2019 Global life sciences outlook - Focus and transform | Accelerating change in life sciences - Deloitte
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
2019 Global life sciences outlook Focus and transform | Accelerating change in life sciences
2019 Global life sciences outlook l Focus and transform | Accelerating change in life sciences
Contents
Outlook 3
Economic overview 4
Focus 12
Transform 23
Questions/actions leaders should consider for 2019 39
Appendix 41
Endnotes 43
Contacts 53
22019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences
Outlook
2019 will continue to see a focus on digital transformation in life sciences.
This transformation is about using technology symbiotically and strategically,
not just adopting a particular technology or device. Data is fast becoming
the currency of life sciences, and digital enterprises are building a new
business model for the future.1
In 2019, how can leaders move forward and accelerate change in life
sciences? They should Focus and Transform.
••Focus on patients and regulators as partners, building partnerships that
are strategic and relationship-driven
••Focus on external innovation and expanding a richly
networked ecosystem
••Focus on mobilizing data and collaborating with nontraditional partners
like startups and tech giants
••Focus on outsourcing for advanced technologies and manufacturing
capabilities, and choosing vendors who share similar values and
risk profiles
Transforming means aligning the enterprise to deliver an exceptional
customer and patient experience, using data intelligence to create value,
and evolving a digital culture and new leadership styles. While this type of
change may be challenging, it is likely to be essential to accelerating change
in the year ahead.2
32019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences
Economic overview
Global health spending is on the rise. The Growth trends US$900 billion in 2019 to US$1.2 trillion
compound annual growth rate (CAGR) for by 2024. From 2018 to 2024, CAGR for
Life expectancy
health care spending across 60 countries pharmaceutical drugs is expected to be 6.4
is predicted to increase 5.4 percent for the Overall, life expectancy at birth is rising percent, or six times the 1.2 percent over
period 2018–2022, compared to just 2.9 rapidly and expected to reach 74.4 years 2011–2017.7 Drivers of growth are predicted
percent over 2013–2017. The overall share by 2022, up from 73.3 in 2017. Falling infant to be novel therapies that address key,
of Gross Domestic Product (GDP) devoted mortality is contributing to most of the unmet needs and increased access to
to health is forecast at 10.5 percent for gain.4 However, the US Centers for Disease medicines, as a result of new pricing policies
2019. Per-person spending varies widely Control and Prevention (CDC) reports that around the world.
by country—from US$11,674 in the US to life expectancy in the United States fell for
Challenges to growth include payer scrutiny,
just US$54 in Pakistan. Except for North the third year in a row, to 78.6 years.5
sales losses due to genericization, and
America, all regions anticipate spending to
Pharmaceutical drug and disease trends competition from biosimilars. In 2019, it is
accelerate compared to the growth over the
estimated that US$19 billion in prescription
period 2013–2017.3 Global pharmaceutical spending is
sales may be at risk due to patent expiries,
predicted to outpace overall health
with approximately half resulting in lost
care spending.6 Worldwide prescription
sales.8
drug sales are expected to rise from
Figure 1. Worldwide prescription drug sales, 2018–2024
1400
1200
+6.4% CAGR 2018–24
1000
800
600
828
749 785
663 706
583 608 631
400 590 572 569 581 565 576
558
262
240
216
200 192
151 169
125 138
94 100 112
69 77 82 88
100 104 109 114
67 70 76 78 80 81 84 89 95
60 66
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Prescription excl. Generics & Orphan Orphan Generics
Source: EvaluatePharma, 2018
42019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences
Regional and country outlooks, •• United Kingdom: A major exporter of •• India: The world’s tenth-largest
2018–2022 pharmaceutical products. Pharmaceutical pharmaceutical market in US-dollar terms.
sales are up 5.7 percent annually. Private expenditure is expected to drive
Regionally, transition economies9 are
However, continued uncertainty around growth. In particular, the increased use of
expected to be the fastest-growing market,
Brexit throughout 2019 may disrupt online pharmacies is creating a demand for
averaging 9.3 percent per year, with the
trade. Pharmaceutical sales in the United more advanced, costly medicines among
highest growth expected in the Ukraine
Kingdom are expected to rise at a CAGR India’s growing middle class. NCDs account
at 15.2 percent CAGR in US-dollar terms.
of 4 percent in nominal local-currency for 53 percent of deaths, while diabetes
Latin America is likely to be the slowest at
terms.18 Age-related diseases, including accounts for only 2 percent. The leading
3.6 percent growth per year. North America
dementia, (especially Alzheimer’s), cause of death is ischemic heart disease
is expected to remain the largest regional
Parkinson’s, rheumatism, osteoporosis, followed by chronic obstructive pulmonary,
market, averaging 4.9 percent growth per
and metabolic disorders are on the rise, diarrheal, and cerebrovascular diseases.24
year, but will see a fall in its share of total
and the UK’s obesity rate is among the
pharmaceutical spending to 34.8 percent Pharmaceutical Research &
highest in Europe. The number of people
by 2022.10 Development (R&D)
with diabetes is expected to reach 5.2
million by 2025, from 4.5 million in 2016, with Worldwide pharmaceutical R&D spend is
•• United States: While pharmaceutical
cancer and circulatory system diseases being expected to decrease from 4.1 percent
spending is expected to rise at a CAGR
the leading causes of death in England and CAGR in 2018 to 3.1 percent in 2019.
