Over the past two years, COVID-19 has had a profound impact on the life sciences sector, and every other aspect of our lives. While the pandemic didn’t force every company to alter course, it did push many organizations to advance much more quickly along a road they were already traveling. Today, many life sciences companies are more digital, more collaborative, and more focused on environmental, social, and governance (ESG) factors than they likely would have been without the pandemic. Here’s a look at some areas many life sciences leaders will likely be paying particularly close attention to in the year ahead:
The digitization of everything: Heading into 2022, many of our life sciences clients are ramping up their efforts to digitize virtually every business function. We’ve been talking about the transition to digital for the past several years. That’s nothing new. What is new is the sense of urgency we are seeing at both a process level and at an enterprise level. Everything from research and development (R&D), to commercial processes, to supply chain, to human resources is being reimagined, digitized, and transformed at a pace that we have not seen in years past. We recently surveyed 150 biopharma executives about their adoption and investments in digital technologies. More than 80% of respondents agreed that digitalization of operations will likely continue even after the pandemic ends. The people who lead life sciences companies are pushing their organizations to catch up to other industries (e.g., finance and retail) that have been operating in the digital world for several years. Many of these sectors have already digitized internal processes and the ways in which they interact with customers and other stakeholders. It would be difficult to for me to name a life sciences client that is not diligently focused on digital today. Many of our clients are continuing to make significant investments into all things digital. The question is…how far will they take it, how will they organize around change, and what value will they realize (and measure) as a result?
Artificial intelligence: AI is no longer a new idea in life sciences. However, as the technology matures, it is being used for an expanding range of applications—from all aspects of R&D, to immensely complicated supply chain and procurement processes, to human resources. In the year ahead, I suspect we will see companies integrate AI more holistically into all processes—from preliminary research, to clinical trials, to manufacturing and supply chain, to commercialization and enabling functions. The combination of human intelligence and AI will likely also continue to influence how companies react and respond to health care professionals and the patients they serve. But integrating AI throughout an organization—across historically separate and often siloed organizational structures—could be challenging for many companies. Key to the digitization of everything—and the holistic adoption of AI—will be the availability of data across the enterprise and even the ecosystem. Data that is high-quality, standardized, and referenceable will likely be required for higher-end technologies (like AI) to make impactful use of that information.
Environmental, social, and governance (ESG): In virtually every industry, ESG is getting a lot of attention from board members, shareholders, and advocates. The threat of climate change, for example, has prompted many industries to develop environmental strategies to reduce their carbon footprints. A number of large life sciences organizations have publicly committed to dramatically reducing their carbon footprint in the near future. Life sciences companies are also continuing to emphasize, and I believe take a lead role, in improving health equity. Health inequities are apparent across a broad range of illnesses—from COVID-19 to diabetes and heart disease to mental health issues. Improving clinical-trial diversity is one way to address some social health inequities. As we noted in our recent paper, members of under-represented communities who participate in clinical trials help advance scientific discoveries. Their participation can also help improve public perceptions and build public confidence about drugs. While the return on investment for ESG might not be as immediate or obvious as other investment areas, there will likely be more pressure this year to invest in the greater public benefit. Pressure from large and small investors will almost certainly continue to influence CEO and boards alike in the year and years ahead. We are already working with organizations to help them define their future. This includes the building of dashboards and platforms to help measure real progress toward ESG. There is huge opportunity in our sector and I’m excited to see companies invest in it.
Collaboration: I’ve discussed my optimism about the life sciences sector in past blogs. But I have never been more optimistic about the opportunity, the willingness, and the potential for organizations—even fierce competitors—to collaborate with each other. Partnerships and collaborations have been taking place in this industry for years, but the power of joining forces to reach a common goal was amplified by the pandemic. Many of the companies that have been most successful—particularly around the development of COVID-19 vaccines and therapies—have been those that don’t try to do everything on their own. Collaborations and partnerships are helping to advance medicine, advance testing, advance diagnostics, and advance next-generation therapies. I expect partnerships and alliances will continue to be an active lever across the sector.
Trust: While I am optimistic about the level of collaboration that is occurring, I also recognize that the sector has some work to do when it comes to building trust across the ecosystem. One way to build trust is through transparency. Our recent research on consumer trust in biopharma showed that 72% of US focus-group participants wanted to see more price transparency. The life sciences sector is undergoing some fundamental changes, particularly when it comes to the magnitude of data and reporting that is likely to become available across the ecosystem. Health care providers and consumers typically are not exposed to pricing information. Confusion between list pricing and net pricing can lead to a range of implications and frictions. Life sciences companies should try to revisit their core busines processes (e.g., pricing, contracting negotiations, patient services, value communications and messaging, and external market engagement) to improve trust.
Mergers and acquisitions (M&A): Most of the M&A activity we saw this year was primarily in therapeutic areas such as rare diseases and oncology. We didn’t see many blockbuster deals, which could set up 2022 as a very active year. Catalysts include failed or negative results in drug trials, the need to re-plenish pipelines, and the down-stream effects from past mega-mergers and divestitures. Many of our large life sciences clients are focusing on their scientific core and are placing less emphasis on diversification. 2021 saw a flurry of spin-offs and carve-outs, which will likely continue in 2022 and might trigger even more novel and innovative partnerships and acquisitions. Many private equity firms are also sitting on lot of cash and could be looking to make deals. As my colleague Peter Micca noted in his recent blog, 2021 will likely go down as one of the biggest years ever for digital health-tech investments and revenue growth. Investors pumped nearly $15 billion dollars into 372 digital health care deals during the first half of 2021. That tops investments for all of 2020. A decade ago, digital health investments were a fraction of what they are now (fewer than 100 deals and just $1.1 billion in investments).
Retention and recruitment: After nearly two years of lock-downs, quarantines, and remote work, many people are reevaluating their professional lives. The so-called ‘great resignation’ is a challenge (and opportunity) for virtually every industry. Life sciences is no exception. This trend has led to a battle for talent unlike anything we have ever seen. As the sector continues its digital transformation, it is also facing unprecedented challenges in attracting, motivating, and retaining the best and the brightest employees. The ‘perfect storm’ analogy might be overused, but it certainly fits this scenario. Life sciences companies are competing with each other for talent. In many cases, they are also competing with other industries for tech-savvy employees. Every organization should reimagine how they think about talent and look for new ways to attract and inspire the best of the best. There's never been a more important time to focus on employees.
I expect the life sciences sector will continue to change in 2022 as nearly every process undergoes a digital transformation. But enterprise-wide change can be a slow process when compared to the speed of technology advancements. Most importantly, I believe that 2022 will continue to shine a light on the amazing people, innovation, science, and the significant contribution this sector can continue to offer—from the response to the on-going pandemic, to health equity, to continued progress on curative therapies.
Ref: By Mike DeLone, US life sciences leader, Deloitte LLP