Deloitte: A Snapshot of the 2015 Global Life Sciences Outlook

Editor’s Note: Deloitte’s Center for Health Solutions recently released its forecast report on the global healthcare industry in 2015. VCBeat has selected and translated sections covering two key areas: healthcare and life sciences. The report primarily elaborates on the challenges and trends facing each sector. Below is the excerpt related to the life sciences field.

Major Issues Facing the Life Sciences Sector in 2015
The expansibility of life sciences product development requires departmental stakeholders to adopt long-term strategic planning, portfolio management, and market expansion. However, organizations must also prepare for and respond to near-term challenges and opportunities. Deloitte predicts that four major trends in this field will warrant attention in 2015: pursuing innovation and growth, navigating the changing regulatory and risk landscape, leveraging retained earnings to create value for shareholders, and preparing for the “next wave” of challenges. The resulting challenges and opportunities will have a global impact while being market-specific. Read on to learn more about these trends and key considerations.

(I) Seeking Innovation and Growth
Companies in this sector are seeking M&A opportunities for innovation and growth to offset the general decline in R&D productivity. In their response to a rapidly changing market landscape, partnerships and informal collaborations will also play a significant role, leveraging invested capital to develop distribution networks. New insurance and payment models, rapidly shifting consumer demographics, and the explosive growth of technology-driven therapeutic innovations will drive both horizontal and vertical expansion in M&A activity.

(II) Adapting to Evolving Regulatory and Environmental Risks
Regulatory challenges facing the global life sciences sector today include product safety issues, breaches of security and privacy, entanglements in intellectual property (IP), inappropriate marketing practices, and corruption, all of which have placed the industry at the forefront of regulatory scrutiny. Each of these issues can lead to government fines, product recalls, negative media coverage, damage to brand reputation, and loss of revenue or market share. This complexity has driven rapid changes, increased scrutiny, more sophisticated risk monitoring, and the need for coordination across departments and regions. As regulatory authorities and regulations continue to evolve, life sciences companies must demonstrate that they have proactive and comprehensive compliance programs covering their business and clinical operations, including commercial activities, research and development, and supply chain management.

(3) Retained Earnings Create Value for Shareholders
Global life sciences companies are grappling with pricing pressures, generic drug competition, supply chain disruptions, and regulatory constraints, all of which may curb their revenue growth. Meanwhile, rising R&D expenditures, sustained marketing outlays, and increasing overall operating costs could also strain profitability. Nevertheless, these companies intend to leverage retained earnings to create value for shareholders.

Fortunately, improved R&D efficiency, recently approved New Molecular Entities (NMEs), and expanded product pipelines, combined with ongoing cost controls, are expected to largely enhance shareholder equity. Transparency in financial operations, risk management, and process improvements can also bolster shareholder confidence. Furthermore, optimizing the mix of sales, marketing, and market-access expenditures at the local level is critical to increasing shareholder value. However, numerous internal and external forces could derail these efforts, such as price controls, generic competition, and supply chain operations.

(IV) Preparing for the “Next Wave” of Challenges
Life sciences companies are also adjusting their business models in anticipation of the next wave of opportunities to expand their operations. Efforts to control costs are driving a shift toward the more critical pursuit of value-based care (VBC). Moreover, comparative effectiveness research (CER) is becoming a focal point in the therapeutic market. Life sciences companies will need the capability to provide real-world evidence of positive patient recovery outcomes to avoid exceptions and sales losses.

The size and diversity of the life sciences user base imply that a “one-size-fits-all” approach cannot adequately understand and address all their needs, as the industry is exploring a model that requires greater customer engagement. The evolving roles and influence of stakeholders are increasingly calling for a cross-functional, collaborative customer-centric model to effectively engage all key decision-makers.

Adjusting the business model to drive continuous innovation—such as in personalized medicine—and applying technological advancements to healthcare delivery, talent strategies, and ongoing expansion into emerging markets will further help companies adapt to challenges, seize opportunities, and meet the evolving demands of the industry.
2015 Global Life Sciences Outlook

Note: This series is translated by VCBeat under authorization from Deloitte.

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