If the last few years felt like the Dark Ages for the life sciences industry, its Renaissance is emerging, fueled by new growth and the promise of reshaping processes and patient care with powerful new technologies. The upbeat vibe is palpable and uniquely different from what the industry has experienced during the past three years.
The industry as a whole is returning to growth. During 2011 to 2014, big pharma as a cohort, including such companies as AstraZeneca, GSK, Novartis, Roche, Pfizer, Eli Lilly, Merck, BMS, and Sanofi, saw its compound annual growth rate (CAGR) decline nearly 5%. The industry now is expected to grow at a healthy 3% to 6% CAGR between 2015 and 2018.1 Four factors contribute to this:
Patent expirations are tailing off.
From 2009 to 2014, popularly known as the “patent cliff” years, more than $120 billion in global revenues were lost.2 Legendary products such as Lipitor, Plavix, Advair, Viagra, Seroquel, Zyprexa, Symbicort, Singulair, Cymbalta, Celebrex, Lunesta, Actonel, and Lexapro all went off patent. By contrast, a more modest $99 billion of global revenues are expected to be lost in the coming five years.3
Launch activity is becoming more robust.
In the coming five years, almost 200 products are expected to be launched, nearly double the number for the previous three years.4 More importantly, the industry is poised to tackle some of the world’s most challenging unmet medical needs, including new therapies to treat cancer, hepatitis C, and Alzheimer’s disease.5
R&D activities and drug approvals are increasing.
As recently as 2012, R&D productivity, as measured by the number of new drugs launched for every dollar of R&D spend, fell to nearly a quarter of what it was in the late 1990s. In fact, between 2005 and 2011, on average no more than 25 new drugs were approved by the U.S. FDA.6 In contrast in 2014, there were a record 41 new drug approvals.7
The scorching pace of M&A and divestiture activity.
More than $150 billion in deals completed made 2014 a record year for M&A and divestiture activity–and this year looks set to smash that record. The entire industry is being reshaped, pointing to tripartite transactions among Novartis, GSK and Eli Lilly.
With leading companies on firmer financial footing, the industry is reaching a digital inflection point.
Just like the invention of the steam engine led to the Industrial Revolution, a plethora of advances in technology are creating a quiet digital revolution in the life sciences. This digital revolution will ensure that this era of growth is very different from the late 90s and early 2000s in very fundamental ways, i.e., sustainable, with flexible new business models and smarter processes. In the second part of this series we will explore more about how digital tools and technologies such as 3D printing, wearables, artificial intelligence, robotics and more are starting to reshape this Renaissance age in the industry.
Digital solutions abound across the entire life sciences value chain, from pre-clinical to commercialization and marketing. Visit http://www.cognizant.com/life-sciences to see more thought leadership on current digital applications for the industry.
1 World Preview 2015, Outlook to 2020, EvaluatePharma, June 2015, http://www.evaluategroup.com/PDFs%20for%20Download/EvaluatePharma-World-Preview-2015-Outlook-to-2020-Executive-Summary.pdf, accessed 07/03/15, pg. 9
2 Ibid, pg. 9
3 Ibid, pg. 9.
4 “Spike in Growth in 2014-15 Driven by Innovation Surge and
Few Patent Expiries” IMS Institutes for Health, November 20, 2014, accessed 07/07/15
5 CDER New Drug Review: 2014 Update , December 11, 2014, accessed 07/03/15
6 FDA Novel New Drugs 2015 Summary, FDA Center for Drug Evaluation and Research, January 2015, page 3. https://www.fda.gov/drugs/new-drugs-fda-cders-new-molecular-entities-and-new-therapeutic-biological-products/novel-drug-approvals-2015, accessed 07/03/15
7 Ibid, pg. 2