Europe’s bound to be less attractive for the pharmaceutical market

May 2024
By Paolo Bozzacchi and Gaia De Scalzi

Guenter (Merck) warns: policies too slow and little venture capital 

With more than 350 years of history, Merck is the oldest pharmaceutical company in the world. The Group, present in 65 countries, despite the enormous difficulties marked by market instability, closed its 2023 accounts with a slight contraction. However, looking at the balance sheet, what stands out is the performance of the Healthcare division, led by Peter Guenter, a member of the executive board who arrived in January 2021. His area has indeed recorded a +8.5% increase in net sales. In addition to having been able to intercept the unmet needs of patients, the strategy of the new CEO has further enhanced one of Merck’s pillars, namely “research and innovation.”

“In the pharmaceutical sector,” Guenter tells The Watcher Post, “increasing productivity in research and development will be decisive, allowing the delivery of new drugs to patients. Just think of the role of Artificial Intelligence. Before his arrival, researching was like finding a needle in a haystack. Literally ten thousand or a hundred thousand molecules were tested, hoping that one molecule would hit the target, and then, thanks to chemistry, the molecule itself could be further improved. With the hope — after the various clinical steps—that it could become an innovative drug, with AI, digital copies of physical people can be created, and treatments with drugs can be simulated, comparing the results with real ones. In this way, research will be less expensive, faster, and more predictive.”

The elections for the European Parliament will take place soon. So, the question arises: from your point of view, how do you see the support of this industry by the European Union in terms of policy and regulation?

“The globalized world, as we know it, is collapsing. Whether we like it or not, that’s what’s happening. The European Union, China, and the United States: there is competition between these blocs for attracting investments. Up to twenty years ago, pharmaceutical companies invested more or less the same amounts in Europe and the United States. Today, they increasingly choose the USA, so much so that the EU lags behind in research and development investments by about 20 billion euros compared to the United States.”

How do you explain this?

“The first reason concerns speed. When a new drug comes to market, American authorities quickly determine the price and reimbursement. Furthermore, very often, the established cost allows companies like ours to reinvest in research and development. If a pharmaceutical company has to choose where to conduct clinical trials, it chooses a country where all this happens quickly and not slowly.”

It makes sense. And what is the second reason?

“The second reason concerns the availability of venture capital. In Europe, there is a lot of basic research, such as university research, which is excellent. However, when it comes to moving from basic research to clinical application, for example, by going through a biotech company, it is much easier to do so in the USA. For example, by going to Boston, or the Bay Area of San Francisco, to obtain Series A Funding. At some point, then, one can also go public, often on the NASDAQ.”

So in Europe, we can say that, to date, there is no suitable ecosystem…

“To be honest, solving this critical issue is not an easy task. Nevertheless, there are European biotech companies that are going against the trend and are listed in Europe. This is to say that financing in Europe is difficult, but not impossible. Returning to the EU, from a policy perspective, I believe that decision-makers should reflect on how to bring back a share of venture capital to Europe, perhaps with tax breaks for those who invest in biotech. But this is a so-called ‘hard nut to crack’.”