Uncertainty was the prevailing theme of 2020 across nearly every sector and business function of the life sciences industry. The pandemic’s unpredictability and economic turbulence halted business plans, scrambled supply chains, and turbo-charged digital transformation. Throughout the pharmaceutical industry, the rapid development of vaccines and therapeutics has upended pipeline plans and transformed product portfolios. Simply put, despite an expected rapid economic recovery after the completion of widespread inoculations, the seismic impacts of 2020 will likely reverberate for years to come.

In Q1 2021, we continue to sit at an inflection point, with multiple variables in play over the months to come. It appears this uncertainty will last until at least the first half of 2021, until multiple approved vaccines are successfully distributed and administered to help the population attain threshold herd immunity.

While the near-term forecast for industry leaders is challenging, positive change is on the horizon. Indeed, 2021 is shaping up to be a “tale of two cities” and life sciences leaders should track these developments as they may have positive or negative impacts on pipeline, business planning, and marketing strategies.

Continued Headwinds in the Near Term

1. The Product Pipeline

During the initial surge of the pandemic, we witnessed the significant downstream impact on healthcare systems acutely focused on addressing the needs of COVID-19 patients. For example, one study from nine high-volume U.S. cardiac catheterization laboratories found a 38% decrease in patients treated for ST-elevation myocardial infarction, a life-threatening condition.1 Beyond these human tolls, the ripple effects of further delayed medical procedures and screenings will continue to be felt by healthcare providers and pharmaceutical companies alike. This sustained decrease in elective medical care, and subsequent changes in reduced or delayed life-saving therapeutics, should be watched closely by marketers responsible for a commercial portfolio.

In fact, the pandemic not only temporarily impacted sales of existing therapeutics, but also had a sustained impact on the development of novel solutions, with non-COVID clinical trials not reaching their enrollment targets. One analysis conducted by EY in Q2 2020 suggests that losses of clinically administered products alone, among the top 20 pharma companies, could exceed $100B through the end of 2024. While the immediate pipeline impacts are steep, the risk to assets-in-development may be longer lasting, with unpredictable consequences for morbidity and mortality.

2. Vaccination Efforts

Further, the pandemic has shown that the need for consistency and unity between pharmaceutical companies, regulators, and policymakers has never been greater. With 67 vaccines for COVID-19 currently at some stage of clinical trials in humans, it’s been an all-out innovation sprint to develop a safe and protective vaccine. But with surveys showing vaccine hesitancy, and only 60% of the population willing to be inoculated, industry leaders must collaborate with government to prioritize public health for the long term.

Complicating the vaccination efforts is the emergence of new variants, as the virus is mutating fast with the availability of a massive global theater. The original Wuhan virus has almost disappeared and been replaced by the UK strain, which is further being challenged by strains originated in South Africa and Brazil. Those mutational changes make it difficult for long-term planning purposes, with the looming uncertainty whether the vaccine arsenal now at our disposal will continue to show protection.

Compounding this effort are the challenges to vaccine production, distribution, and administration. At a time of tremendous uncertainty, the vaccine storage, shipment, disbursement, tracking, and monitoring must be carefully orchestrated, and given the emergence of more virulent strains of the virus, time is of the essence. Further, the vaccine distribution effort should prioritize access to patients most in need—from those in congregate settings to underserved communities disproportionately impacted by COVID-19. To succeed, stakeholders within life sciences companies—including marketers—must ensure patient centricity is maintained throughout this complicated process.

3. The Supply Chain

Further, the pandemic has illuminated the need for resiliency by re-onshoring manufacturing of essential medicines so there are no interruptions to the supply chain. Now is the time to reimagine the future of the pharmaceutical supply chain, not only for producing the therapeutics needed to treat COVID-19 and replenishing the Strategic National Stockpile, but also for long-term planning. We need to build a resilient supply chain network, pre-empting future disruptions caused by natural disasters, geopolitical risk, or pandemics alike.

4. The Payer Landscape

Finally, the remaining focus on reimbursement and drug pricing with the carryover impact of Most Favored Nation provisions and considerations of price negotiations for Medicare Part D (which is three times bigger than Part B) will cast a long shadow on planning for growth, especially for biologics.

Tailwinds on the Horizon

1. Industry Reputation

2020 may have had one silver lining: demonstrating the incredible capacity and speed of innovation of the biopharma industry. Consider that although the first Ebola outbreak was reported in 1976, a vaccine was only approved by the U.S. FDA in 2019. There are no approved vaccines for two other coronaviruses, SARS and MERS, which were first reported in 2003 and 2012, respectively. The positive reputational impacts of this unprecedented innovation should be of note to commercial marketers as they look to bolster brand awareness, now and in the post-pandemic world.

2. Investment Opportunities

Despite market volatility, life sciences companies closed the year with record levels of liquidity. In fact, 12% of biopharma’s firepower was deployed in 2020, compared to 20% in 2019. At this stage in 2021, there’s reason to believe that M&A activity and other deal-making will continue apace, fueling further business growth. Starting in Q2 2021, we anticipate biopharmas will prioritize high-value alliances and bolt-on deals. Given the unburdened valuations, the timing is opportune for life sciences companies to divest their non-core assets.

In 2020, special purpose acquisition companies (SPACs) gained prominence as an alternative avenue for companies to go public outside of the traditional IPO process. A boom in biopharma and pharma SPAC deals in recent years has spurred interest in the vehicle, which appears to be a bright spot for the industry. Broadly across the life sciences sector, we are observing an all-time high IPO activity. With a strong flow of capital, low interest rates, and sustained innovation as evident by a solid 53 new molecular entities mostly sponsored by biotechnology companies and approved by the FDA last year, 2021 appears to see sustained activity across the sector.

3. Political Impact

Turning to political influences on industry, executives should feel positive following what was a contentious election cycle. Analysis shows that over the last 30 years, the S&P 500 Health Care Index, which includes pharma companies, medical device makers, biotechs, and payers, has an 18% annual return during a Democratic presidency, compared with a 4% return during Republican administrations. This should provide a semblance of stability after what has been a tumultuous year.

4. The Sales Model

One particular area pharma marketers should pay very close attention is the digitalization of commercial activities. The industry endured an undesired and unplanned market experiment in which the sales and medical science liaison (MSL) organizations had to perform their functions in a virtual or hybrid environment. This is not a mere cost-takeout exercise, but a rethinking of the optimal go-to-market model of the industry. The physicians who also have gone through the similar experiment may be more willing to engage the pharma representatives in a digital ecosystem than the traditional face-to-face model. The digitalization of the pharma commercial model will remain a key priority triggered by the experiment we all had to live through.

In summary, 2021 will present itself as the tale of two cities. With the political uncertainty mostly subsided and herd immunity within reach in the first half of the year, a path toward a new normalcy is emerging. This is the right time to think bold and consider a strategic assessment focused on re-shoring pharma supply chain, re-thinking digital and hybrid commercial models, and getting more broad adoption of value-based contracting.

References:

1. https://www.jacc.org/doi/abs/10.1016/j.jacc.2020.04.011.

  • Arda Ural, PhD

    Arda Ural, PhD is Americas Industry Markets Leader for Health Sciences and Wellness at EY. Arda started his career leading brand and new product development in pharma, and previously led life sciences M&A at a strategy consulting firm.

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