ODGERS INTERIM OPINION
Nick Behan – Consultant in our Life Sciences team – discusses the status quo and trends in his sector...
The “new normal” of expiring patents, shrinking pipelines, fewer billion dollar blockbusters, generic competition, pricing pressures, increased regulatory scrutiny and the economic downturn has seen a significant drop in sales and profits across the Life Sciences sector. This shift change has forced companies into re-evaluating the way they approach business and also change their business models in order to not just counter these sudden changes but to survive.
The general approach to the problem has seen companies explore various options, including; expanding into emerging markets, acquisitions and making alliances with complementary companies which can result in a much better product range and service.
However, with a significant amount of the world’s biggest selling drugs going generic; over $100 billion in sales were lost between 2009 - 2012 (1) and shrinking pipelines, companies have had to radically change the way they approach R&D. This has seen a shift in the overall focus from blockbusters to more targeted treatments. This approach to innovation comes with its own problems as it is very much a volume based model and requires the creation and launching of more products than ever before in order to generate similar levels of income to those seen pre-2009.
Beyond just the shift in R&D focus, efforts to address the issues have seen attentions turn to operational efficiencies in order to grow margins and profits once more. These efficiencies have seen more than 150,000 jobs being lost since 2009 (2), as well as a decline in R&D funding and an increase in acquisitions & collaborations to help expand portfolios in specific areas. There has also been the development of “Orphan Drugs” because of their increased patent protection and simplified regulatory review process in some countries. The ultimate aim of all of these trends is – of course - to find faster ways to grow a business.
One of the more interesting operational innovations to come out of the focus on finding new and better commercial methods has been the move to a more fluid and flexible workforce. Across the board, I have started to see a real shift in this approach with many companies reluctant to invest in a large permanent workforce due to the risks involved - both operationally and financially. For example, if a new product fails to gain approval - or is delayed - then the impact of no sales and high overheads can be devastating. However, the solution to this problem is straight-forward and is already being used regularly as a tool in many other sectors…What is it? Well, it’s interim management....
The ability to bring in an expert or specialist who can provide tangible short or long-term solutions along with flexibility in terms of their availability, working hours, work location and role has proven a very successful and productive approach. Also, as interim managers are a variable cost they have removed a lot of the financial risks associated with full-time employees. So, if your R&D or commercial project has failed to take off and you have used interim experts then you would be able to remove them at very short notice without any additional financial or emotional cost to your business.
The companies that have embraced the use of interim managers have benefitted from greater flexibility in the direction they want to take their business and - at the same time - have been able to improve their quality, knowledge and experience which has ultimately led to them being more efficient, productive and profitable.
- Source: DTTL Global life Sciences and Health care Industry Group analysis of Global Generic, Cygnus
- Source: http://www.forbes.com/sites/matthewherper/2011/04/13/a-decade-in-drug-industry-layoffs/
If you would like to learn more about Nick or his work, please do check out his profile.
Categories: Life Sciences