of 5.4 percent over the forecast period,
Wales.19 Companies may improve R&D efficiencies by
a sharp deceleration may be expected
using big data and predictive analytics, or by
by 2020 in anticipation of a possible
•• China: Pharmaceutical sales are expected directing less revenue toward replenishing
cyclical downturn in the US economy and
to see a CAGR of 8.7 percent in nominal pipelines. Overall, R&D spend from pharma
continued political uncertainty. In 2019,
local-currency terms. Central government and biotech companies is expected to be
Americans without health insurance will
reforms represent a maturation of the US$177 billion in 2019, compared to about
not face a penalty, and private insurers
market,20 and the recent expansion of US$171 billion in 2018.25
may shift their focus to younger and
drug reimbursement lists is expected
healthier clients and low-cost policies. According to Deloitte’s annual study,
to fuel demand. In the next year, there
It is predicted that the public sector Measuring the returns from pharmaceutical
will likely be continued concerns around
will struggle to cover costly care for the innovation, projected R&D returns for
corruption and safety as a result of
elderly and low-income families.11 Heart 12 large cap biopharma companies, have
recent drug scandals.21 However, evolving
disease and cancer are the leading causes fallen to their lowest level in nine years,
invoicing systems are being designed
of death in the United States.12 at 1.9 percent in 2018, down from 10.1
to streamline distribution channels and
percent in 2010. The cost to bring an asset
prevent corruption.22 Noncommunicable
•• Japan: The second-largest pharmaceutical to market has increased to record levels in
diseases (NCDs) account for 85 percent
market after the United States. Its aging 2018 (to US$2.168 million) but the forecast
of deaths. Other leading causes of death
population is expected to continue to peak sales per asset have more than halved
are cerebrovascular disease, ischemic
drive demand for drugs to treat cancer, since 2010 (from US$816 million in 2010 to
heart disease, chronic obstructive
diabetes, cardiovascular disease, and US$407 million in 2018). In contrast, more
pulmonary disease, lung cancer, and
other age-related conditions.13 However, specialized biopharma companies are
Alzheimer’s, according to the latest data
Japan is the only declining market among outperforming these large cap companies
from 2016. The share of people over 65
major countries,14 despite the launch of with projected returns of 9.3 percent in
is expected to rise to nearly 14 percent
health technology assessments (HTAs) 2018, as despite higher development costs,
by 2022. A chronic-disease plan, targeting
aimed at improving cost efficiency.15 they have higher projected pipeline values.26
cardiovascular disease, cancer, and
Pharmaceutical sales in Japan are
chronic respiratory diseases, aims to Biotech
expected to significantly lag16 behind the
cut deaths for 30- to 70-year-olds by 10
6.3 percent worldwide average over the Biotechnology products are expected to
percent by 2020.23
forecast period.17 contribute steadily to sales, rising to 52
percent of the top 100 product sales by
52019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences
2024, from 49 percent in 2017. In 2019, accelerating growth. The Chimeric Antigen In 2019, safety, efficacy, and costs will likely
biotech is forecast to represent 27 percent Receptor T-cell (CAR-T) therapy market is continue to be the biggest challenges in
of the global market, and by 2024, 31 projected to increase at an annualized rate this sector.34 As these drugs comprise
percent.27 of over 51 percent during the time period, substantial shares of payer budgets, they
2018–2030.30 may face a backlash. Payers’ decisions
To date, Japan has fostered a series of
to reimburse a drug that may carry a
licensing deals, contract manufacturing The first two CAR-T immunotherapies,
significant price tag will heavily depend on
tie-ups, and mergers and acquisitions, as well as a novel gene therapy targeting
the drug’s value, with many ways for value
and continues to be an attractive place for a disease caused by mutations in a
to be determined.35 The therapy could avert
biotech firms to do business. Japan became specific gene, gained US Food & Drug
downstream medical costs or be justified by
the world leader in regenerative medical Administration (FDA) approval in 2017.31
the payer due to low patient numbers. Ten
products with the introduction of the These therapies received Priority Review,
percent of prescription drug spending is on
Pharmaceuticals and Medical Devices Act in Breakthrough Therapy, and Orphan Drug
orphan indications, or about 1 percent of
2014.28 designations, demonstrating the FDA’s
approximately US$3.7 trillion in US health
commitment to expediting the development
Orphan drugs, next-generation cell and care spending for 2018.36
and review of these groundbreaking
gene therapies
treatments.32 Cellular and gene therapy- Biosimilars
By 2024, the orphan drugs sector is related research and development is
Biosimilars have been on the market in
expected to almost double and account advancing rapidly in the United States
Europe for more than a decade, and India
for 20 percent of prescription sales.29 and China, where hundreds of trials are
released its first biosimilars guidelines
In particular, gene and cell therapies are underway.33
in 2012. But while Europe has approved
Figure 2. Rapid growth of cell therapies being investigated
Approximately an 80% increase within
the last 12 months2
Russia
21%
Canada
43% 14
25%
4% 28 50% 36%
18%
China
3% 4% 2%
USA and China are the
Europe 6% leaders in the development of
USA 20% 9% Japan
35%
cell therapies
18% 21%
335 32%
157 Middle East 19 CAR-T therapies
40% 11%
431 2% 79% represent the largest share of
5%
19% 8% 31% 42% the global cellular therapy
38%
11 Southeast Asia
13% 12%
market
1% 24%
12% 10% 13%
31% China has the largest number
8
of CAR-T therapies under
62% Australia investigation (280+) followed by
37% the USA (170+)
50%
8
13%
LEGEND
CAR-T cells
TCR-T cells
NK T cells Date as of September 24, 2018
TAA / TSA
iPSC/Gamma-Delta T cells Note: The percentages indicate the proportion of studies for certain intervention/therapy and
the number inside the donut hole indicate the grand total of studies conducted.
