As the sector moves toward a future of data-driven technologies, this year’s global life sciences sector outlook tries to answer questions around creating new value, leveraging opportunities, and investing in the future.
Biopharma and medtech organizations are in the fast lane, headed toward a future driven by evolving, data-driven technologies. As organizations strive to make sense of all the data signals, is it time to take a break to refuel and rethink what is being measured? In a rapidly changing world, what metrics really matter?
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To find the next generation of key performance indicators, there are several questions organizations could be asking: What can be done to reduce complexity in the patient experience? What is the next level of performance, and how to get there in the next year? Is there adequate visibility of products, costs, and operations to help make timely, informed decisions? Is there a need to acquire, build, or partner for additional capabilities?
The 2020 global life sciences outlook helps answer these questions and more. As leaders set their sights on the road to 2020 and look to shift their strategic gears, here’s what they can consider:
Leaders should more deeply consider ways to increase value and meaning for all stakeholders. The experiences of workers, customers (patients), and ecosystem partners (vendors, alliances, advocacy groups) are interrelated.
Creating value for patients, care teams, and partners. To create value for patients, organizations can focus on providing a holistic patient experience—mapping all the touchpoints that patients may experience throughout their journey and with their care teams. Building an empathetic solution—such as a “patient hub”—could help patients and caregivers connect digitally and address needs ranging from diagnosis to maintenance. Similarly, medtech companies can work to gain a deeper understanding of the end user, develop more user-friendly devices, and look at ways to offer patient-centered services in nonclinical settings.1
In an era of precision medicine, clinical trials should be representative of the patients who will eventually use a drug or therapy. Efforts are underway to make trials more inclusive and increase participation from minorities and the elderly.2 Stakeholders can look at options such as telemedicine to reduce complexity and provide people with virtual access to clinical trials.
Creating value for the workforce. In the workplace, when conditions, tools, and requirements change rapidly, organizations, systems, and practices should assimilate these changes. To create value for the workforce, life sciences and medtech organizations can look at emerging technologies, meaningful work, and flexible work models. Heading into 2020, leaders will likely look at how jobs can be redesigned and work reimagined around human-machine collaboration, working with machines to think exponentially.
Creating value in the market, tracking discernible change. With a rocky market and talks of recession in many parts of the world, biopharma companies appear to be biding their time to ink merger and acquisition deals. In biotech, ballooning valuations may be getting a reality check,3 but health-related technology companies are now being valued at over a billion dollars, with many reaching unicorn4 status in the last year.5 Medtech has also entered a billion-dollar era, having seen its largest year for multiple billion-dollar deals.6
In 2020, the shift is expected to continue toward rare diseases and treatments for unmet needs. Biopharma is making the move to invest in or acquire companies specializing in gene therapies. Manufacturing is expected to be a key differentiator for gene therapies. Large pharmaceutical companies, contract manufacturing organizations (CMOs), and contract development and manufacturing organizations (CDMOs) are adding capacity,7 either from new facilities, expansions, or acquisitions.8 The demand for additional manufacturing capacity will likely be exacerbated by accelerated regulatory approvals.
Technology investments, either through acquisition or software licensing, will likely continue to play a dominant role in life sciences.9 In addition to compliance, risk management, and product lifecycle management (PLM) software, organizations should look to continue investing in applications to enhance real-world evidence and drug discovery.
The growing demand for personalized medicine and orphan drugs is driving R&D investments in large-molecule products.10 R&D was found to be a source of diminishing return on capital (ROC), especially having fewer assets in the late-stage pipeline and lower potential sales per asset.11 Return on capital could be one of the key metrics that matter for 2020—providing insights for organizations that are considering potential partners and a new understanding of the efficiency of allocating capital under control to drive profitability.12
In the future, smaller companies may ultimately take an increasing share of the market from Big Pharma by developing and commercializing products independently.13
Accelerating R&D using technology. Artificial intelligence (AI) is ushering in a new era of intelligent drug discovery, and the trend is likely to continue in 2020. There has been an explosion of AI startups, and tech giants such as Google have also made advances in AI-driven biochemistry that are expected to lead to new developments.14 Pharmaceutical companies are expected to continue to leverage partnerships.
