October 28, 2019 PAP-Q3-19-CL-029
For emerging US-based pharma and biotech companies that have reached their initial milestones, business growth can best be achieved by expanding internationally. Emerging markets are particularly attractive, because they represent more than half of the world’s population and a significant percentage of the global pharma market.
While many companies are eager to establish a global footprint, the first step in a successful international strategy is to establish a strong presence in an initial — typically, domestic — market. Success in an initial market allows companies to overcome barriers to entry in secondary markets. Establishing internal processes, building an expert team, and generating cash flow in an initial market will increase the likelihood of a successful expansion abroad.
A successful global expansion strategy must focus on the competitive advantages of the company and the value proposition of the products or services in foreign markets.
There are numerous mechanisms for global expansion. Some companies choose to build brick-and-mortar edifices in a new market, while others choose to establish partnerships with domestic firms. The correct approach depends on the risk profile of the biopharma company, the regulatory environment in markets of interest, and the competitive landscape within the product category.
When developing an appropriate globalization strategy, there are four key concepts to consider:
Regardless of whether you are a pharmaceutical company, biotech firm, contract research organization, contract development and manufacturing organization or testing lab — and whether you are partnering or going it alone — the results will depend on how you manage these four factors. Appropriate planning and proper execution with the right people drive success.
It is essential — but often undervalued — to understand the cultures of the markets you are considering. Cultural differences impact buying habits and, in the case of pharmaceuticals, prescription volume. Time and resources must be invested to ensure that the target market is appropriate for your products or services.
For American firms, Western European markets tend to offer the easiest entry, as there are many cultural similarities. Asian countries, on the other hand, present an entirely different cultural landscape. We recommend leveraging experienced professionals to navigate cultural complexities in foreign markets. Having a key influencer on the ground with a detailed implementation plan — regardless of the mechanism used for expansion — is essential.
Every region/country has its own regulatory agencies and compliance requirements. There has been some degree of harmonization among U.S., European, and Japanese pharma regulations, and while many emerging markets are rapidly closing the gap, important differences remain. It is necessary to understand, in detail, the regulatory pathway of the target market. The most effective way to achieve this goal is to invest in human resources — consultants or external hires who have appropriate experience early in the process.
Government policy can heavily influence the operations of foreign companies. It is necessary to understand those policies that impact foreign companies, especially those that protect the domestic biopharma industry to determine the best strategy for expansion. In addition to government finance programs, exchange rates, and permitting issues, there may also be standards that promote hiring domestically and discourage expatriates from establishing businesses. Building robust relationships with government representatives should begin at the earliest possible stage.
If the proper cultural considerations are made, the regulatory pathway is understood, and government policies are supportive, the target market may still not be suitable for your product or service without a well-devised business plan. An understanding of market size, growth rate, penetration rate, intellectual property and trademark protection establishes the foundation of the business plan. There must be a clear sales benefit before making your international move.
Erica Sosnowski is the President of Sosna & Co. She founded Sosna & Co. in 2017, bringing more than a decade of multi-industry leadership, and business and corporate development expertise to life science companies globally. Erica is a motivated executive with multi-cultural business acumen developed through extensive international business experience throughout Asia-Pacific, Europe, and the Americas regions. Educated in Canada, Erica holds a BSc and an MBA.