Railroads were a game-changing innovation in the US during the early 1800s. As the industry began to boom, new players joined the game as they rivaled for competitive positioning. The potential seemed limitless.
There were questions and concerns about the new industry’s scope, scale, viability, and cost. It was difficult for investors to determine which competitors would succeed and which would fail; investing in these ventures was risky.
One thing was abundantly clear to investors though—it was time to get out of the horse business.
This analogy was raised by a life sciences sector investor and panelist who participated in the recent Financial Times/Deloitte Pharmaceutical and Biotechnology Conference in London. It was also particularly apt given the theme of this year’s conference – Predictions 2020 – which focused on what life sciences could look like in the future.
Deloitte’s annual conference with The Financial Times brings together many of the finest minds and boldest thinkers from the broader life sciences community. Setting the tone for this year’s conference theme was new research from the Deloitte UK Centre for Health Solutions, “Health care and life sciences predictions 2020: A bold future?” which reveals a series of predictions and projects a vision for the life sciences and health care industry over the next five years. A lot of that prognosticating was about how innovation in life sciences is being transformed.
I had three main takeaways from the conference:
First, the room was generally optimistic for perhaps the first time since Deloitte has been conducting the conference. Our previous conferences have not been particularly optimistic affairs. Top industry leaders and thinkers wrung their hands about the patent cliff, weak pipelines, over regulation, poor industry reputation, and the most recent global economic meltdown. However, this year’s conference had a different tone: the patent cliff is largely behind us, pipelines have improved, and for the first time in many years, blue skies are visible beyond the clouds of economic doom and gloom, despite some lingering economic worries across Europe and Asia. The traditional industry is feeling pretty good about itself.
This year, the general sense of optimism was coupled with a consensus that the industry is at the cusp of dramatic and important change. An interesting thought was that much of the change will be driven by non-traditional players and new entrants to the industry. This made me ask, as I looked around the room, “which of these folks are in the horse business?”
My second takeaway was that the traditional life sciences industry seems to be in the midst of a major realignment. The volume of mergers and acquisitions in the sector has been staggering; yet there was a perspective that most of these deals were not about consolidation. In fact, the gross market share of the top 10 pharmaceutical companies has barely moved over the last 10 years. Rather, we are seeing companies realign their asset base – in some cases, swapping whole operating units – to focus on core competencies and areas where they believe they could have a competitive advantage.
There was a very real sense that focus is key. The technologies that have been talked about since the genome was cracked finally seem to be coming into their own. For example, use of biomarkers and companion diagnostics, gene expression, and targeted therapies and target-based versus phenotypic screening all seem to have entered the common lexicon and become part of “business as usual.” Moreover, these technologies are now much more accessible than they ever have been. Much of the innovation is now coming from smaller players looking at problems from a unique perspective.
Finally, solving problems in health care is attracting many new entrants with non-traditional technologies, significant capital, unique perspectives and a creative approach different from that of the traditional life sciences companies. It seemed obvious to attendees that information technology and analytics techniques will be de rigueur to solving our most challenging health care issues; companies with these competencies are already entering the health care market. It also seemed clear that many other technologies are realizing some of their promise and they could dramatically impact the industry over the next several years. These technologies include nanotechnology, additive manufacturing, regenerative medicine, wearable devices and electroceuticals—just to name a few.
A topic of interest on a number of the panels was aging, perhaps spurred by Aubrey de Grey’s famous quote that the person who will live to 1,000 is alive today. This topic captures the imagination of many as it represents one of the quintessential health care “problems.” Significant resources are being directed at aging research – much of it by the non-traditional entrants into life sciences – and de Grey’s quote is not as far-fetched as it seems. The topic further illustrates the apparent optimism in the industry – an industry that is taking on some of the biggest issues out there and has the potential to make real progress against them.
But, it also illustrates the implied threat that was identified at the conference.
Even as many of the attendees seemed to believe that the innovation and new models being talked about for the last decade are finally at the cusp of realization, many also wondered whether the traditional pharmaceuticals players had the imagination and creativity to take this on. Glances were exchanged across the room as attendees tried to determine which of their neighbors were still in the horse business and which had moved on.