- Companies looking for new destinations for manufacturing and supply chain operations rank the United States, China and Japan as the top three jurisdictions of interest.
- Despite new opportunities for supply chain expansion, one-third of North American and European respondents indicate they are not considering new operations destinations
- Cell and gene therapies and products related to neurological diseases/
psychiatric disorders show the most promise for growth in the next 5 to 10
- Over the next 2 to 5 years, companies indicate their focus on women’s health and femtech will increase from 36% to 63%.
- Life sciences companies are increasingly looking to grow through collaborations and partnerships with other life sciences and technology companies.
In the third and final instalment the Life Sciences Business Evolution Series, Baker McKenzie explores how pharmaceutical, biotechnology, medical device and medtech companies continue to leverage new and existing sources of growth over the next decade. The survey of 250 life sciences respondents from North America, Latin America, Europe and Asia-Pacific reported views on changing market conditions, challenges and opportunities affecting life sciences business models, growth patterns, funding and shifting operational dynamics. The report was conducted in partnership with Informa Pharma Intelligence.
Vanina Caniza, Global Chair of Healthcare & Life Sciences, Buenos Aires: “When discussing what the future looks like for supply chains, many industry clients’ mindsets are focused on reshaping cost, risk, geographical proximity, alternative sources of supplies, stable (and modern) regulatory frameworks and digital solutions. To streamline operations and seek business transformation, life sciences companies may pursue M&A activity to divest existing manufacturing or supply chain operation sites as a way to channel resources into other avenues of growth including investment in digitalization. Being ready to rapidly adapt is important in every region but even more so in Latin America, where the pandemic opened a new dimension on how companies conceive supply chains following two very challenging years.”
Supply Chains & Manufacturing Trajectories
Supply chains in the life sciences sector are global and complex, with a multitude of moving parts occurring simultaneously. The survey indicated respondents chose the US (34%), Mainland China (19%) and Japan (19%) as the leading destinations for manufacturing and supply chain operations. Given the size of US and Mainland China markets, it is unsurprising that these countries were named as top destinations. In fact, 47% of respondents from Asia Pacific cited Mainland China as a key destination choice.
In considering choosing new destinations for manufacturing or supply chain operations, 46% of respondents said they were looking for established regulatory and compliance frameworks, 37% would look for clear guidelines on tax, antitrust, bidding, pricing and public tenders and 36% are considering proximity to geographies in line with go to market strategies. Furthermore, ESG considerations in the supply chain are impacting decision making. The survey indicated that 31% of respondents consider established laws that protect human rights and 29% consider the availability of renewable energy sources.
Cecilia Pastor, a Partner at Baker McKenzie in Madrid commented, "The complex interdependencies of life sciences supply chains has never been more apparent than with the COVID-19 global pandemic. Companies need to find cost-effective and low-risk ways to develop, test, manufacture and distribute the products whilst navigating logistic, regulatory, tax, market access and compliance issues across borders. Additionally, businesses need to seek legal advice on issues such as downstream compliance and ESG mandates for life sciences supply chains."
Interestingly, almost one-third of respondents globally, particularly respondents in the US and Europe, indicated they are not looking for new destinations, which may indicate a potential ramp-up in M&A and divestiture activity from large and established pharma companies. In fact, 21% of global respondents indicated that they would seek legal advice for M&A, including growth via acquisition, carve-outs and specific subsector divestiture.
Landscape for Therapies, Product Modalities and Indications
Today, and over the next two to five years, life sciences companies are and will be primarily focused on cardiovascular (40%), infectious diseases (40%), oncology (38%), vaccines (38%) and diabetes (37%). These preferences reflect prevalence of diseases, products and current scientific and commercial realities. Other burgeoning areas for growth in the next two to five years include treatments and products for autoimmune diseases and radiology and imaging. Similarly, almost one-third of respondents are exploring hybrid medical devices and therapies.
In the next five to ten years, women's health/femtech is poised for massive growth and investment. Over 75% of respondents indicated a strong interest in this area which reflects ongoing cultural change and a heightened awareness of women’s needs related to fertility, menstruation, menopause and more.
Elisabeth White, Head of the Asia Pacific Healthcare & Life Sciences Group at Baker McKenzie in Sydney said, "Women experience unique healthcare challenges, yet women's health remains globally under-researched and under-funded. Healthcare and life sciences companies, investors, and digital health start-ups are increasingly recognizing the untapped potential of approaching women's health holistically, identifying significant opportunities in better supporting the health needs of the world's nearly 4 billion women. We are beginning to see increased investment and femtech innovation focused upon specific female health issues, as well as broader health services focused upon mental health and wellbeing."
Pharmaceutical and biotech companies respondents said they plan to focus on the development of cell and gene therapies (15%), biosimilars (13%) and vaccines (13%) within the next five to ten years. For medical device and medtech companies, around 1 in 5 medical device and medtech companies respondents will be investing in products that address neurological diseases/psychiatric disorders as well as a continued focus on hybrid devices and therapies, reflecting interest in exploring the new frontier of technology and its use for mental health support and treatments.
Growth Through Collaboration: Bridging Resource and Funding Gaps
As business models shift in response to changing tides of demand, resource and funding, life sciences businesses continue to look at collaboration as the way forward. While traditional partnerships are still a mainstay of the life sciences industry, there is an increase in collaborations beyond the life sciences sector in light of the need to develop more complex therapies and products such as biosimilars, cell and gene therapies, vaccines, hybrid medical devices, gamification therapeutics and other mHealth solutions.
Increasingly, life sciences respondents are looking to partner outside of their industry to gain access to the proper digital tools and expertise that enable effective management, storage, and monetization of data in the face of current limitations around time, resources, and know-how.
Technology is propelling change in the industry and technology collaborations are changing the landscape for life sciences. A third of respondents said they have formed newly structured partnerships across sectors (i.e., public-private partnerships or partnerships with technology companies). Almost one quarter of medical device and medtech respondents also shared that they have seen the need to shift from product-only to product-service hybrid development. Furthermore, 42% of pharma biotech respondents say that are implementing data analytics and solutions as sources of new revenue streams.
Marcela Robledo, a Partner at Baker McKenzie in San Francisco said, “The life sciences industry has not fallen behind other industries in adapting to new business models and service offerings through innovation. What underpins the transformation of the industry are partnerships with technology companies ― combining data access, app development, cloud computing and other capabilities, life sciences and tech are coming together to churn out new offerings, alternative treatments, and therapies that are changing the face of patient care. This pace of collaboration is not likely to slow in the coming years. Through M&A transactions as well as other standalone partnerships, we can expect closer cooperation between tech and life sciences to become the new imperative to industry success."
As the life sciences industry evolves to meet new realities and the changing demands of the market, companies are addressing evolving patterns of growth, funding, supply, manufacturing and collaboration. Such trends, when combined with a rapid rise in digitalization and myriad transactional routes to funding, are poised to influence the trajectory of growth in the next decade.