TIL
Source: Deloitte analysis
62019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences
65 biosimilars,37 and India currently has over United States.49 Public and government
50 approved biosimilars on the market,38 scrutiny of generics’ price increases, along Not-for profit generics:
the United States just made its first approval with underperformance, are causing some
Civica Rx
in 2017.39 To get biosimilars to market more companies to reevaluate their portfolios,
quickly and help save costs, the FDA is including divestiture of low-margin
A new business model
accelerating the approval process through products.50 Some companies and hospitals
its Biosimilars Action Plan launched in July are partnering and manufacturing their disrupting the generics
2018.40 The plan was updated in December own generics in response to shortages
segment. In 2018, Civica
2018, to better address anti-competitive and high prices.51 In 2019, generic drug
practices that abuse current regulations and shortages are likely to continue due to Rx, a not-for-profit generic
distribution systems.41 The new policies and issues with manufacturing quality and
drug company formed by
revised guidance aim to prevent companies capacity, including the impact of the
from gaming exclusivity provisions hurricane in Puerto Rico. Disruption in the a consortium of hospitals,
and ensure that when drugs transition role of pharmacy benefits managers (PBMs),
launched in the United
into biologics, they don’t receive extra and other players in the value chain, are
exclusivities they aren’t entitled to have.42 expected to be another factor in the future. States with the aim of
When markets become more competitive,
•• Europe: The European Medicines Agency addressing shortages and
regulators expect prices will fall, and more
access will be made available to patients.43 (EMA), which, as a result of Brexit, is high prices of lifesaving
moving from London to Amsterdam
The World Health Organization (WHO) in 2019, is showing an upward trend in medications. Attracting
is undertaking an effort to harmonize marketing approvals for innovative drugs the interest of 120 health
standards for biosimilars worldwide.44 In and generics.52
2017, it launched a pilot prequalification organizations, including
program for biosimilars in an effort to make •• Japan: The government has a target of
the US Department of
expensive treatments for cancer more achieving an 80 percent market share
widely available in low- and middle-income for generics by September 2020, and it Veterans Affairs (VA), its
countries.45 is encouraging Japanese companies to
initial focus will be 14
develop generic drug production facilities in
Generics
lower-cost Asian countries. Not only would hospital-administered
Governments worldwide are looking this likely reduce drug prices in Japan, but
generic drugs.56 Civica Rx
to boost patient access to affordable it is expected to also strengthen Japanese
medicines and may increase demand for pharmaceutical sales across Asia.53 presents a new business
generic drugs.46 Over 2018–2024, US$251
•• India: Accounts for approximately 20 model—a non profit, non
billion in drug revenues are at risk from
patent expiries with established pharma percent of global generics output, and stock-bearing company
giants likely to struggle to compete against generic drugs account for three-quarters
of the Indian market by volume. Local with transparent pricing.
generics.47 While this may create growing
pipeline opportunities for generics, the production of generic drugs and vaccines It will own the right to
number of companies manufacturing keeps prices low, while local companies
are taking advantage of low labor and manufacture all products
generics is consolidating, and the number
of complaints about rising prices for some research costs to export generics.54 and be backed by the FDA.57
generics is increasing. Drug shortages may
•• Latin America: Governments are not
also restrict growth.48
only expected to focus spending on
generics, but also restrict imports of more
•• United States: The largest generics market
expensive medicines.55
in the world. Generic drugs account for
the majority of pharmaceutical sales in the
72019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences
Personalized medicine for personalized medicine are anticipated
to be reimbursement, clinical utility, data
The global personalized medicine market is
connectivity, and access.60 About 30 percent
expected to increase over 11 percent CAGR
of personalized medicine is focused on
for the period 2017–2024, with the help of
oncology.61
advances in health care analytics, artificial
intelligence (AI), and blockchain.58 In 2019, The FDA is planning a new 52-person
the shift to value-based, personalized health Office of Drug Evaluation Science (ODES)
care will likely require new platforms to to improve the review of new medicines
support the patient and many stakeholders and standardizing the approach for using
needed to deliver targeted breakthroughs personalized medicine, digital data, and
to patients.59 The most pressing challenges patient reporting.62
Personalized medicine: LinkDoc
Digital health startups are enjoying robust funding, especially in China.63 LinkDoc is
a Chinese medical data solution company that provides clinical, structured data and
personalized information to government bodies, insurers, pharmaceutical companies, and
research organizations. It serves China’s oncology hospitals, as well as 500 hospitals in over
30 provinces.64
LinkDoc’s tools work to provide better decision making, by standardizing health care data and
personalizing information, using AI and Big Data. Millions of clinical electronic medical record
(EMR) data can be converted into research-grade data. Its image-intelligent diagnosis system is
designed to increase efficiencies, while reducing rates of misdiagnosis or inaccuracy.65
Therapeutic focus
Oncology is expected to remain the dominant therapy segment, growing US$129 billion
in projected worldwide sales over 2017–2024, and reaching US$233 billion by 2024.
Immunosuppressants are expected to have the highest CAGR gain in the period, 2017–2024,
at 15.7 percent, followed by Dermatologicals (13 percent), Oncology (12.2 percent), and Anti-
anemics (11 percent).66
82019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences
Figure 3. Top 15 prescription drug & OTC therapy categories by worldwide sales, 2016–2022
Therapy Areas WW Sales 2017 (US$B) Projected WW Sales 2024 (US$B)
1. Oncology 104.0 233.0
2. Anti-diabetics 46.0 59.5
3. Anti-rheumatics 55.7 56.7
4. Vaccines 22.7 44.6
5. Anti-virals 42.4 39.9
6. Immunosuppressants 3.7 38.1
7. Bronchodilators 27.2 32.3
8. Dermatologicals 12.9 30.3
9. Sensory organs 21.6 26.9
10. Anti-hypertensives 23.0 24.4
11. Anti-coagulants 16.8 22.9
12. MS Therapies 22.7 21.5
13. Anti-fibrinolytics 12.7 20.4
14. Anti-hyperlipidemics 11.3 16.4
15. Anti-anemics 7.6 15.7
Top 15 445.0 683.0
Other 379.0 567.0
Total WW Prescription & OTC 825.0 1247.0
Source: EvaluatePharma, 2018
92019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences
Medtech in 2018, up from 31 in 2017.74 In a new •• China: The National Medical Products
Report on Non-Device Software Functions: Administration (NMPA) is targeting data
Medtech is projected to grow at a 5.6
Impact to Health and Best Practices, the integrity in a new checklist to guide on-site
percent CAGR over the forecast period
agency addresses medical software inspections of medical device clinical trials
2017–2024. In 2019, worldwide medtech
functions not part of SaMD.75 As more released in late 2018.84
sales are predicted to be US$475 billion,
devices become connected in the Internet
growing to US$595 billion by 2024. The Navigating geopolitical uncertainty
of Medical Things (IoMT), the FDA’s medical
fastest-growing device areas by CAGR are
device cybersecurity program is being Disputes over US health care policies are
predicted to be Neurology (9.1 percent),
strengthened to protect patients,76 as part expected to continue, causing uncertainty
Diabetic Care (7.8 percent), and General and
of the Medical Device Safety Action Plan.77 for all market players in the next few years.
