In a recent update, the European Federation of Pharmaceutical Industries and Associations (EFPIA) emphasizes the critical challenges faced by biopharmaceutical Small and Medium-Sized Enterprises (SMEs) in Europe. The update focusses on the urgent need for policy reforms to support their future and improve their access to capital. Access to capital is one of the primary hurdles impacting biopharma SMEs, making it essential to address these issues for the sector’s growth and sustainability.

Access to Capital

One of the main obstacles for biopharma SMEs is accessing capital. The current financial landscape is fraught with challenges, such as rising global inflation, high interest rates, and a lack of private funding. This situation complicates the ability of SMEs to secure the necessary funds to develop and bring their products to market.

Preferred funding sources for SMEs include private investment funds, venture capital (VC), and family offices. However, these sources often provide relatively lower amounts of funding compared to alternative financing options. For instance, private placements frequently yield lower funding volumes compared to other alternatives.

The regulatory environment also complicates access to capital. Proposed revisions to the EU Pharmaceutical Legislation, might significantly diminish the incentives for companies to invest in drug development, making it harder for SMEs to secure vital funding. This could result in a potential loss of around 50 out of the 225 expected new treatments over the next 15 years, as many would become economically unviable in Europe.

Regulatory Burden

The regulatory landscape in Europe is fragmented and uncertain. This unpredictability, along with the lack of a stable regulatory system, hinders SMEs’ ability to innovate and compete against regions such as the US and China. Proposed changes to the EU Pharmaceutical Legislation, including adjustments to RDP and the tighter definition of ‘unmet medical need,’ will likely worsen the investment proposition for new medicines and disproportionately affect SMEs.

Skilled Labour

While the discussion does not explicitly detail the difficulties of locating and hiring skilled labour, it indicates that a robust EU industrial and pharmaceutical strategy is vital for fostering a strong research ecosystem. This includes a stable regulatory framework and a supportive intellectual property regime, implying a need for policies aimed at attracting and retaining skilled workers.

A coordinated Competitiveness Strategy for European Life Sciences, proposed by EFPIA, would help create an environment conducive to effectively utilizing and retaining skilled labour within European biopharma SMEs.

Need for Drastic Reforms

To maintain competitiveness with the US and Asia, Europe requires substantial reforms. The ongoing decline in R&D investment in the region—which has resulted in a 25% decrease in investment over the past two decades—must be reversed. EFPIA advocates for a more coordinated and supportive policy framework, which includes clearer funding options, shorter approval times, and simplified processes for accessing public funding.

The establishment of large, specialized European life science guarantee funds, engaging both public and private investors like the European Investment Bank, is recommended to enhance venture capital funding and support SMEs through all development phases. This approach could help retain innovative SMEs in Europe rather than allowing them to relocate to more favorable financial climates in the US or China.

In summary, the regulatory and financial environments in Europe significantly hinder biopharma SMEs in accessing capital and operating efficiently. Drastic reforms are necessary to streamline these regulatory procedures, enhance funding access, and create a more supportive ecosystem for innovation and competitiveness, ensuring that Europe remains a viable hub for biopharmaceutical development. Addressing these challenges is crucial for the future success of biopharma SMEs in the region.