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2015 Life Sciences Industry Outlook
Interview with Homi Kapadia
Homi Kapadia, U.S. Life Sciences leader and vice chairman of Deloitte LLP, anticipates what is coming in 2015, including market consolidation, new models of innovation, growth in specialty therapeutic areas, R&D efficiency and the data revolution.
Where do you see the opportunities for growth in your sector?
U.S. life sciences companies operate in a dynamic environment that presents numerous opportunities for growth. To capture these opportunities, companies in 2015 should focus on areas in which they excel, improve areas that are important to achieving their goals, and let go of elements that might be holding them back.
Market reconfiguration and consolidation are driving companies to search for the right scale. This could mean narrowing to a core set of capabilities or therapeutic areas or building them out by acquiring and managing a large portfolio of businesses. Each approach is resulting in an unprecedented level of deal-making in the form of mergers, acquisitions, joint ventures, divestitures, and licensing agreements.1 In addition, emerging markets are fueling the growth of local companies that are expected to shift the U.S.-centric “skew” of the global competitive landscape and open up new M&A opportunities for U.S. companies.
Innovating in specialty (versus primary care) therapeutic areas may drive considerable pharmaceutical revenue growth in coming years. Meanwhile, some biotech companies are moving to M&A and open innovation models as a way to help overcome organic productivity challenges and spur product and market growth. A number of medtech companies are integrating R&D, marketing, engineering, and other disciplines to more effectively connect customer insights with the biodesign process. In addition, some are looking for ways to wrap health care services (e.g., cellular therapy) around their products.
1A conversation with Homi Kapadia, Deloitte Life Sciences,” Pharmaceutical Commerce, October 29, 2014.
What should businesses be mindful of as they plan for growth?
As the health care industry shifts and transforms so, too, must the life sciences sector. In 2015, this may require companies to recalibrate business models and research priorities, and retool commercial practices to better articulate their value proposition. In addition, companies increasingly will need to use real-world evidence to demonstrate a product’s clinical, safety, and economic impact (e.g., comparative effectiveness), and robust data analytics to improve marketing strategies and effectiveness. They should consider M&A transactions to scale up within particular areas of specialization and exit others, and expand into new markets. Organizations also should engage in more proactive risk management and regulatory compliance.
In another key focus area, life sciences companies could improve R&D efficiency, diversify risks and costs and use their human capital better by employing open innovation and other novel development approaches – for example, hosting companies on site or establishing innovation centers that incubate 30-40 companies to broaden future possibilities. In pursuit of innovative new products, they should look to develop patient-centric suites/portfolios of products and services to improve the overall health of their customers. For example, there is growing interest in wearable technologies and sensors to monitor vital signs; digital medicines such as ingestible smart pills with microchips; and novel drug delivery systems.
What’s the next big thing? What markets do you see emerging in the sector?
We see “big data” becoming an integral part of life sciences organizations encompassing the entire value chain. Regulatory compliance and patient safety will become board room topics. Life sciences companies will look to other industries and non-traditional players for disruptive technologies that could be applied to health care and foster product innovation, market expansion, and revenue growth. For example, mobile health (mHealth) is expected to be a valuable partner in health care’s shift towards a patient-centered, value-based delivery model. mHealth has the potential to improve workplace efficiencies, increase patient safety, better coordinate care, facilitate payments, and engage patients.2
Additive manufacturing (AM), often referred to as “3D printing,” also has disruptive potential in health care. AM can spur additional innovation, improve patient access to life-saving devices, simplify and accelerate the supply chain and production process, and achieve considerable savings. The medtech industry already stands at the forefront of this transformative change—medical applications account for about one-sixth of AM market revenues.3
In an era of specialty pharmaceuticals, life sciences companies will evaluate their role with regard to social responsibility and consider the overall impact of their corporation’s reputation.
Finally, given the level of transformation occurring in the overall health care industry, life sciences companies should pro-actively address many aspects of their strategy in order to maximize opportunities for their success.
2The four dimensions of effective mobile health: people, places, payment, and purpose,” A View from the Center, Deloitte Center for Health Solutions, January 13, 2014, http://blogs.deloitte.com/centerforhealthsolutions/2014/01/the-four-dimensions-of-effective-mobile-health-people-places-payment-and-purpose.html#.VEgE_Gd0yUk/.
3 Wohlers Associates, Additive manufacturing and 3D printing: State of the industry, 2013, p. 14. 2Espicom Business Intelligence Ltd., The WorldMedical Markets Fact Book 2012, 2012.
2015 U.S. Life Sciences Outlook
Despite their considerable size and resources, U.S. life sciences companies — like their peers in Europe and elsewhere — operate in a dynamic environment that presents numerous challenges to revenue and market share growth. Six critical issues rise to the top for 2015: Market reconfiguration and consolidation; pricing pressures; health reform and the shift to value; R&D productivity; disruptive technologies; and risk, regulations, and compliance.
2015 Global Life Sciences Outlook
Growth in the life sciences sector — comprised of the pharmaceutical, biotechnology, and medical technology (medtech) segments — is closely tied to economic and demographic drivers that fuel a continual transformation of the broader health care industry. Life sciences companies have demonstrated their ability to survive and thrive amidst recent periods of economic recession, health care spending cutbacks, geographic market swings, and changing population profiles. If history is any indication, 2015 will again test the sector’s ability to adapt in an era of transformation.