The distinction between biotech and pharmaceutical firms will erode over the next decade, according to a white paper just released by the Life Sciences and Health Care practice at Deloitte.
The future of the life science industries
The report, which was developed in collaboration with the Economist Intelligence Unit, predicts biotech and medical device firms will grow more quickly than the pharmaceutical sector, with the fastest growth in Asian markets.
Stuart Henderson, life sciences partner at Deloitte, comments:
'Widespread pressure to lower prices, along with increased competition, will speed up consolidation and convergence in the sector.
'Firms can no longer rely on internal resources to achieve their objectives. They must establish a new ecosystem through acquisitions, mergers, alliances, and exploratory relationships in emerging markets. This is reflected in the survey results which showed that 92% of life sciences executives expect further consolidation in the next decade, with 82% expecting significant M&A activity.'
Most survey respondents expect biotech revenue to grow in excess of 15% annually over the next ten years, compared to less than 10% growth for pharmaceuticals. A major factor is innovation. Industry executives expect more innovation from biotech, with small, young companies leading the way.
Henderson continues: 'Companies positioned to sustain strong revenue growth and exceed shareholder expectations in the coming years will be those that harness both the innovative culture typical to biotech companies, and the operating capabilities and management processes more characteristic of pharmaceutical firms.'
Major findings from the report include:
Pressure from consumers and governments to slow the growth of health care costs, along with new competitors, will drive structural changes in the industry. More than 70% of survey respondents said stricter regulation of drug pricing and reimbursement will have the biggest negative impact on the industry in the next decade. Established firms will face strong competition from emerging markets, as companies in these markets evolve from outsourcers and generic drug producers to become formidable competitors.
Roughly half of survey respondents believe revenue in China and India will exceed 15% annually over the next decade, outpacing growth rates in the United States, Japan, and Western Europe, which are projected to increase at 10% or less annually. Executives believe revenue in the developed countries will grow more slowly because prices of medical products will rise less rapidly than in previous years.
One third of survey participants believe erosion of corporate reputation will affect long-term revenue growth. Some industry leaders are worried this problem will result in more government regulation, but they are hopeful since the damage was self-inflicted, it can be remedied.
About the research
The white paper, entitled 'The future of the life sciences industries,' combines three research initiatives: an online survey completed by 206 senior industry executives from around the world; in-depth interviews with executives; and an executive forum that brought leaders together to discuss survey and interview results.
The research asked senior executives to define strategic priorities over the next decade, identify the main challenges, and share how they intend to seize opportunities.
The study is available online at http://www.deloitte.com/lifesciencessurvey.
The life sciences industries in this report refer to pharmaceutical firms, biotech companies, and makers of medical devices.
In this press release references to Deloitte are references to Deloitte & Touche LLP.
Deloitte & Touche LLP is the UK's fastest growing major professional services firm based in 21 UK locations, with over 10,000 staff nationwide and fee income of 1,246 million in 2003/2004. It is a member firm of Deloitte Touche Tohmatsu, a leading professional services organisation, delivering world class audit, tax, consulting and corporate finance services, with around 120,000 people in over 140 countries. Deloitte Touche Tohmatsu is a Swiss Verein, and each of its national practices is a separate and independent legal entity.
Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.
The information contained in this press release is correct at the time of going to press.
The Deloitte Cambridge office comprises 8 Partners and over 250 staff who deliver a full range of professional services to the East Anglian region. As well as focussing on the life sciences and technology sectors for which the region has become so renowned, the office has long standing specialisms in other sectors including the professions, consumer business, food and agribusiness.