It is a general trend for pharmaceutical companies to go overseas, and the proposition of the times behind it is also advancing with the times. Under the new changes, how to re-examine the gold-mining places such as the United States, Europe, and Southeast Asia? Different countries and regions have different market sizes and policies and regulations. How to examine the pros and cons of the market and formulate a more suitable strategy for going overseas? Everything needs to be answered by the industry.

At present, more and more signs show that pharmaceutical companies are no longer just focusing on the "fat meat" of the US market as in the past, and countries and regions such as Europe are becoming more and more important. After being hit repeatedly by the FDA, more and more PD-1s have moved to Europe and been approved for listing. Since the beginning of this year, domestic pharmaceutical companies including Fuhong Hanlin, Qilu Pharmaceutical, CStone Pharmaceuticals, Yifan Pharmaceutical Holding's subsidiary Yiyi Bio, Sinovac Pharmaceuticals, and Junshi Bio have all had their products approved for listing in the European Union.

Obviously, Europe is open to domestic innovative drugs. As the world's second largest innovative drug market after the United States, Europe's drug review and approval is still relatively loose compared to the FDA. Judging from the recent approval results, small indications can be applied for listing through clinical data in China; including large indications such as lung cancer, there is also the possibility of approval when the clinical control group is non-standard treatment. As for the latter, it is almost impossible in the United States.

This also brings new gold-digging opportunities for pharmaceutical companies. In any case, Europe is the second largest innovative drug market in the world, and domestic companies cannot miss this opportunity. The EU market as a whole is also a major player in the global innovative drug market. Not only is the market very mature, it has a number of well-known multinational pharmaceutical companies such as Bayer, Roche, and AstraZeneca, and the acceptance of new biotechnology is relatively high.

According to Deloitte data, from 2015 to 2020, new products launched by biotech have been dominant in the European Medicines Agency (EMA), accounting for an average of 33% of the total number of EMA-approved drugs each year. In other words, Europe is an important market for biotech to launch new drugs. Even American biotech and biopharma will seek to expand in the European market as their important task. Among the biotechs that have expanded to Europe, about 52% are from the United States, followed by Japan or Canada.

Chinese pharmaceutical companies are rapidly joining this camp, especially after the domestic PD-1 encountered obstacles in the US market. Because, compared with the increasingly strict review trend of the US FDA, Europe has shown a different attitude. On September 24, Junshi Bio announced that the PD-1 monoclonal antibody Teplizumab recently obtained two nasopharyngeal carcinoma indications approved by the European Commission. Teplizumab is not the first domestic PD-1 approved for marketing in the EU. Before it, BeiGene's tislelizumab and CStone Pharmaceuticals' sugemalimab have both been approved.

At the same time, Teplizumab will not be the last domestic PD-1 monoclonal antibody approved in the EU. On September 20, Fuhong Hanlin announced that the EMA Committee for Medicinal Products for Human Use (CHMP) has issued a positive opinion recommending that srulizumab obtain a marketing authorization, and recommended its approval for the first-line treatment of extensive-stage small cell lung cancer (ES-SCLC) indications. It seems that Europe is much more relaxed than the United States. On the one hand, small indications for nasopharyngeal carcinoma, such as Tecentriq, can be approved for marketing through clinical data in China; on the other hand, large indications, such as lung cancer, may also be approved if the clinical control group is a non-standard treatment.

The supporting study for the application of slulizumab for small cell lung cancer indications is Astrum-005, whose control group is chemotherapy. In the end, slulizumab beat chemotherapy alone in overall survival (median 15.4 vs. 10.9 months, HR=0.63, p<0.001). However, the current standard treatment for first-line SCLC in Europe is Imfinzi plus chemotherapy or Tecentriq plus chemotherapy. At present, CHMP has given a positive opinion, and slulizumab is about to be approved, which means that EMA has not asked Sluli to re-conduct head-to-head clinical trials.

This also shows that the attitude of EU regulators is more open than that of the US FDA. According to the strict requirements of the FDA, if a drug has been approved for marketing before, and a new drug of the same type is launched later, there is no head-to-head data, let alone competing with other products, and the possibility of even being approved for marketing is very small. For overseas companies, this is a signal worthy of attention. After all, conducting head-to-head clinical trials overseas is not only time-consuming and costly, but also very risky. Of course, relatively loose supervision is not enough to drive pharmaceutical companies to embark on this overseas exploration journey. More importantly, the European market is broad enough.