Plastic Surgery/Dental (tied at 6.5 percent).67
There is also considerable uncertainty for
By 2024, In Vitro Diagnostics is expected •• United Kingdom: The National Institute Western Europe, where Brexit has raised
to be the largest medtech segment with for Health and Care Excellence (NICE) risks for some economies and health care
annual sales of US$79.6 billion, followed by set new standards for digital health systems across the region.85 If no deal is
Cardiology and Diagnostic Imaging. Medtech technology development in 2018. The new reached by 29 March 2019, the United
R&D spend is estimated at US$39 billion by guidance outlines what evidence is needed Kingdom has a contingency plan to remain
2024.68 when innovators submit health care apps part of the EU medicines and medical
and wearable devices to National Health devices regulatory networks. Medicines
Software-as-a-Medical Device (SaMD) is
Service (NHS) commissioners.78 and medical devices have been prioritized
a rapidly growing area of innovation that
on alternative routes to maintain access
regulators across the globe are working to
•• European Union: The EU is preparing for to these supplies for UK patients.86 On
de-risk and make more agile.69
a new regulatory framework in 2019—the 4 January 2019, the UK’s Medicines and
Medical device and SaMD regulations Medical Devices Regulations (MDR) 79 and Healthcare products Regulatory Agency
In Vitro Diagnostics Directive (IVDR).80 (MHRA) issued “Further guidance note on
•• United States: In 2019, the FDA will The MDR provides a three-year transition the regulation of medicines, medical devices,
launch its software precertification (Pre- period to 26 May 2022, and the IVDR, and clinical trials if there’s no Brexit deal,”
Cert) program for Software-as-a-Medical a five-year transition to 26 May 2022.81 whereby UK Marketing Authorizations, which
Device70 and recently released a new Once in place, the new regulations will are currently Centrally Authorized Products
working model: Developing a Software be stricter than those imposed by the in the EU, will be grandfathered in on
Precertification Program.71 The agency will FDA, particularly with the depth and exit day.87
review previous software approvals and breadth of clinical evidence required and
Pricing pressures
also test its model on some new software post-market product monitoring.82 The
submissions, applying the standards regulatory change will result in product Pricing pressures on the pharmaceutical
it uses for medical devices classed as reclassification and recertification for segment are predicted to continue,
medium-risk. Data-sharing between many of the medical devices and in vitro driven by governments, patent losses,
developers and reviewers will also be diagnostics on the market today. Notified and increased promotion of generics and
tested.72 The FDA is updating its Medical bodies and industry are expected to biosimilars.88 To deal with these pressures,
Device De Novo Classification process, struggle to meet the tight timelines some pharmaceutical companies are buying
amending the definition of a medical required. rivals to streamline marketing staff or
device (excluding certain medical software buying unique treatments that do not have
functions). This process aligns medical •• Australia: The Therapeutic Goods lower-cost alternatives.89 Many will continue
device quality systems with international Administration (TGA) released guidance to look for ways to increase efficiencies,
standards and finalizes the FDA’s proposed on SaMD regulation in late 2018. However, enhance trial savings, and demonstrate
rule for procedures and time frames for the TGA is concerned that its current value.90
requesting internal agency supervisory regulations underestimate the risks posed
review.73 Digital health companies by many SaMDs and its advice is likely to
contributed to 38 De Novo authorizations change in the near future.83
102019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences
•• United States: Rising health care Branded Medicines Pricing and Access. 500 percent. The Central Drugs Standard
costs are driving greater scrutiny of the The scheme places a 2 percent cap on the Control Organization is launching a
economic value of new treatments by growth in sales of branded medicines to digital database that will list information
government and private payers.91 The US the NHS, potentially saving approximately on pharmaceutical producers and
administration is looking to test lower drug £930 million in 2019. Pharmaceutical medicines.107
prices and raise pricing transparency.92 companies are expected to repay the NHS
Expanding access to drugs, cell and gene
The aim is to align US prices more closely for spending above the cap but will benefit
therapies
to those abroad, but some believe from faster NICE appraisals, and patients
this could dampen innovation.93 The are likely to get access to new medicines In 2019, life sciences companies should align
potential International Pricing Index Model up to six months earlier than today.103 their commercial models with changing
for Medicare Part B Drugs94 would affect market dynamics. If physicians are no
certain pharmaceutical companies more •• France: The government has an longer the key decision makers, and clinical
than others.95 Also proposed is giving agreement with the Federation of programs are no longer sufficient to gain
Medicare Advantage plans the option Medicines Enterprises to regulate the price market access and product differentiation,
of applying step therapy for physician- of medicines from 2017 to 2019. 104 life sciences companies may want to
administered and other Part B drugs96 as demonstrate the economic and humanistic
well as overhauling how physicians are •• Germany: The government approved value that their products provide to all
reimbursed for prescription drugs through the German Drug Law (AM-VSG) in 2017, stakeholders, not just the clinical benefits.108
Medicare Part B.97 In addition, legislation aimed at ensuring Social Health Insurance Market access becomes a priority, before
is under review to eliminate rebates on financial stability and extending the price field force, calls, samples, details, and Direct-
prescription drug purchases.98 Rebates moratorium for all patent-free drugs until to-Consumer (DTC).
are negotiated by PMB managers and 2022.105
Trade wars and supply chains
used by large health plans and employers
to lower prices for their clients.99 New •• Japan: The government is seeking to Global pharmaceutical companies depend
alternatives are likely to emerge, and constrain pharmaceutical prices, while on stable supply chains, and uncertainty
drug manufacturers will need to rethink promoting innovations to improve about trade policy could cause disarray
their market-access approach and treatment. A full HTA for drugs is being in supply chains. Scores of biopharma
pricing strategies. Some believe lower put in place to ensure that only the most materials and medical devices from China
prices overall could be more beneficial cost-effective treatments are used. The are targeted in the US$100-billion trade war
to consumers.100 Should the PBM model ministry is also increasing the frequency of between the United States and China.109
be disrupted in 2019, new investments in its price reviews.106 About half of the goods the United States
technology, processes, and organizational imports from China could be subject to
capacity will likely be required.101 •• India: The Drug Price Control Order tariffs.110
(DPCO) regulates the prices of 384 drugs
Uncertainty also makes it very difficult for
•• United Kingdom: The Health Service on its National List of Essential Medicines.
companies to make investment decisions.