Drug approval rates have also witnessed a spike. Fast-tracking new drugs is becoming “a new normal,” but there are also concerns over quality, safety, and costs.15
Increasing operational efficiency. The demand for small-volume, personalized medicines is driving operations away from large-scale bulk production to multiproduct facilities. The lens is gradually zooming in on smart factories of the future that may offer digital automation solutions, industrial IoT connectivity, and flexible manufacturing processes.16 With a digitized core, the number of days it takes to release a drug product could potentially be reduced from 100 days to seven.
Data-driven manufacturing is generating more excitement heading into 2020, providing a renewed focus on quality. Companies are being nudged to revisit their approach toward managing the cost of quality and compliance, and businesses are expected to be more agile. With new technologies such as AI and augmented reality (AR), organizations could track productivity in real time, as well as reduce the risk of human error.
Partnering with other players and leveraging outsourcing opportunities are likely to be a huge success factor. Partner expertise could help address manufacturing, supply chain, and distribution challenges. Key outsourcing areas could be cell therapy manufacturing and big data capabilities.17
Innovative financing for innovative therapies. Innovative therapies address unmet needs but typically carry high costs. Gene therapies, for example, are not just being touted as treatments but as cures. However, public and private systems will not likely be able to absorb the prices of these drugs. In 2020, companies are likely to move beyond just selling therapies and enter the business of health care financing—innovating drug pricing and reimbursement.
The commercialization of gene and cell therapies comes at a time of wider drug price scrutiny from policymakers and the public. In 2020, drug pricing, health care expenditures, and market accessibility will likely continue to be the main concerns.18
Digital transformation in biopharma and medtech. Devices and the data they generate are likely to inspire the development of new analytics tools, generating insights that drive personalized, real-time decision-making and improve patient outcomes.19 While medtech companies may consider technology companies as competitors, collaborations may help develop more consumer-friendly devices.20
Both medtech and technology companies will continue to come under consumers’ scrutiny around data, privacy, and security. In 2020, expect the debate on data ownership and ethics to continue.
Marrying innovation with social good. Research shows that corporate social responsibility (CSR) adds value to pharma companies’ corporate financial performance.21 Increasingly, stakeholders, including investors, appear to be scrutinizing pharmaceutical firms’ environmental and social performance. In addition to companies voluntarily taking up initiatives that are beneficial for society at large, some governments are also making CSR spending mandatory. Companies are likely to look at ways, including public-private partnerships, to more closely align CSR with innovation and patient programs, as it will not just benefit them but society as well.
What’ll sell? Worldwide prescription drug sales are projected to have a positive compound annual growth rate (CAGR) of 6.9 percent from 2019 to 2024. Oncology is expected to have almost a 20 percent share of the worldwide market and a CAGR of 11.4 percent by 2024. Over the same period, worldwide orphan drug sales are expected to have double the CAGR of nonorphan drugs, at 12.3 percent. The in vitro diagnosis (IVD) segment is the largest medtech segment globally, accounting for a market share of 12.9 percent in 2018,22 and is expected to remain the number one device area in the foreseeable future.23
What will not sell? In 2020, clouds of uncertainty will loom large over drug pricing, and challenges may come from lower investments in R&D as a proportion of sales (which is expected to drop from 21.6 percent in 2018 to 18 percent in 2024). By 2024, sales worth US$198 billion are at risk due to patent expiries, and a decline is projected for anti-rheumatics (-1.0 percent CAGR).24
As for medtech companies, downstream pricing pressures, nontraditional challengers, stringent regulations, and operational inefficiencies due to industry consolidation are forcing them to implement effective cost-reduction strategies to remain competitive. Future success can depend on being proactive and leveraging recent advances in digital technologies.
To learn more, read the full report: 2020 global life sciences outlook: Creating new value, building blocks for the future.
The Deloitte Touche Tohmatsu Limited's life sciences & health care (LSHC) industry group is composed of more than 12,000 professionals in more than 90 countries. These member firm professionals understand the complexity of today's life sciences and health care industry challenges, and provide clients with integrated, comprehensive services that meet their respective needs. In today's environment, LSHC professionals from across the Deloitte network help companies to evolve in a changing marketplace, pursue new and innovative solutions, and sustain long-term profitability.
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