European Mid-Caps
Swiss Mid-Caps and Minnows: At the Vanguard of Creativity
In view of the manifold hurdles encountered when attempting to raise capital, Switzerland’s medium capitalized entities and SMEs have grown adept at punching well above their weight. After the giants, Roche and Novartis, some of the larger companies in the Swiss pharma sector like Ferring and IBSA are privately held, and some have developed rather specialized strategies for driving impactful R&D with limited financial firepower.
In view of the manifold hurdles encountered when attempting to raise capital, Switzerland’s medium capitalized entities and SMEs have grown adept at punching well above their weight. After the giants, Roche and Novartis, some of the larger companies in the Swiss pharma sector like Ferring and IBSA are privately held, and some have developed rather specialized strategies for driving impactful R&D with limited financial firepower.
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Both Ferring and IBSA specialize in improving the efficacy and value of products by optimizing delivery forms, and while this sounds a lot like “supergenerics” development, the results often go beyond what would be expected from “supergenerics” players outside of Switzerland. Gilles Pluntz, Ferring’s SVP for Europe-Canada and chairman of the group operating committee, illustrates their strategy with MINIRIN, a peptide which normally needs to be injected, as peptides would usually get destroyed in the stomach. “As injections are typically not patient-friendly, we developed a nasal spray. Then we acknowledged that for children taking a nasal spray every night is not the optimal solution. Therefore, we went back at it again and succeeded in developing a tablet and later a fast dissolving melt formulation which proved to be absolutely the right solution for children,” he proudly recalls. “Given our mid-size, our R&D has to be carefully focused. We spend considerable money on new chemical entity R&D but in comparison to Big Pharma players, this is not a lot, which makes excellent life-cycle-management a necessity for our business model.”
In IBSA’s case, taking the example of their new Tirosint-Sol product, head of Swiss business operations Maleša Ulrico Sidjanski explains how clinical trials have demonstrated that this formulation breaks new ground in that “unlike other forms of levothyroxine, Tirosint-Sol isn’t affected by being taken with food and coffee to the same extent” so is considerably more patient-centric and less disruptive to patients’ lifestyles. “We are generating some early but not yet conclusive evidence that Tirosint-Sol may still be effective even when taken alongside proton pump inhibitors,” he reveals.
Privately-held Helsinn takes a slightly different tack, seeking to leverage their very specific expertise in late-stage clinical development and registration of assets for cancer supportive care. Group CEO and vice chairman Riccardo Braglia explains that their strategy since the Group was founded 40 years ago has been “to work via in-licensing of innovation… we license products which have a proof of concept, having completed phase IIa for example, and develop them through phase IIb and phase III, and then handle all of the work required for manufacturing and regulatory approval… Once approved, we license out the product to our partners around the world for commercialization, with the exception of the USA where we have our own sales organization.”
Given our mid-size, our R&D has to be carefully focused
According to Bragglia, Helsinn has “even had situations where we have developed a product and then handed back rights to the originator after leveraging our expertise in development of cancer supportive care products.” However, as recently as 2016 they have “decided that, based on our experience in cancer supportive care, we can now expand our vision to include the development of therapeutics – drugs to treat the cancer itself. As our first step in this direction, we have in-licensed full rights to Pracinostat, a phase III ready acute myeloid leukemia treatment, from San Diego based MEI Pharma.” At the same time as carrying out this very focused strategy towards R&D, as Helsinn is “looking to get involved in earlier stage innovation,” the Group has taken a rather incongruous step and “incorporated a [USD 50 million] corporate venture fund, Helsinn Investment Fund, based in Luxembourg.”
The less capitalized a venture is, of course, the more its management needs to be creative to ensure the biggest bang for every buck expended. Thomas Tóth von Kiskér, CEO of gastroenterology specialist Tillotts Pharma, argues that, “Pharma and life sciences SMEs are increasingly facing an external context which features significant barriers for smaller players, and where companies without a certain minimum size and financing capacity may find it evermore difficult to compete.” He notes that, “Companies can fill their pipeline with new products, either by in-licensing/M&A, or developing them internally.” When it comes to product development, the average cost of developing a new drug on their own is now far beyond the means of most private SMEs, while the valuations for licensing and product/asset acquisition opportunities have “escalated alongside M&A transactions to dizzying levels, with valuations that don’t necessarily reflect reality,” and as such “it has become extremely difficult – especially for smaller pharma companies – to find opportunities to license or acquire products or companies for a reasonable price.”
The solution, he says, is collaboration and strategic partnerships: “by collaborating with each other, SMEs can cover the whole world or large regions, and either afford the high price-tags to acquire suitable products or jointly develop them. Doing so, they can share risks, costs and profit from each other’s specific expertise, be it in marketing, regulatory or other fields.”
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