Medical Supplies Act grants public In the second half of 2018, it announced
For global pharmaceutical companies,
authorities more power to regulate plans to expand the list to include more
major decisions on strategic investment
medicine prices.102 For 2019, the medical devices and consumables and was
can have a time horizon of at least 10 years.
Association of the British Pharmaceutical preparing new rules to cap distribution
In 2019, a lack of a clearly foreseeable end
Industry (ABPI) and the NHS have agreed margins for pharmaceuticals amidst
to the US-China trade war could put future
to a new voluntary scheme regarding complaints of some margins increasing
investments at risk.111
112019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences
Focus
Strategic focus on deal-making and In 2019, external innovation is likely to Licensing
external innovation continue to be a strategic focus for pharma
According to Deloitte research, licensing
companies that may face patent expiries,
The continuous search for the next leads biopharma deal-making activities,
competition from and biosimilars, weak
generation of market-leading medicines and constituting 93 percent of deals in the
new drug pipelines, and growing technology
decreasing returns in R&D make external data set.115 The first three months of
needs.113 But many factors can determine
deals attractive sources of innovation for 2018 resulted in almost 20 percent more
the optimal deal structure. Below are some
biopharma companies, either through licensing deals compared to the same
of the most successful strategic reasons
licensing, mergers and acquisitions (M&A), period in 2017.116
buyers and sellers might consider for each
and/or joint ventures.112
type of deal.114
Figure 4. Deal types and potential strategic rationale, advantages, and disadvantages
Deal type Rationale-buyer/ Rationale-seller/ Advantages Disadvantages
licensee licensor
Licensing •• Access to talent and •• Access to capital and •• Access to new •• Shared decision making
expertise capabilities to help capabilities or can complicate or delay
get to the next value technology operational progress
•• Traditional contingent inflection point
payment structure •• Access to new •• Each party is dependent
allows risk sharing •• Upside associated with geographic regions on the other to achieve
the asset is retained key milestones or goals
•• Economically viable
option budgets, •• Company investors may
especially when M&A be seeking an IPO
valuations are high
Merger & acquisition •• Ownership of new •• High valuations •• Streamlined decision •• Alignment on valuation
(single-asset product(s) could be lucrative for making after transition for public companies
companies or deals) current investors and of ownership may be difficult
•• Redundant capabilities employees
are reduced, thus •• Contingent M&A •• Tend to be more
lowering costs •• An exit option for deals could allow for disruptive in nature;
private investors additonal payments tied may result in loss of
to value creation key personnel and tacit
knowledge
•• Potential tax benefits
for the buyer •• Consolidation of assets
could have a negative
accounting impact
Joint venture •• Able to align on goals with little definition of specific •• Ideal for areas where •• Complex financial
products or technology scientific mechanisms structure
are not well known
•• Complementary capabilities are maximized
•• Entry into new or
unknown markets
Source: External Innovation – How biopharma companies are bolstering R&D pipelines through deal-making, Deloitte Center for Health Solutions, 2017
122019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences
M&A The trend of different types of structures is opposite to pharma’s traditional, legacy
likely to accelerate, but we’ll likely see less culture. In the future, next-generation
Over the last ten years, the top 10 pharma
of the traditional framework of just buying therapy startups are more likely to mesh
companies with the highest return on
a company outright. Instead, we can expect into their own mergers and could form a
investment (ROI) spent an average of 35
more complicated, innovative structuring new breed of company with a very different
percent on M&A from their total R&D and
with use of options, milestones, and culture around innovation and life sciences.
M&A investment.117 The biotech segment is
partnerships. Among the challenges is pharma’s value
seen as one of the most active in M&A.118
chain, which is built around traditional
However, as trade tensions between the Focus on new entrants
products, while next-generation therapies
United States and China escalated in the third
As the world continues to digitize, life are being built around the patient. The cost
quarter of 2018, biotech M&A experienced
sciences incumbents may see next- of goods sold is also much greater than the
the slowest quarter since 2013.119 High-risk
generation or technology startups and 20–25 percent average that exists in life
sectors like biotech are challenged in volatile
large tech companies continue to threaten sciences today, as is the revenue required
times, and 2019 is likely to continue to be
the status quo. Some new entrants to maintain return on innovation. While
volatile for pharma and biotech.120
are diversifying from other industries, costs are expected to go down, they will still
While expectations around immuno- while others are innovating with new likely be significantly higher than most other
oncology have been tempered, cell and capabilities.125 Traditional pharma and therapies in the marketplace.
gene therapies are expected to remain medtech companies can take advantage of
Smaller companies, often with one asset,
popular with investors in 2019.121 A new these opportunities and drive innovation or
are increasingly trying to control that asset
era of deal-making is accelerating among find themselves increasingly on the outside
throughout its life cycle—or for a bigger
biopharmaceutical and genomics companies and in a reactive mode.
portion of the life cycle. The digital world is
looking for a leadership position in next-
Startups: Key drivers in the disruption making it possible for smaller companies,
generation therapies.122 In particular, China
of next-generation therapies without the infrastructure of Big Pharma, to
is in a race with the United States for "bio-
acquire capabilities that could put them on
intelligence," investing over US$9 billion in While only a few big pharma companies are
par with larger companies.
expanding AI and biotech capabilities to developing next-generation therapies, more
commodify biological and genomic data.123 than 250 startups are focused on gene-
based therapeutic solutions.126 As these
Large, transformative acquisitions in the
startups mature, pharma companies who
US$60–70 billion range defined 2018 and
may be looking to buy these companies can
the beginning of 2019. This year, companies
expect a hard time acquiring this innovation.
may be rearranging portfolios based on the
Startups bring a whole new mind-set and
coming pricing controls, and acquisitions are
tech culture that appears to be dramatically
expected to be very strategic, with a focus
on core therapies or specialties. As a result,
Figure 5. Value creation of cell and gene therapies
a lot of activity is expected in divestitures.
