The European Medicines Agency offers benefits to small and medium-sized enterprises (SMEs) who are developing medicines for human and veterinary use. The primary aim of the SME initiative is to promote innovation and the development of new medicinal products by smaller companies.
But what exactly qualifies a company as an SME in the EU? This article explores the official definition, how companies can apply for SME status, and the valuable benefits it unlocks from funding opportunities to regulatory advantages. Whether you’re a startup or a growing business, understanding SME classification can be a key step in shaping your strategic direction.
SME definitions
The SME Regulation (Commission recommendation 2003/361/EC) determine whether an enterprise qualifies for SME status. This means that companies are classified according to their size (micro, small or medium) and category (autonomous, partner or linked).
By size
Micro-enterprises are defined as enterprises that employ fewer than 10 persons and whose annual turnover, or annual balance sheet total does not exceed EUR 2 million.
Small enterprises are defined as enterprises that employ fewer than 50 persons and whose annual turnover, or annual balance sheet total does not exceed EUR 10 million.
Medium-sized enterprises are defined as enterprises that employ fewer than 250 persons and either have an annual turnover that does not exceed EUR 50 million, or an annual balance sheet not exceeding EUR 43 million.
- Headcount:
- includes: (covers full-time, part-time, temporary and seasonal staff): employees, persons working for the enterprise who have been seconded to it and are considered to be employees, owner-managers, partners engaged in a regular activity in the enterprise and deriving financial advantages from the enterprise
- not include: apprentices or students who are engaged in vocational training and have apprenticeship or vocational training contracts, employees on maternity or parental leave
By category
The SME Definition distinguishes between three different categories of enterprises (autonomous, partner, linked). Each category corresponds to a type of relationship that an enterprise could have with another. This distinction is necessary in order to establish a clear picture of an enterprise’s economic situation.
an autonomous enterprise
The enterprise is either completely independent, or has one or more minority partnerships with other enterprises (each less than 25%)
a partner enterprise
The enterprise is associated with another enterprise, and you hold between 25% and 50% of capital and voting rights, or vice versa. Also partner enterprise isn’t linked to another enterprise
a linked enterprise
The enterprise is associated with another enterprise and holds >50% of capital and voting rights, or vice versa. A typical example of a linked enterprise is the wholly owned subsidiary
Applying SME status as a pharma company
Applying for SME status with the EMA allows smaller companies to access valuable incentives under the SME Regulation. To qualify, companies must submit an application with supporting documents such as financial accounts, proof of establishment, and details of partner or linked enterprises.
Submission to the SME office:
Application form with following annexes
- the most recent annual accounts (audited, if possible) for the applicant enterprise and any linked or partner enterprise,
- the proof of establishment of the organisation in the EEA
- a chart of the company structure, including any partners or linked enterprises
- partner enterprise: Must include a proportion of partner’s headcount and financial data. The proportion should reflect the % voting rights or capital held (whichever is greater). If partners are linked to other enterprise, this information must also be included in the SME application
- linked enterprise: If enterprise hasn’t drawn up consolidated accounts and the enterprise in which are linked to is also partnered with or linked to other enterprises, add 100% of the data of all the linked enterprises and the pro rata percentage of the partner enterprises
Requests for SME status should be submitted in English. Supporting documents such as annual accounts, annual reports or evidence of proof of establishment can be submitted in any official EU language
If the application meets the SME criteria, EMA will issue the enterprise with an EMA-SME number. At that point the company may benefit from the incentives offered by the SME Regulation.
Maintenance of SME status
SME status expires two years after the date of closure of the accounts on which the declaration has been based. EMA will send reminders for renewal prior to SME status expiry.
To extend SME status, renewal application for SME status should be submitted. Supporting information is required to submit if certain aspects of the company has been changed since initial application, including
- Change in the category type of the enterprise (autonomous, partner, linked) or significant changes in ownership structure (e.g. acquisition, takeover, merger of the applicant or its partner/linked entities)
- SME thresholds exceeded over one accounting period (headcount or annual turnover)
- The company’s SME status has expired and there are one or more years of accounting data missing since the last submission
Regulatory and financial benefits of SME status for pharma companies
SME status provides companies with a wide range of advantages that help ease regulatory and administrative burdens while supporting product development. The benefits of SME status are:
- Regulatory, administrative and procedural guidance from EMA’s SME office including SME briefing meetings to discuss regulatory strategy for product development or to engage in early dialogue with the multidisciplinary team at the EMA.
- Certification of quality/non-clinical data for advanced therapy medicinal products (ATMPs) intended for human use.
- Translations assistance (free of charge) for all EU languages except Icelandic and Norwegian as part of the initial MAA.
- Waiver of the medical dictionary for regulatory activities (MedDRA) licensing fee when registering with EudraVigilance (only for micro- or small enterprises).
- Inclusion in the SME public register. Register promotes interaction between the SMEs, which can be support further partnering and networking between companies. It also gives access to more information and is also source of information for other EU institutions, agencies and member states.
Fee reductions as listed in the table:
Gaining the SME status in the EU offers both financial relief and also regulatory guidance and stronger visibility within the industry. By understanding the definition, application process, and the strategic benefits it brings, companies can better position themselves to grow and innovate in the highly regulated EU market.
Medfiles has supported its clients with regulatory affairs services for over 30 years, working with companies ranging from early-stage start-ups to fully established multinational corporations. We can work with SME-labelled companies developing human and veterinary medicines, providing regulatory support that helps them fully benefit from the incentives available through SME status. Our 40-member expert team supports your products through every stage – from regulatory strategy and initial submission to launch, lifecycle management, and maintenance of established portfolios.
Author: Kirsi Pajarinen
Senior Regulatory Affairs Expert
Kirsi has worked at Medfiles for over 11 years. She is part of Medfiles’ veterinary and human medicines team, where she handles regulatory tasks related to marketing authorisations (MA) including MA applications and lifecycle management for pharmaceutical products approved through centralised (CP), mutual recognition (MRP), decentralised (DCP), subsequent recognition (RUP/SRP) and national (NP) procedures.
