Top business trends and issues for life sciences companies in 2019
From AI to emerging markets, what’s next for life sciences companies?
INSIGHT ARTICLE |
What are the top trends and issues affecting middle market life sciences businesses like pharmaceutical, bio-tech and medical devices companies in 2019? RSM’s John Lanza, life sciences industry practice leader, shares his insights on the important things to watch.
The pursuit of the best talent will be an ongoing challenge in 2019 for the life sciences industry. Middle market businesses must be open and creative with their hiring strategies to stay competitive with larger organizations’ recruiting efforts. And, the secret to landing talent is to think globally. If your best candidate is in another city or abroad it may benefit your business to consider a remote arrangement with the employee. Don’t let miles stand in your way of landing top talent. Video conferencing and other technology can bridge the distance. In addition, outsourcing may be a smart decision for some middle market companies to find necessary skills, particularly related to technology, finance, accounting or tax needs.
Watch Hunter Smith CFO of Rhythm Pharmaceuticals, biopharmaceutical company aimed at developing and commercializing therapies for the treatment of genetic disorders of obesity, and Nancy Aubrey, RSM Life Sciences Partner, as they discuss precision medicine, technology and the impact of the labor market on Rhythm.
Big tech disruption
Technology companies like Amazon and Google are currently exploring opportunities in life sciences, from pharmaceutical distribution to leveraging the industry’s big data related to consumer health care. With these added players in the life sciences space, in 2019 we may see the beginnings of a shake-up regarding existing distribution models, which historically has been controlled by just a few major distributing giants. This disruption could eventually result in lower pricing given the efficiencies and innovation these big technology companies can bring to the sector. While this shift could be several years in the making, for middle market life sciences businesses, competitive distribution models and lower pricing is good news and something to watch as opportunities evolve.
Consumerism is on the rise across industries and the pharmaceutical sector is no stranger to this. In 2019 we will continue to see consumers driving change, whether through calling for transparency in the production of medicines or demanding fair pricing on drugs. And, in terms of pricing, the Trump administration as well as individual states will also push for further scrutiny. Middle market businesses should anticipate the impact of pricing shifts on their overall operations. This includes assessing current production efforts and gaining efficiencies where gaps are identified, analyzing reimbursement structures with federal and state governments and insurance companies, reviewing raw materials and production contracts, shoring up supply chains, and evaluating margins. Finding improvements and efficiencies can save costs, which can translate to more competitively priced pharmaceutical products.
More and more life sciences companies have used artificial intelligence (AI) in areas such as clinical trials and this will continue in 2019. With AI’s automation and quick assessment, patients are identified in a more efficient way, outcomes are determined faster and costs to run the actual trials are minimized. For instance, previously it may have taken four months to identify trial candidates. With AI the timing is reduced to weeks. Another area of AI impact includes drug development. AI can now simulate how synthetic proteins will fold before they’re even synthesized. This dramatically reduces the development lead time and costs of creating new drugs. Middle market life sciences companies must look for ways to incorporate AI in their operations in 2019 in order to stay competitive in the marketplace.
Data and personalized, predictive medicine
The volume of health care data will continue to expand in 2019. For life sciences leveraging this information, opportunities abound in a variety of areas, especially in the space of personalized, predictive medicine. For instance, patients with a certain type of cancer, with the help of genetic data, could receive personalized drugs that specifically meet their individual treatment needs. Likewise, data could be used to predict an illness’s trajectory (e.g., a patient has lung cancer and data predicts the cancer could travel to the liver next). Middle market life sciences companies leveraging and assessing the vast amounts of data in a meaningful way will be the winners, and patient consumers will greatly benefit as well. However, companies will need to be ever vigilant with cybersecurity efforts to protect sensitive data.
Historically, the United States has been the market for life sciences businesses because the country has the highest reimbursement rates on drugs, bolstering companies’ potential profitability. However, for those pharmaceutical companies that have established medicines, but may be lacking in new products, expansion to other countries, particularly markets in Central and South America, may make sense. Emerging countries, like Costa Rica, for instance, are ideal marketplaces. The country enjoys a strong workforce and a highly educated population with a commitment to improved health, and is therefore receptive to medicines and health services that will address their medical needs. Middle market companies would be wise to explore opportunities in these new markets in 2019 and beyond.
Add-ons and spin-offs
In 2019 dealmaking in the life sciences space will likely see more add-on and spin-off deals as opposed to large acquisitions. Similar to what Eli Lilly did recently in spinning off its animal health division, companies will look to rid themselves of noncore assets to focus on primary business divisions, fortifying resources and profitability. And as these spin-offs become available, other life sciences companies will acquire them to add on to existing business. These divestitures will benefit middle market companies as they provide incremental ways to expand their business portfolios.
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