Some companies are being creative about 45.0 100 %
divestitures and using alternative financing
2018–2024 Cumulative sales of Recently
40.0 90 %
Launched and Pipeline Products ($bn)
models, like alliances and joint ventures, to 35.0 80 %
70 %
keep a pulse on new therapies.124 30.0
60 %
25.0
Joint ventures 20.0
40% 50 % %
40 %
15.0
Large companies are expected to pool 30 %
10.0
resources and create more innovative joint 20 %
05.0 7% 10 %
ventures and partnerships to look at parts 00.0 +0 %
of their business that might be non-core, Cell Therapy Gene Therapy
but enable them to divest, monetize, or gain Top 20 Pharma Non-top 20 Pharma Top 20 Pharma Share of Sales
value.
Source: Evaluate Pharma, May 2018
132019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences
CAR-T therapy: Nanjing Legend Biotech
More than 200 CAR-T therapies are being investigated in China.127 CAR-T cells have become a
major source of cellular immunotherapy in China, and the number of clinical trials in progress in
China continues to grow.128 In March 2018, Nanjing Legend Biotech received approval from the
Chinese FDA (CFDA) for the first cellular therapy to officially enter the clinical trial stage in China.
In 2017, Nanjing Legend reported remarkable data to the oncology field for its experimental
anti-BCMA CAR-T treatment on 35 relapsed multiple myeloma patients. The data showed that
a total 94 percent, or all but two patients, had shown clinical remissions (complete response
or very good partial response) in two months after receiving the treatment.129 However, CAR-T
therapy competition in China is intense, and in late 2018, Nanjing Legend was facing scrutiny
over its data.130
Figure 6. Next-generation therapies
Adoptive cell transfer In 2019, lack of manufacturing
Involves ex-vivo genetic
Monoclonal antibody capacity is expected to continue
modification of the body’s Antibodies that bind specifically to present a significant challenge
immune cells to arm the cells to to malignant cells and stimulate
target specific tumor antigens the body’s immune system to for next-generation therapies.
upon reinfusion attack those cells Many startups are not vertically
integrated and do not have
Immunotherapies the necessary manufacturing
contain active cells or genetic capability, e.g., to produce
constructs that exert a
metabolic, immunologic, or vectors. As a result of hundreds
other mechanism of action to
target cancer of ongoing clinical trials and
projected drug launches, the
contract manufacturing capacity
is already being taxed. Wait
Gene therapy
times can be 12–24 months.
Contains an active substance
In 2019, companies should
that consists of a recombinant continue to develop, or contract,
nucleic acid used in or Cancer vaccines
administered to regulating, manufacturing capability, without
repairing, replacing, adding, or Contains or consists of cells or
deleting a genetic sequence tissues that have been subject to compromising quality and safety.
substantial manipulation to
influence therapeutic modulation
Note: Other types of immunotherapies exist, such as Oncolytic virus therapy, Nonspecific immunotherapies,
and Cytokine and Immunomodulators, many of which are still in early stages of development and testing.
Source: Deloitte analysis
142019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences
Tech giants: Partners, competitors, or
chaos Obsessed with customer experience: Amazon
Six of the top ten tech giants are diversifying Amazon’s deep knowledge of the customer experience is one
into health care and life sciences. They have
a cumulative value estimated at almost of biggest threats to traditional players in life sciences and
US$4 trillion131 and are investing in startups. health care. In 2018, Amazon reportedly paid almost US$1
Alphabet’s venture arm, Google Ventures
(GV), allocates a third of its funding to 60 billion for PillPack,140 an online full-service pharmacy, in one of
health care and life sciences companies the most transformative deals in health care by a tech giant.
from genetics to telemedicine.132
Licensed to operate in all 50 US states, PillPack is dedicated
About a third of the world’s data is
generated from health care, and technology to simplifying customers’ lives and reducing costs with its
companies specialize in data.133 In health technology. Customers receive a personalized bi-weekly
care, tech giants are using Big Data
and AI for prediction and prevention.134 package containing presorted medications, a recyclable
For example, AI shapes every aspect of dispenser, and any other medications that cannot be placed
Amazon’s business,135 and it recently
launched Amazon Comprehend Medical into packets, such as liquids and inhalers. A medication label
to mine and decode unstructured data in explaining each pill and how it should be taken is included in
medical records using machine learning.136
For Alphabet, the future is structured data every shipment.141
and AI,137 including its deep learning platform
DeepMind Health.138 Amazon says it selected PillPack because the company is
Tech giants are developing medical-grade well run and matches its obsession for a highly differentiated
consumer technology focused on both customer experience.142 News of the acquisition reduced
diagnostics (e.g., Amazon Echo) and
therapeutics (e.g., Alphabet’s Calico and market cap by US$11 billion off major US pharmacy/drugstore
Verily), and using their deep understanding companies.143 Delivery giants are also rattled by the threat
of the consumer to enhance and simplify the
patient experience.139 of Amazon Air.144 Is it a sign punishing incumbents for not
For life sciences, tech giants can be: already being where Amazon appears to be going?145 Amazon
•• An opportunity as potential partners, is poised to control every mile of the customer experience.146
•• A threat as competitors, or
business competitors, in the hope of Regulatory disruption
•• An opportunity and a threat by disrupting mutually beneficial results. Pharma and medtech companies are
a specific area and creating chaos.
