Top trends affecting middle market biopharma companies

The last few years have reshaped the way we think about health care delivery, drug development and the overall life sciences and health care ecosystem.

In particular, the capabilities and impact biopharma companies have had on the health, safety and well-being of humanity were thrust into the spotlight by the COVID-19 pandemic. 

Experts say that even after the emergency of the COVID-19 pandemic passes, the health care ecosystem won't return to business as usual. The future of care delivery is evolving to become patient-centric, virtual, personalized, in the home, value-based and risk-bearing. It will be driven by data and analytics, enabled by biopharma innovation, new medical technologies and funded in large part by private investors.

With that as a backdrop, the following is an overview of some of the top trends and challenges ahead for middle market biopharma companies.

Shifting capital market activity

All eyes were on the biopharma industry during the pandemic as the scientific community raced against the COVID-19 virus, escalated vaccine development timelines, collaborated in new and different ways, and broke new ground in working with regulators, health systems and governments. Biopharma saw record levels of private and public capital inflows between 2020 and the end of 2021, and those streams have begun to slow as investors look to other sectors for near-term returns. This contraction in capital deployment is unsettling the biopharma market and pushing biopharma leaders to take a hard look at development pipelines, clinical trials and the organization of their workforce. 

“Market volatility following a global event like the pandemic is to be expected, and overall, the biopharma sector is still operating above the long-term average in terms of capital activity," said Adam Lohr, RSM senior analyst and partner in the life sciences industry practice. "There is increased competition for investor dollars as the broader economy recovers, and we expect to see a shift in capital activities away from private investment and IPOs to strategic partnerships and M&A."

That's not to say there will not be challenges, as Lohr pointed out. “Downward pressure on valuations and excess cash reserves of strategic investors are likely to spur strategic acquisitions. But the Federal Trade Commission's attention on tech and pharma deals is likely to push many biopharma companies to pursue drug licensing deals, joint ventures and other pipeline development strategies."

For the middle market biopharma industry thinking about drug in-licensing, there are a wide variety of opportunities ranging from later-stage small molecule assets that have established safety and efficacy and likely smooth paths to approval to the cutting edge of early-stage biologics. According to Lohr and in recent years, biologics have represented approximately 35% of new drug approvals and are very prevalent in oncology, immunology and nervous system indications. While they have significant market potential, they are also at inherently higher risk with much more complicated paths to approval as well as uncertain pricing and market access.

Another key component of attracting investors is tracking and reporting environmental, social, and governance (ESG) activities and commitments. According to recent reports, ESG-oriented investing has experienced a meteoric rise, and global sustainable investment is now more than $30 trillion.

Talent acquisition woes 

Biopharma companies are increasingly focused on driving innovation through the adoption of digital and technology tools like artificial intelligence (AI), machine learning and high-powered data processing. This requires them to also focus on data protection and cybersecurity mitigations. Technology and data analysis are leveraged to cut research and development costs and expedite clinical trial timelines. 

According to the U.S. Department of Labor's Job Openings and Labor Turnover Survey (JOLTS) report recently issued, nearly 4.3 million people quit their jobs in January. For middle market biopharma companies this also means a severe shortage of STEM workers central to health and scientific innovation. 

"Biopharma companies are coming to terms with a tighter funding environment. Although many have plenty of cash to get through it, they are being forced to reconsider how to secure the right talent to continue driving innovation. Outsourcing may appear costly on the surface, but it allows companies more flexibility to spend on what they need when they need it. This allows them to avoid expensive capital outlays and specialized workforces that may or may not be the right long-term fit for a rapidly evolving industry," said Stephen Kemler, RSM senior analyst and director in the life sciences industry practice.

Expanding access to clinical trials

Clinical trial diversity has recently been at the forefront of U.S. Food and Drug Administration's (FDA) initiatives. The pandemic expedited the rapid growth of decentralized clinical trials, and experts agree they are here to stay. Traditional clinical trials rely on major health care and academic centers, which typically cater to trial participants that live in or can easily travel to metropolitan areas for treatment and monitoring. This limits participation from geographically and ethnically diverse participants, exactly the populations the FDA is targeting.

"Many clinical trials are shifting from a traditional model to a hub and spoke approach in which the trial is managed centrally, often by a CRO (contract research organization). Then decentralized clinical trial solutions are introduced to solve logistical barriers, speed up enrollment and keep participants better engaged throughout the process," said Lohr. Biopharma manufacturers are introducing decentralized clinical trial solutions to reach more diverse and vulnerable participants and keep them engaged throughout trials, too. These can include telehealth visits, in-home treatments, community-based clinical trial sites, wearables, digital tools, tracking technologies and more. 

Maintaining supply in uncertain times

While modern biopharma companies certainly rose to the challenge of maintaining a supply of therapeutics during the pandemic with solutions like cloud applications, automation and AI, supply chain uncertainty remains. 

"One major lesson learned during the pandemic is that no industry is immune from supply chain disruptions. And overconfidence in the stability of a global supply chain can result in expensive and life-threatening delays in getting patients products, treatments and preventative medicines they need," said Lohr. "We anticipate many commercialized biopharma and medtech companies will consider onshoring or nearshoring supply chains over the next few years."

Some of the pressing supply chain concerns for biopharma and the broader middle market include:

• The increasing complexity of processes and technologies limits which can be leveraged from a supplier, service or support perspective 
• Waning interest in preparing for future disruptions
• Shortages of raw materials and active pharmaceutical ingredients (API)
• Resource intensive management of laboratories, bioreactors and cold storage
• Varying regulations and safety guidelines across geographic borders
• Limited integration of systems and reporting within organizations and across their external networks

Get additional sector insights by reading our outlook.