Businesses engaged in the life sciences are poised to undergo dramatic change in the next decade, according to a unique survey of top executives in the field undertaken by Deloitte Touche Tohmatsu (DTT) member firms. Driven by shifts in age and demographics, disease, the entry of new technologies, and the pace of health care inflation, life sciences companies see the need for dramatic change in their business strategies in order to cope with the future industry environment.

But despite universal recognition that the business environment may experience upheaval, life sciences companies are frequently unclear about what their specific corporate priorities should be to secure success in the coming decade-let alone how these realities should be addressed.

"Over the next decade, life sciences companies will have to reassess their strategies to achieve success," said Robert Go, Principal, Deloitte Consulting LLP, and DTT Life Sciences and Health Care Industry Group Leader. "They must build ecosystems through acquisitions, mergers, alliances, and exploratory relationships in emerging markets in order to survive in 2015."

To help spotlight and address these potential issues in the life sciences business, DTT developed a whitepaper in collaboration with the Economist Intelligence Unit (EIU) titled "The Future of the Life Sciences Industries: Strategies for Success in 2015." The findings and views expressed in this report are drawn from three research initiatives; a global survey, roundtable discussion and individual interviews.

The executives surveyed indicated that developing a robust Research & Development (R&D) pipeline (74 percent), forming alliances and partnerships (52 percent), talent management (41 percent), developing closer relationships with customers (37 percent) and streamlining commercialization processes (36 percent) are key strategies for success in 2015.


Upgrading Proficiencies

However, the assessment shows that companies are not always proficient in these critical areas. Life sciences firms will need to improve their proficiency in many core areas, and, at the same time recruit and retain top talent. Not only did over 40 percent of survey respondents feel that harvesting new managerial and scientific talent was a key tactic for success in 2015, but executives in the survey also fretted about their companies' operational proficiency in 2015, with the possible exception of compliance and research. The areas in greatest need of improvement, say respondents, are management processes, sales/marketing and information systems-and in the case of medical device and pharmaceutical companies, product discovery.

* 95 percent of respondents indicate that their company will have to become significantly more proficient in development today, while 85 percent feel the same way about basic research.

* Sales and marketing are at the top of the list for much needed proficiency improvements. Over 90 percent of the participants in the survey claim that by 2015 they will have to be increasingly proficient in sales and marketing to secure success.


Increasing R&D Pipelines and Partnerships

Since its inception in the 1920s, following the discovery of penicillin, the modern life sciences industries have looked to R&D as the engine of success. This remains true. Senior executives who took part in the 2006 DTT/EIU survey are certainly banking on the development of a robust R&D pipeline. The future of the life sciences industries will depend on products and services not yet found in their offerings and companies will need to determine how they can successfully deliver these innovations.

Within the life sciences industries generally, business confidence appears to be on the rise, at least among the most senior executives. Companies not only believe that their R&D pipelines are going to become stronger, but there is a high level of optimism about the emergence of genuinely innovative products, according to the senior executives interviewed.

For all the bullish talk, life sciences companies recognize that they must improve their ability to translate research ideas into products. Nearly two- thirds of the senior executives participating in the survey say this ability is extremely important for speeding up the time lag between discovery and taking a product to market. This is essential if firms are to change their product portfolios as radically as respondents say they need to.

"While the scientific tools for developing new molecular entities have rapidly increased, the crucial organizational steps required to bring products from the bench to the bedside are often based on obsolete models and siloed thinking," noted Jacques Mulder, Principal, Deloitte Consulting LLP, and U.S. Pharmaceutical R&D Practice Leader.

* No less than 52 percent of respondents expect at least half of their 2015 corporate revenue will be generated from products and services that are not available from their companies today. Yet in 2005 research productivity-in pharmaceuticals, at least-had fallen to an all-time low.

* 74 percent of respondents say that transforming research and development to create robust R&D pipelines is the most important strategy for success through 2015.

* Survey participants also place great emphasis on recruiting top-tier scientists as well as establishing long-lasting R&D partnerships and networks with firms, non-governmental organizations and the academic community, to provide the means for improving R&D productivity.


Emerging Markets
Emerging markets will play a major part in the future of the life sciences industries. Companies will have to expand investment in emerging markets significantly across a wide range of activities, including R&D. When asked about the relative importance of different emerging markets to their companies, survey participants voted China into top place, as the most preferred emerging market. The country's vast population, low costs and rapid economic growth could be the main reasons. Central Europe, voted in second place, is an economically robust and stable market, able to produce life sciences and goods and services at low cost. India, which came third, not only has a large domestic market but a potential for commercial synergy within R&D. In fourth place is Eastern Europe, including Russia, which also has a large number of skilled technicians and researchers in medical science as well as being an inexpensive place to work.

"As the opportunities in emerging markets continue to expand, we are seeing more companies undertake efforts to better address the significant market potential in countries outside the U.S." says Mulder.
* At least half of all survey participants expect that by 2015 emerging markets will account for more than 25 percent of their companies' total revenue, necessitating big initial investments in the geographic region (just 8 percent of the participants made the same claim for 2006 revenue).

* Survey participants also anticipate that by 2015 their companies are likely to increase the percentage of certain core activities that are performed in these markets significantly, including R&D.

* Once again, alliances and partnerships are seen as the preferred mechanism to gain entry into these emerging markets. Just over 60 percent of respondents believed that an increase in the number of mergers, acquisitions and partnerships would be driven by a need to enter new markets.

For more information on "The Future of the Life Sciences Industries: Strategies for Success in 2015" visit www.deloitte.com/lifesciencessurvey.