A survey by Deloitte and AdvaMed also witnessing regulatory disruption as a
In the future, a tech giant, or one of the found medtech R&D leaders looking to result of tech companies. A common tech
larger data companies, may begin to push nontraditional partners for help to drive archetype is the company who sees beyond
so far into R&D that they come up with innovation. Over the next two years, traditional regulatory approaches when
their own hypotheses or even seek out 82 percent of those surveyed plan to entering a market, disrupting the status quo
a different type of compensation. As a collaborate with organizations outside of and building consumer buy-in quickly. Once
result, they could have a real impact on medtech-like technology and health care behind a product or service, consumers may
R&D spend in the future, although this companies—almost double the exert public pressure on lawmakers, and
is not evident yet. In 2019, we may see percentage today.147 ultimately, regulators. The trend could make
more "coopetition," collaboration between the process less burdensome.
152019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences
We’ve already seen the accelerated push in
approvals for CAR-T and next-generation Regulatory disruption: Apple Watch152 ECG Tech giant
therapies as well the FDA’s Pre-Cert program receives its first FDA clearance.153
to expedite standards for SaMD.148 The
ECG app for Apple Watch149 was one of the The ECG app on Apple Watch154 Series 4 generates an ECG
most high-profile clearances receiving de
novo classification from the FDA.150 While
similar to a single-lead ECG. It can provide information about
this is a signal the agency is helping them heart rate and heart rhythm and enables classification of
to innovate,151 it may also be a threat to
traditional medtech companies and the way
atrial fibrillation (AFib). However, the app cannot be used to
they currently operate. identify heart attacks and other heart-related conditions,
Focus on expanding a richly networked blood clots, or stroke. In a clinical trial of approximately
ecosystem
600 subjects, the ECG app could accurately classify an
Digital technologies and massive
connectivity are creating rich networks
ECG with 99.6 percent specificity with respect to sinus
of connection, collaboration, and rhythm classification and 98.3 percent sensitivity for AFib
interdependence. As companies can more
easily deploy and activate assets they
classification for the classifiable results. The clinical validation
neither own nor control, opportunities and results reflect use in a controlled environment.155
risks are expected to grow exponentially.
Rich networked ecosystems could create Apple156 says the tool is not a diagnostic device, and patients
new value, provide a competitive advantage,
and accelerate learning. It appears the need
should consult their doctor for health advice. But with easy
for companies to translate learning into access to an ECG, patients are starting to inundate their
innovation has never been greater.158
doctors with data. Some doctors are concerned their time is
Managing third-party risk
being pulled from those who are actually sick. But better-
A growing, networked ecosystem, however,
may also carry risk. There could be the
informed patients are changing the culture of medicine, and
traditional risk of adapting to an increasingly the future is likely to continue to be a balancing act. Patient
complex environment, but there could
also be a broader-based and extended
support organizations could play a pivotal role.157
enterprise risk. Organizations may lack
expected to be critical, and leaders should of the customer experience, life sciences
the necessary visibility and monitoring
look for partners that match their own risk companies should keep patients at
of third-party activities and platforms.159
profiles.160 Smart companies will want to the core, and start thinking “outside
In life sciences, this is seen as a possible
be proactive in understanding the risks in” when designing value chains. They
risk because companies are ultimately
associated with “cyber everywhere."161 should create coherent and meaningful
responsible for any regulatory mishaps
experiences through the entire chain of
and security breaches by vendors and Keeping patients at the core
patient interactions—from R&D to product
contracted partners.
As an increasing number of processes launch and commercialization phases.162
New data partners and the Internet of and tools become digitized and more When patient-centricity is engrained into
Things (IoT) are already dictating a need patient-centric, patient expectations grow. a company’s culture, a lot of new creative
to better manage "cyber everywhere." In order to gain a better understanding ideas may be uncovered to create value.163
In 2019, management frameworks are
162019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences
Figure 7. Patient experience feedback loop
Motivate action
Measure and adapt Gather insights
Plan and execute
Develop strategy
Quick wins
Business
Data
Organization
Operations
Tech Operations
Model the experiennce
Source: Elevate the patient experience, Deloitte Patient Connect, 2018
Design thinking: Big Pharma
The human aspect is critical. Design thinking brings empathy to innovation. The first step is
to gain an empathic understanding of the problem you are trying to solve. When coming up with
solutions, refocus back to the end user, the people you are trying to benefit.164
A patient with systemic sclerosis was invited to meet with the team designing a clinical trial. The
patient explained, “I’m not sure if you realize, but with the disease, I am in a wheelchair now. If you
want me to come to your meeting at eight or nine o’clock, I need to wake up at three o’clock in the
morning. I need to get dressed, I need to style my hair and do my makeup.” She lost part of the
skin on her chin and wanted to look her best. She added that she also needed assistance from her
husband, and the whole ordeal was a nightmare.165
In lieu of an in-person meeting, the team met via Skype with the patient, and soon realized, that to
enroll this patient in the clinical trial, or any patients with this disease, in no way could they be asked
to travel, possibly take public transportation, and have a 20-minute visit every week. Patients may
drop out of the trial and not be compliant—not because they don’t want to, but because they simply
can’t as a result of this disease. This is not something readily understood within study teams. Even
with highly qualified people, MDs and PhDs, they tend to look at the scientific needs and aspects,
and not the human ones as much. This experience changed that mentality and the approach, as well
as the business.166
172019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences
Focus on outsourcing Outsourcing for manufacturing compliant operations as pharmaceutical
capacity companies carry the overall responsibility
Over the next few years, major
of oversight. Communication should be
pharmaceutical companies are expected In 2019, as cell therapy manufacturing
paramount, and technology can inform
to shift from transactional outsourcing volumes rise, demand for cell therapy
better decision making, especially in real
relationships to more strategic, relationship- manufacturing and related services
time.180 Advanced technologies, such as
based models for biologics, data-driven is expected to grow.172 Contract
AI, machine learning, and the IoT, appear
clinical innovation, and manufacturing manufacturing organizations (CMOs), and
to be taking knowledge management in
capacity.167 Also, more companies will likely contract development and manufacturing
the pharmaceutical segment to the next
be outsourcing expertise in advanced organizations (CMDOs) will continue to
level. Novel visualization tools enable data
technologies, such as AI, robotic and be to be a strategic and integral part of
