Life sciences execs must foster partnerships, increase R&D to tap into emerging markets

The U.S. pharmaceutical, medical device, and biotechnology industries had better prepare to be challenged by sweeping demographic shifts, globalization and emerging markets, mounting health-care costs, and convergence between industry sectors.

So says Robert Go, Deloitte Touche Tohmatsu's (DTT) Life Sciences and Health Care Industry Group leader for New York-based Deloitte Consulting.

“Over the next decade, life sciences companies will have to reassess their strategies,” says Go. “They must build ecosystems through acquisitions, mergers, alliances, and exploratory relationships in emerging markets to survive.”

To determine how companies will align themselves for success, DTT and the London-based Economist Intelligence Unit conducted a survey of senior life sciences executives. The resulting white paper, The Future of the Life Sciences Industries: Strategies for Success in 2015, makes clear that “positioning for success will require many companies to challenge their business models, markets, and products,” says Go. “And in some cases, broad transformation may be needed.”

Executives polled say increased R&D, more and better partnerships, and tapping into emerging markets count among the necessary weapons.

The future of these companies will depend on products and services not yet found in their offerings, and how well they can successfully deliver these innovations, say survey participants. Given that perspective, nearly 75 percent of respondents say creating robust R&D pipelines is the most important strategy for success through 2015.

On the other hand, they also must speed the cycle of translating research into product ideation. More than 60 percent believe decreasing this cycle time will affect the time lag between discovery and taking a product to market—an essential move if organizations are to change their product portfolios as significantly as respondents indicate.

While emerging markets offer substantial potential, companies will have to expand investment across a wide range of activities.

For instance, at least half of respondents expect that by 2015, emerging markets will account for more than 25 percent of their company's total revenue, requiring big initial investments in different geographic regions. They also are likely to increase the percentage of certain core activities performed in these markets—including R&D.

As might be expected, survey participants named China as the most preferred emerging market, due to its vast population, low costs, and rapid economic growth. Second is Central Europe, due in large part to its economically robust and stable market, and the ability to make life sciences goods and services at low cost.

India, with a large domestic market, also offers synergy within R&D. And considering its large number of skilled technicians and researchers in medical science—as well as being an inexpensive place to work—survey participants named Eastern Europe, including Russia, as yet another vital emerging market.

“Today, we do business in more than 120 countries,” says Michael DeMane, senior VP and president of Europe, Canada, Latin America, and emerging markets at Minneapolis-based Medtronic. “While the prevalence of medical problems that our products address is greater outside the U.S., approximately two-thirds of our revenues are generated inside the U.S. As a result, we have major efforts under way to better address significant market potential in countries outside the U.S.”