Pharmaceuticals & life sciences

Pharmaceuticals and life sciences CEOs are optimistic about a future which will see continuing growth through innovative products and partnerships, but they recognise the challenge of realising their ambitions in a world where expectations are growing all the time. New technologies will help both to deliver life-saving innovation and to enrich engagement with stakeholders.


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Interview with Dr. Leonard S. Schleifer, Founder, President, and Chief Executive Officer, Regeneron Pharmaceuticals Inc., US
Over-regulation and exchange rate volatility are top of pharma CEOs' list of threats to growth

Growing in complicated times

Pharmaceuticals and life sciences CEOs are optimistic about future prospects.

Pharmaceuticals and life sciences CEOs are optimistic about future prospects. While economic prospects globally are complex and difficult to predict, the trajectory for healthcare demand looks more straightforward. It’s rising, thanks to ageing populations in major markets and expanding affluence in emerging ones, and that’s translating into high levels of optimism. Nearly half of pharmaceuticals and life sciences (pharma) CEOs (48%) are very confident of revenue growth over the next 12 months, significantly more than across the overall sample (35%) and up slightly from last year. Looking forward three years, nearly every CEO is confident or very confident of revenue growth, making the sector one of the most optimistic we survey.

The most promising geographical market over the next 12 months is the US, by a wide margin (52% of pharma CEOs rank it in their top three in terms of growth prospects, compared to 39% of CEOs overall). Other markets with a strong rating are Germany (32%) and China (34%).

And they’re planning more partnerships.

Nearly two-thirds of pharma CEOs (62%) expect to enter into a new strategic alliance or joint venture over the next twelve months – notably more than in most other sectors or across the sample overall where just under half the respondents expressed this intention. At a time of intense deal activity for the industry, 31% of respondents expect to complete a domestic merger or acquisition, with the same percentage planning a cross-border transaction.

For many companies, these transactions represent opportunities to enter new markets or expand their portfolio. More than two-thirds of pharma CEOs (69%) say there are more growth opportunities for their business today than there were three years ago. Again, that’s up from last year, and higher than the 60% we saw across the survey population as a whole.

But there are still some clouds on the horizon.

Three-fifths of pharma CEOs say there are more threats to growth than there were three years ago. Indeed, the industry’s biggest opportunity – rising healthcare demand – also contains a threat, as it means governments face mounting pressure to cut the cost of care. Accordingly, over-regulation is the threat pharma CEOs are most likely to believe will put the brakes on growth. It’s a perennial issue for the sector, which already faces strict review and approval processes and is increasingly subject to pricing regulation. Up significantly this year is attention to currency exchange rate volatility. That’s not surprising as the strength of the US dollar has seen the amount returned from European and Japanese sales plummet, with a 16% and 13% reduction respectively (based on comparing the first nine months of 2014 and 2015).

Pharma CEOs’ level of concern over the availability of key skills has been on an upward trend for the past several years. Nearly two-thirds of pharma CEOs say their companies plan to increase headcount this year, so it’s only natural that their ability to secure the right people with key skills is front of mind.

Pharma CEOs see more divergence ahead.

Pharma CEOs are in line with their peers across the sample seeing regional trading blocs taking precedence over a single global marketplace and multiple economic models triumphing over economic unions.

For pharma CEOs, one particular concern is divergence in regulatory regimes. In recent years, more individual countries have created their own specific requirements, especially regarding HTA (health technology assessment). The majority of pharma CEOs (59%) see unclear or inconsistent standards or regulations as a barrier to responding to stakeholder expectations. Gary Pruden, Worldwide Chairman, Johnson & Johnson Medical Devices, Johnson & Johnson, US, remarks that “As markets become more uncertain there are greater restrictions on healthcare products, on access to care, and more pressure on costs in some of the emerging markets. As a healthcare company dedicated to raising the standard of care around the world, that’s a considerable concern for us.”

Addressing greater expectations

Pharma CEOs are proud of their contributions to improving the world’s health.

When we asked CEOs to define, in their own words, what “purpose” means to them, many cited improving public health and/or the lives of individual patients. That reflects the two largest stakeholder groups whose expectations are influencing sector companies: customers/clients and the government/regulators.

More than half of pharma CEOs say that the expectations of governments and regulators have a very high impact on their organisation’s strategies. That’s not surprising. Not only does the industry face regulatory hurdles for new products, but in many countries the government is also the industry’s single largest customer. And what governments expect from pharma companies is changing radically as they seek more value – including curing rather than managing conditions – for less cost. As expectations of value become greater, the challenge for pharma and life sciences will be to move to a new reward mechanism while the strain on healthcare economies continues to intensify. As Dr. Leonard S. Schleifer, Founder, President, and Chief Executive Officer of US-based Regeneron Pharmaceuticals Inc. puts it, “We have to make sure that innovation in healthcare gets an adequate reward for the risk.”

A positive industry reputation is important to pharma and life sciences companies.

It helps attract capital: pharma CEOs are more likely to be believe that their investors are seeking ethical investments, both now and in five years, as opposed to focusing on income and capital growth. The only sector where CEOs are more likely to agree on this point is the healthcare industry.

