The European Medicines Agency, the drug regulator for Europe, is headquartered in London. The problem is that the U.K. voted Thursday to leave the European Union, meaning the EMA will now have to leave and find a new home. It is one of the countless concerns that affect the pharma industry with Britain’s historic vote to give up on European unity.
Over the warnings of business leaders in pharma and all other industries, U.K. voters by a 52% to 48% margin opted to quit the EU. While the vote is not even legally binding, U.K. Prime Minister David Cameron has said he would do as voters decided. He has pledged to resign.
The financial reaction was immediate and messy. The London FTSE 100 index sank by 8%, the biggest fall in more than three decades, before recovering slightly to trade down 5%. The broader FTSE 250 index has dropped 7.5%. The pound hit its lowest level against the dollar in 31 years touching $1.3236, as investors tried to puzzle through what the vote means for businesses.
While the drops were dramatic, Evercore ISI analyst Mark Schoenebaum pointed out to investors that most major drugmakers derive less than 3% of their revenues from sales in the U.K.
And not all investors were panicked by the decision. Pharma investment specialist Neil Woodford said in a statement “in our view, it is not as negative a development as the market's initial react appears to imply." Woodford, who has backed a breakup of U.K.-based GlaxoSmithKline, acknowledges there are uncertainties and challenges, but thinks the industry faces a lot more than whether the U.K. is a member of the European Union. ”Many of the greatest economic challenges that we face now and in the future, in my view, dwarf the economic issues associated with today’s outcome.”
That is the future but for now, everyone is focused on figuring out how their particular concerns will be affected. Warwick Smith, director general of the British Generic Manufacturers Association and the British Biosimilars Association, in a statement pointed to the benefits that a single European marketing authorization has had for drugmakers and Britain's National Health System by reducing complexity and cost for drugmakers. He raised the possibility that the U.K. would continue to work through the EMA.
“The UK generic and biosimilar medicines industry therefore urges the government to do everything possible to maintain this European marketing authorisation system in the forthcoming negotiations with the European Union,” Smith said.
Global legal experts Dechert parse the concerns in more concrete terms. The firm pointed out that, besides being home to the European Medicines Agency, the U.K. has provided a voice for industry at the EU table that will now be lost.
On a more practical level, Dechert said businesses must figure out what the move means to trade agreements which affect their supply chains, and the tariffs involved. For intellectual property, it said that trademark owners that have relied on an EU approval may lose their protection until they can convert to a U.K. trademark, which will come at additional cost. The vote may affect the future of the “unitary patent,” which was to go into effect when the Agreement on the Unified Patent Court went into force.
Dechert does point out that not all these things have to be figured out immediately. Once U.K. officially notifies the European Council its intention to leave, EU treaties have a two-year time limit for the exit to begin and can be extended if all sides agree. The treaties do not set a time limit for the U.K. and EU to remake its relationship.
As for the EMA, there is little doubt that it will find a new home, even though it just moved into its new building two years ago. Already, officials in Italy, Sweden and Denmark have all expressed interest in taking over as host country, Politico reports.
'Brexit' risks serious side effects for U.K. life sciences