The challenges faced by pharmas and biotechs in the year to come are well documented — drug pricing regulations, a skittish investing landscape and looming patent cliffs contribute to the shaky ground beneath the industry’s feet.
What can drugmakers do to overcome these hurdles? Analysts and other industry watchers have laid out a roadmap that could help keep the life sciences on track through the difficulties that lie ahead. From dealmaking to embracing technology to improving innovation strategies, here are some of the tactics analysts said could give pharmas and biotechs an edge.
Reinventing the investment playbook
In the harsh market environment of the post-pandemic world, it’s more difficult to realize a return on investment despite booming R&D, according to a report from consulting firm PwC. As competition becomes more concentrated in indications like blood conditions, cancer and infectious disease, PwC recommends that pharmas differentiate their investments and find “white space” where the market is less saturated.
This dynamic is also visible in industry M&A, which has been relatively slow since the beginning of the pandemic. Dealmaking is likely to pick back up again, and the beginnings of that surge could be witnessed last year, according to a report from consulting and professional services company EY.
While oncology has led the way in life sciences dealmaking in the last five years, the intense competition for proven cancer treatments has caused valuations to skyrocket with oncology acquisitions averaging almost 12 times the target company revenue, wrote Subin Baral, EY global deals leader in life sciences.
With that number in mind, Baral recommends that potential acquirers do the math to ensure they are actually bringing value to the bottom line through these deals.
“Life sciences companies must understand that doing the right deals is a process rather than a single transaction,” Baral said in the report. “Even with the unsettled operating environment we expect to see continuing into 2024, the life sciences companies that can recognize and deliver on these dealmaking imperatives will be well placed to secure value far into the future.”
To accomplish this, Baral said more focused business models, identification of value-adding therapeutic areas and awareness of disruptive opportunities could help ensure a more robust M&A portfolio.
With life sciences M&A rising 34% from 2022 to $191 billion in 2023, the industry is seeing the return of dealmaking, particularly from pharma giants looking to support a dwindling number of blockbusters as patents end.
The PwC analysts said “the sector should also widen the types of investments it’s willing to target, including smaller biotech, research universities, equity investments, collaborations and venture capital.”
Build trust by mitigating risk
When convincing investors to buy into the prophecy of better biopharma returns in the future, companies need to build the narrative that will bring them to the table, according to a year-end 2023 report from Evaluate.
“Unless companies can tell a very convincing growth story, investors are refusing to put money to work,” Evaluate analysts wrote. “This is likely to remain true next year, for both the public and private biopharma sectors.”
PwC analysts call this “protecting the enterprise” — to maintain trust in a company’s future profits, executives need to anticipate threats and manage risks, the PwC report says.
“Executives focused on growth alongside the risk agenda know that trust is critical to the mission,” PwC analysts wrote. “Strong risk and resilience capabilities can be the difference between those that thrive and those that fight to survive.”
What this comes down to in the eyes of EY analysts is improving the lives of patients. If companies can demonstrate value in the wider healthcare landscape, then risks like regulatory scrutiny or pricing crackdowns within the Inflation Reduction Act will be less impactful.
“To realize value from their acquisitions, life sciences companies need to focus on the north star of delivering better outcomes for patients — including an improved, more personalized health experience,” EY’s report said. “They must also work to ensure they have the right processes, discipline and execution to deliver value creation from dealmaking.”
Embrace changing technology needs
Technology’s breakthroughs don’t always match up to the hype, but biopharma companies need to keep up with the times to ensure success down the road, according to Julien de Salaberry, CEO of Galen Growth, as featured in Evaluate’s report.
“The industry’s resilience and adaptability will be tested as it navigates this transition from hype to pragmatic innovation, setting the stage for a dynamic and potentially transformative future,” de Salaberry said.
“Even with the unsettled operating environment we expect to see continuing into 2024, the life sciences companies that can recognize and deliver on these dealmaking imperatives will be well placed to secure value far into the future.”
Subin Baral
EY global deals leader in life sciences
Artificial intelligence and advanced analytics offer greater speed of drug development and new market opportunities. Nine in 10 companies in the space are bolstering their overall technology budget this year, according to the PwC report.
“This is not just technology for the sake of technology,” the report said. “Instead, it’s about unlocking returns by deploying digital technology specifically to go faster, connect dots and release capacity,” the report said.
AI automation and analytics could reduce process timelines by as much as 70%, reduce operational costs by 30% and shorten the timeline to project delivery by 40%, according to PwC. But executives need to have a clear vision of how they can use these emerging methods — a scattershot approach will cost more in the long run.
Overall, growth in the life sciences will require not just doing more within the parameters of the past, but thinking creatively to overcome the challenges of the financial and regulatory onslaught of 2024, according to PwC.
“While product launches and other growth strategies continue to be the lifeblood of the industry, planning growth on top of the same business model is likely to yield more of the same disappointing results in the capital markets,” the PwC report said. “Instead, leading companies will use 2024 to reinvent the model in a way that matches the moment and sets the stage for competing differently in the years ahead.”
Source link
#banner #year #biopharma #headwinds