to be interpreted more easily in multiple
cognitive automation, and cloud computing. the global supply process. The shift to
dimensions.181
Outsourcing technology providers could biologics, personalized medicine, and
increase efficiencies, lower costs, and specialized, often low-volume, small Collaborating with new partners for
decrease clinical timelines.168 molecules is creating a shortage in transformation
manufacturing capacity.173 Only one-
Outsourcing for biologics Patients as partners
third of manufacturing—whether in the
In 2019, biopharmaceutical outsourcing development stages or after commercial The digitization and consumerization of
will likely continue to drive sector growth launch—is estimated to be conducted in- health care is changing the way patients,
as third-party contractors provide more house.174 providers, and life sciences innovators
external expertise, technology, and capacity interact. Today, patients are becoming
In 2019, pharmaceutical companies should
that is unavailable in-house. Companies partners in the design of their health care
focus on building more strategic, long-term
are increasingly partnering with academia experience, and companies should explore
partnerships with CMOs and CDMOs
and contract research organizations (CROs) a greater focus on customer experience.182
to streamline the supply chain—better
for R&D capabilities.169 Biopharmaceutical The future of customer experience could
managing capacity, improving efficiencies,
delivery devices, such as prefilled syringes, become more personalized and patient-
and minimizing time-to-market.175 CDMOs
could be another outsourcing opportunity centric using interoperable data and AI.183
are expanding to become full-service
as drug companies look to make products
providers and "true partners" that can
that are easier for physicians and patients In the future, our groceries
offer a wider variety of capabilities.176
to use.170 would be ordered automatically
Sponsors should evaluate a partner, not
Outsourcing for data-driven clinical just on technical capability and capacity, but based on our personal
innovation experience, quality, and reputation.177 preferences, health status, or
Patient-centricity, risk-based monitoring, The new vendor relationship
nutritional needs. While sleeping,
digitization of clinical trials, adaptive our device or digital assistant
The relationship between sponsor and
trials, and analytics are all having an might determine that the pollen
vendor is now much more collaborative, and
impact on clinical outsourcing. In the count is too high for a morning
the most effective relationships are built on
future, outsourcing decisions will likely be workout. The workout and our
shared understanding.178 Pharmaceutical
influenced by patients’ experiences with
companies should have an outsourcing schedule would be rearranged
vendors and CROs. Vendors that provide
game plan and predetermined objectives with other digital assistants
platforms to effectively integrate data from
for how vendors can meet requirements. finding a time when air quality is
multiple systems into a central decision-
A broad array of members from cross-
making tool should be in demand. The predicted to be better. A refill for
functional teams should be a part of vendor
need for flexibility in study designs and new our allergy medication would be
selection, including project management,
drug supply requirements could influence placed and delivered by a drone
R&D, and quality control.179
decision making, and more outsourcing
before we even leave the house
work may come to smaller vendors and Building a close relationship with regular
CROs that have better overall predictive facility visits should be key to maintaining in our self-driving car.184
performance analytics.171
182019 Global life sciences outlook | Focus and transform | Accelerating change in life sciences
Patient-centricity means moving beyond Patient advocacy groups
engagement and developing a true Venture philanthropy:
As patients’ expectations and demands
partnership with patients—leveraging
increase, patient advocacy groups in many Dementia Discovery Fund
patient data and understanding the burden
of disease, the caregiver’s role, access
disease areas are becoming organized, (DDF)
funding research, and having an effect on
decisions, and the health care systems
the regulatory environment.186 Life sciences The Dementia Discovery
involved. In addition, a patient-centric
companies are encouraged to take the first Fund (DDF) is a public-
approach can help life sciences improve
step in forming a symbiotic partnership
R&D productivity and may decrease the private fund created in
with patient groups. They could start by
number of patients who drop out
inviting patients into their research labs and 2015, in collaboration
of studies.185
facilities and giving them an opportunity to with the UK’s Department
Elevate the patient experience, from meet with scientific teams. These groups
of Health, the nonprofit
patient engagement to patient- could also provide regulatory insights due
centricity to their relationships with the FDA and other Alzheimer’s Research UK
regulatory bodies. (ARUK), and seven Big
1. Digitize the core Pharma companies. Its
Reimagine the core patient support Public-private partnerships: The
and engagement systems and changing nature of giving scientific advisory board is
processes to build the foundational
capability for higher-order initiatives. Patient advocacy groups, along with
made up of neuroscience
Digitize and automate core manual national disease organizations and venture and drug discovery experts
workflows with new digital front-ends.
philanthropy, fund biomedical research. from several of its partners,
2. Focus on patient experience Many of these nonprofits are cash-strapped.
Enable individualized patient journeys
Funding sources appear to be shifting and
as well as independent
and align services, workflows, and
interactions to those journeys. Refocus corporate giving is undergoing a transition, advisers. By applying the
the digitized processes and systems threatening the future of biomedical venture capital model,
to collect and analyze interaction data research. Life science companies should
that enhances the understanding of pay close attention to these trends. The
DDF appears to be looking
patients’ experience on behavioral,
more philanthropic capital that is put toward to disrupt dementia
clinical, and socioeconomic 188
dimensions. discovering the mechanisms of diseases, research.
the more opportunity there will likely be to
3. Make the engagement precise
Leverage the data from patient develop new therapies.187
interactions for insights and evidence Regulators as partners
that inform targeted and proactive
interventions and encourage The future is expected to be trust
Regulators around the world appear to
adherence and behaviors that result in partnerships formed between the sector
be benefiting from more collaborative
the desired health outcomes. and regulators that optimize the use of
approaches, such as coregulation, self-
new technology and ensure more effective
Source: Elevate the patient experience, Deloitte regulation, and international coordination.
compliance. We expect to see regulators
Patient Connect, 2018 This approach protects consumers, while
coordinating nationally and internationally to
simultaneously encouraging innovation.
handle products and devices for a broader
In today’s new regulatory environment,
set of players in the ecosystem—including
regulatory relationships are seen as
nontraditional players that have entered the
increasingly based on a “win-win” data-
life sciences market.190
driven approach. The life sciences sector
appears to now view regulatory functions
as a strategic asset and are developing
the skills to effectively collaborate with
regulators.189
19You can also read
