Global biotech industry must reinvent itself to survive, warns PwC
PwC ROMANIA - 11 November 2010
Despite some very notable successes, the global biotech industry has fallen short of expectations, failing to reduce the risk in finding and developing new commercial medicines. To survive, the industry must now adopt a more collaborative approach, according to a new research paper from PwC, 'Biotech reinvented'.
Although strategic collaborations are increasing in the industry, PwC believes that there is now a need for more co-operation to produce more efficient and cost effective medicines.
Working in a more collaborative environment requires organisations to share assets and insight that they have previously ring-fenced for themselves, a willingness to take risks and work with third parties and assets that they don't own and this will require investors to take a longer term view on rates of return and change the funding model.
'The current business model on which Biotech has relied is flawed. Due to poor rates of return, investment has dried up and many of the external conditions that have allowed companies to thrive are vanishing. It is now a time for change', stated Kenneth Spiteri, Partner, Assurance Services, Leader of the Group of Services for the Pharmaceutical Industry, PwC Romania.
The research base is shifting East, emerging economies are competing more aggressively and financial investors are getting more cautious. Furthermore, the line between the biotech and pharmaceutical industry continues to blur.
'Efficiency is the name of the game and the adoption of a more collaborative approach could just be the key to unlocking this potential. Working with others accelerates and facilitates innovation, discovery and development, which in turn can reduce costs and benefit both large and smaller companies. Even small changes could yield significant savings', added Kenneth Spiteri.
According to PwC research, given average development costs and lead times, a 5% increase in success rates for each phase transition and a 5% reduction in development times could cut R&D costs by about $160m, as well as accelerating market launch by nearly five months (2).
'There are considerable cultural, behavioural and practical hurdles to overcome if the industry is to succeed. But they're well worth resolving, given the rewards collaboration can bring. Those that adapt quickest will invariably have more chance of success', said Spiteri.
PwC highlights that greater collaboration will also be required in the rest of the value chain. The opportunities for generating value from new medicines are changing and therefore biopharmaceutical companies will have to recognise the changing dynamics of the healthcare market and move from selling medicines to managing outcomes. This is only possible through extensive collaboration.
'Hard-pressed governments are now struggling to meet the healthcare demands of growing populations and their changing demographics. More effective and more economical medicines are now more important than ever and, only when the industry can work together will it be on track to meeting the demands of today's society', concluded Spiteri.
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1 Given average development costs and lead times, $160m is based on a projected 5% reduction in development times and success rates for each stage of transition.
2 Estimates based on average development costs of $1.24 billion and average development times of 97.7 months.
3 What is Biotech? Biotech isn't a distinct sector so much as it's a collection of disruptive technologies for discovering and developing new medicines, and diagnosing and treating patients more effectively.
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