there are alternatives to solo commercialization for gene therapy companies and biotech. One method is co-promotion using a local distributor or using a large contract manufacturing and sales organization (CMSO) such as Syneos Health. This is an attractive proposition to a young biotech because of the cost structure. It does not carry the cost of the extra headcount needed for a market entry project, with personnel contracts able to be swiftly terminated if regulatory approval is not successful.
However, the barriers to many younger biotech companies of using this strategy are twofold. Firstly, the initial cost outlay to sign the contract is very high. Second, the large multinational organizations find it very difficult to provide their services to small clients when they are set up to deal primarily with large pharma.
One company proposing an alternative solution is Bridgehead Group, a syndicate of 12 specialist service providers including preclinical strategic advisory, regulatory, market access and pricing, and investor relations firms.
Bridgehead manages and co-ordinates the project for its young biotech clients while also promoting that syndicate and its capability to a US audience. Bridgehead is a young company itself, only officially launched at JP Morgan in January and already providing consulting and advisory services for several US clients, many arising from the the BIO convention this year in Philadelphia. The group is the brainchild of Laurence Callow, an experienced pharma and consumer health care industry executive.
“It’s such an unusual thing, where you get such well qualified people who are so brilliant with all that they do and how they do it, and yet coupled with this extraordinary naivety of Europe,” Callow told In Vivo. “Maybe it’s not that surprising; Europe can be complex even when viewed from the UK, as we are experiencing right now! To look at it from San Francisco or Boston is really daunting.”
The Bridgehead Group provides an alternative route to market for young US companies. “Don’t give away your asset, don’t just partner up with a big pharma and take licenced revenues, keep your asset value but don’t try to do it yourself because it is extremely challenging,” he advised.
There is a real need for co-ordinated services, said Callow. Young US firms realize the international potential of their assets but are too busy readying for FDA approval, often with limited funding. “This was the consistent message,” explained Callow. “We asked ‘If we could co-ordinate the planning for Europe, in parallel and on a pay-as-you-go basis, would that be of interest?’ And of course it was hugely interesting to that community.”
Bridgehead’s modus operandi is to engage with smaller clients at an early stage and build a lasting relationship. Callow said this “makes good sense because your advice is most potent” earlier on. Also, this strategy avoids competition at the later stages with large CROs and big pharma. “We aim to be in at the beginning and help with the total planning.”
Callow said his was a unique business model for this community. An operational assessment is provided to the biotech which includes information on clinical planning, the regulatory landscape, patient numbers, competitors and a likely price point for the drug. This gives the company a five-year revenue projection and costs, a profit line and a valuation. “A fledgling company can have a European valuation which is really helpful for them when discussing investment with a VC firm, a private equity firm, or even a big pharma venture fund,” said Callow.
“What people don’t want is big capital investment up front,” said Callow, “particularly when it’s something that’s new. This solution is solving some of the problems that keep CEOs awake at night.”
As companies such as Bridgehead build services and innovators such as bluebird bio apply a no holds barred attitude to the tapestry of European market access, the impossible may start to seem possible. The game is definitely changing for US biotech innovators getting into Europe.
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