The life sciences sector comprising of pharmaceutical, biotech and healthcare segments is increasingly achieving positive revenues globally, sustained in part due to emerging markets and generally encouraging worldwide, economic and demographic trends. The pharmaceutical industry has already achieved revenues up-to $1.23 trillion in 2014 (1), an all-time-high, with biopharmaceuticals making up about 20% of the market share. This positive trend indicates the life science industry’s ability to endure conditions of hostile economies, fluctuating markets, constantly evolving technologies and shifting population profiles and still emerge on an escalating path. A review of the current industry scenario along with an insight into future prospects, reveals valuable information about the industry strengths, emerging trends, new opportunities and future challenges.
The backbone of this sector, the R&D wing has conventionally remained capital intensive due to long development and approval cycles. The number of new drugs entering the market had decreased since the mid-2000’s due to recession, cost cutting and increasingly stringent regulations and safety norms. However, for the last couple of years, encouraging trends are being observed indicating a shift in the scenario. The number of new drug approvals by the US FDA has been steadily increasing in the past two years with 35 new approvals in 2013, a figure last achieved in 1997 (2). The scenario seems more optimistic considering the fact that the majority of newly approved drugs are either first-in-class drugs or orphan drugs, signifying the industry’s capability to achieve results regardless of cost cutting measures.
Major trends expected to affect the life sciences sector in the coming years are novel capital sources, shifting demographics, changing healthcare trends, new target diseases, technological advances and transforming market scenarios.
Newly emerging life science firms are increasingly turning to IPO’s as a source of capital. Not only has the number of health-care IPOs in the US increased from 55 in 2013 to 102 in 2014, biotech IPOs are also emerging as better performers in the market (4). This indicates a confident state for the industry, revealing a vast avenue for funding and acquiring investors’ confidence in the long run.
Globally increasing life expectancies, rising affluence and improving life styles are expected to shift the focus of healthcare towards treatment of age and lifestyle-related diseases such as Alzheimer’s, cardiovascular diseases, obesity and diabetes. The increase of income levels in emerging markets, especially India and China, is already leading to a rise in health care spending. Changing lifestyles and rising urbanization in emerging markets have led to a gradual increase in the incidences of life style related diseases like cancer and heart disease, opening up multiple venues of expansion for the bio-pharmaceutical sector.
The need to mitigate the loss of revenue due to expired patents and to counter the growing generic market, has led to a rising number of Big Pharma companies acquiring or partnering both research based new firms as well as generic manufacturers. Rise in costs of drug development has led to the increased outsourcing of specialty functions, especially those involved in drug development and clinical research.
Other key trends observed in the past few years that are expected to affect the industry growth in the coming years, are the evolution and growth of personalized medicine, increasing technology based innovations in health care and rising use of patient and consumer data in the drug development process.
Along with these encouraging trends and opportunities, the life sciences sector also faces some interesting challenges that can affect the business scenario in the near future. While most companies are trying to counter the rise of generic drugs, the generic market continues to grow and is expected to reach global revenues of $283 billion by 2018 (5). The primary problem with the generic drug industry lies with unregulated and developing markets, with a lack of government control. In addition, the sale of illegally manufactured under patent drugs in low-income countries without regulation remains a major problem for global pharma firms.
As regulatory authorities are making stringentdemands for more accurate and detailed data during approval processes, companies are required to maintain comprehensive patient and product data along with improved data capture and management processes. With the increasing use of electronic data capture systems, cloud computing and data sharing, the need for improved systems capable of protection from cyber-attacks and data leakage has heightened.
One of the major concerns worldwide for life science industries is the increasing focus of governments in both developed and emerging markets, to enact pricing legislations in order to minimize pharmaceutical spending. This has emphasized the need for introducing innovative pricing models across markets or to develop breakthrough therapies in order to ensure desired profitability.
Increasing awareness and level of education in consumers is slowly driving the life sciences industry to provide value based services and also to consistently provide market level evidences of their product’s efficacy. This has the potential to change the conventional brand-centric marketing of bio-pharma products to more personalized approach while targeting consumers.
The life sciences industry is set to tackle diverse opportunities as well as newer challenges in recent years. Along with the conventional strengths of the industry, companies will also require to be more adaptive and innovative to counter regulatory and consumerdemands which in turn are instigated by the technological advances in the field and global scenarios.
- World industry outlook: Healthcare and pharmaceuticals, The Economist Intelligence Unit, May 2014. Figures converted from $ billions.
- 2014 World Preview, Outlook to 2020, EvaluatePharma, June 2014.
- Biotechnology Industry Report 2015. Beyond borders Reaching new heights. Ernst and Young (2015). Retrieved September 21, 2015.
- Booth, B. (2015, March 20). Biotech IPO Performance: Discerning Market Or Rising Tide? Retrieved September 21, 2015.
- TechNavio Analysis 2014-2018; Generic Medicines: Essential contributors to the long-term health of society, IMS.