There is a saying in the market that there are only three worlds in the entire pharmaceutical innovative drug industry, the United States, Europe and others. This is enough to show that the size of the European pharmaceutical market cannot be underestimated. According to IQVIA data, in 2022, the world pharmaceutical (prescription drug) market is estimated to be worth 122.2921 billion euros (128.7736 billion U.S. dollars) at ex-factory prices. The North American market (the United States and Canada) is the world's largest market, with a share of 52.3%, far ahead of Europe, China and Japan. Europe is the second largest market after the United States, accounting for 22.4%. Although European countries are famous for controlling drug prices. Unlike the free pricing in the United States, European countries have been controlling drug pricing through various means and policies since the 1990s. For example, Germany was the first country to adopt drug reference pricing, and it has controlled and lowered drug prices through various mechanisms.

After Germany, European governments began to follow suit and formulated a series of policies to control drug prices, such as price freezes, fixed pricing, profit control and reference pricing. In recent years, due to the Russian-Ukrainian conflict, inflation, and the large consumption of medical insurance in various countries by the new crown epidemic, Europe's control over the pricing of innovative drugs has gradually become stricter. Previously, many companies also failed in their attempts to expand in Europe due to drug pricing pressure. A typical example is Bluebird Bio. After negotiations with Germany and other countries failed to launch its first gene therapy drug Zynteglo in Europe, the company decided to focus its business on the United States.

Strict price control has hurt the development of the European pharmaceutical industry. But this does not actually affect the gold rush of domestic pharmaceutical companies. After all, this is a large market for innovative drugs second only to the United States. From the perspective of drug prices alone, you cannot find a market comparable to the United States. According to BCG analysis, taking the world's 25 best-selling drugs as an example, if the US drug price is 100%, the drug prices in 13 European countries are around 20%, and Germany, where the drug price is the most expensive, is only 26% of the US. Except for the UAE (26% of the US) and Japan (22% of the US), the drug prices in other countries are lower than 1/5 of the US. my country's drug prices are even lower, only equivalent to 1/10 of the US and 40% to 66% of the 13 European countries. In comparison, Europe is still a good choice.

Good drugs should go to a wider world. At the same time, the European market is also making changes. For innovative drugs with high clinical value, explore price protection policies that are in line with their national conditions. For example, France, which has the strictest control of drug prices, also made substantial revisions to some drug price control clauses a few years ago in order to promote innovation, investment and exports. For example, while meeting public health needs, promote some improved drugs (ASMR level 4) to align with EU prices; allow a certain therapeutic area to maintain a higher price as a whole or in part because production costs may cause certain supply problems; fix the price of ASMR5 drugs in the first three years of listing, etc. Whether it is the regulatory environment for innovative drugs or the world's second largest market and the gradually improving pricing environment for innovative drugs, it shows that Europe is a market worth digging for gold.

There are more and more "testers", but it is not a smooth journey. Simply put, although more inclusive, the laws and regulations on drug supervision in European countries are different from those in China, and domestic pharmaceutical companies need to go through an adaptation process when going overseas. The single market of European countries is not large, complex and fragmented, covering 31 market segments including the UK and Switzerland. Biopharmaceutical products need to obtain regulatory approval from EMA and the UK Medicines and Healthcare Products Regulatory Agency (MHRA) to be listed, and some countries (such as Italy) need to obtain approval from local or regional regulatory authorities in their own countries. In other words, pharmaceutical companies cannot achieve drug listing and full coverage in the EU by copying a unified model as in the US market.

Even if pharmaceutical companies obtain EMA approval for listing, they still have to face complex barriers such as drug pricing and market development in various countries. Each market has a different medical system, independent medical technology evaluation and reimbursement process. For example, the British government has strict control over the profit margin level of drugs. In addition to normal social security, Switzerland also has additional medical insurance, and some drugs can be paid for this additional medical insurance. From the perspective of EU member states, each country's medical insurance payment policy is different, and the retail and wholesale markets are also completely different. This means that the real difficulty for pharmaceutical companies to go overseas to the EU lies in the commercialization challenge. Of course, for most innovative pharmaceutical companies, it is difficult to build their own commercialization teams in Europe and the United States like BeiGene, so finding a suitable commercialization model is also a necessary skill.

In this case, borrowing a boat to go to sea has become the choice of most people, relying on the overseas clinical, registration or commercialization capabilities of partners to do better. The premise is that their own technology and product quality must be excellent. In general, although the European market is complex and challenging, this market provides an opportunity to seize huge commercial potential, and also provides a platform for innovative pharmaceutical companies to improve patient outcomes by providing new therapies. For Chinese innovative drugs, every company aiming at the global market is exploring better and more suitable ways and means. There are surprises and risks, but the key is to always stay on the road.

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