And positive reputations will help attract talent, too: 43% of pharma CEOs are changing their talent strategy around their reputation as ethical and socially responsible employers. They believe this reputation has a great impact on attracting, retaining and engaging the employees they need to remain relevant and competitive (compared to 29% of CEOs overall). Sixty-three percent of pharma CEOs believe that top talent prefers to work for organisations with social values which are aligned to their own today – and 76% believe they will do so in five years’ time.

But a positive reputation has to be earned. Fifty-seven percent of pharma CEOs worry that lack of trust in business could negatively impact growth prospects. In recent years, the industry has faced criticism and concern over how it interacts with healthcare professionals, leading to new regulation in some markets. Drug pricing has been the subject of recent intense scrutiny and public debate. With increasing numbers of undoubtedly effective but highly costly specialty drugs, new models of reward are being tested, with the pharmaceutical company’s reimbursement contingent on meeting certain outcomes.


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Timothy P. Walbert, Chairman, President and Chief Executive Officer, Horizon Pharma plc, Ireland
CRM and R&D technologies are viewed by pharma CEOs are key to increasing stakeholder engagement

Transforming: technology, innovation and talent

Pharma CEOs are already changing their businesses in response to changing stakeholder expectations.

Just where are CEOs making changes? At the top of their list is how they manage their brand, marketing and communications – 59% of CEOs say their companies will make significant changes in this area, compared to 48% across the sample overall.

Defining and managing risks is another area where nearly every pharma and life sciences company is planning to make some changes, as is measuring success and improving accountability and workforce rights and wellbeing.

Pharma and life sciences is undergoing a digital revolution.

The sector is increasingly using a wide range of digital tools to support everything from drug discovery, development and testing to outcome tracking. That’s reflected in CEOs’ responses – 92% say they will use technology to assess and deliver on wider stakeholder expectations. Which technologies offer the greatest potential to increase engagement? At the top of the list are customer relationship management systems (71%). Two-thirds say that R&D and innovation generate the greatest return in terms of engagement with wider stakeholders (compared to 53% overall). In fact, that number is higher than most other industry sectors except the automotive industry with 69%.

Data and analytics also score highly with pharma CEOs.

Sixty-two percent believe that data and analytics can help improve stakeholder engagement. The opportunities are exciting. New monitoring technologies and the proliferation of apps for patient tracking are making it possible to generate huge quantities of data on how patients respond to different treatments. Pharma and life sciences companies can use this information to improve outreach to patients and healthcare and providers. They can also better document outcomes for governments and other payers. And reflecting the trend towards partnering, pharma CEOs aren’t afraid to look outside of the organisation to capitalise on expertise elsewhere. As Gary Pruden, Johnson & Johnson Medical Devices, notes, “We have a partnership with IBM in orthopaedics, where we’re looking at how to use big data to achieve better solutions. We have a partnership with Google in surgical robotics.”

Surprisingly, pharma CEOs are somewhat less concerned about cyberthreats than CEOs overall. We think CEOs may need to take a fresh look at whether they’ve done enough to ensure their new digitals channels are safe from threats.

Measuring and communicating success

Innovation is the number one area where pharma CEOs (56%) think business could do more to measure the impact and value for wider stakeholders.

This is not surprising – innovation is the lifeblood of the industry, and the ability to communicate the value that its innovative products brings to patients, healthcare systems and society more widely is crucial to maintaining its relationships with a complex network of stakeholders. It’s one area where the imperative to measure is equalled by the desire to communicate.

This isn’t lost on our CEOs. Dr. Leonard S. Schleifer, Founder, President and Chief Executive Officer of US-based Regeneron Pharmaceuticals Inc. remarks, “We have to do a better job of explaining to people where drugs come from and how hard it is to develop them.”

Following on from innovation, the next areas that pharma CEOs see needing more attention from a measurement perspective are key risks (51%) and non-financial indicators such as brand (47%).

Moving to communicating to stakeholders, the number one area for pharma and life sciences is organisational purpose and value, with business stratgey in third place behind innovation. These areas tie in with the need to maintain a positive industry reputation for ethically-motivated investors and also the imperative to emphasise the broader benefits that the industry brings to society. As Timothy P. Walbert, Chairman, President and Chief Executive Officer of Ireland-headquartered Horizon Pharma plc puts it, “It’s a balance of continuing to be transparent about our business results today but also communicating that we’ve got a high-risk business that is not just about generating today’s profits.”


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Gary Pruden, Worldwide Chairman, Johnson & Johnson Medical Devices, Johnson & Johnson, US

"Our biggest challenge is helping to articulate to regulators, to politicians, to consumers just what is driving the increase in costs and how do we influence that and how do we improve it? Because right now, someone will look at the cost of a cancer medicine, for instance, and assume that because it might be $90,000 or $100,000 a year, that it is adding significant cost. Yet, if you can avoid three or four rounds of chemotherapy or extend a patient’s life, what is the downstream cost? In other words, how much could the medicine save you overall, and how do we even measure that amount? So the big challenge is how do we capture – and announce – the real value versus the headline cost?"

Timothy P. Walbert, Chairman, President and Chief Executive Officer, Horizon Pharma plc, Ireland

Explore the data

What impact do CEOs think the following wider stakeholder groups have on their organisation’s strategy? (Pharma & life sciences CEOs: 87)

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Mike Swanick
Global Pharmaceuticals and Life Sciences leader
+1 (267) 330 6060

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