Largest Companies Require Most Dramatic Changes
NEW YORK, March 9 /PRNewswire/ -- As the global life sciences industry struggles to manage rising risk, more than 40 percent of executives surveyed from companies with revenues of at least US$15 billion say that their companies need to institute significant changes across the whole organization to survive the next decade, according to the results of a new white paper released by Deloitte Touche Tohmatsu (DTT).
Reflecting the impact of the current economic downturn, 41 percent of executives surveyed believe that between now and 2015 sales forces will need to become more versed in economic issues and adept at selling the economic virtues of products to patients, physicians and payers.
Additionally, 26 percent of executives surveyed -- 39 percent in Western Europe -- say that the risks associated with research and development (R&D) are set to rise sharply through the next decade. While some companies do not anticipate changes to their approach to R&D, more than one-third of respondents indicate that they will mitigate risks attached to R&D by simply spending more money.
Developed in collaboration with The Economist Intelligence Unit, the DTT white paper, "The Future of Life Sciences Industries: Transformation Amid Rising Risk," (www.deloitte.com/lifesciencessurvey) is based on a global online survey of 360 senior executives in the life sciences industry conducted in 2008. The survey asked executives to predict the level of change their companies will undergo in the future to address growing risk and what areas would face the highest growth in risk. The survey also examined how companies will increase proficiency and deal with rising risks in these areas, as well as how they would manage internal and external risk.
"Mounting pricing pressures, expiring patents, high cost of research and development and in some cases, plummeting stock prices, have plagued the industry for the past decade, forcing life sciences companies to dramatically rethink their business models to survive in the next decade," said Robert Go, DTT Life Sciences and Health Care Industry group leader. "To thrive in the long run, companies cannot simply depend on future returns from new products in their pipelines. As they wake up to new market realities, they must tackle their challenges and address risk in a fundamentally different way, frequently requiring significant transformation."
While many respondents agreed some kind of change was necessary, life sciences executives were surveyed about the changes that must occur for their companies to address future risks and how they will make these changes to key areas.
According to the survey results:
"Most creative industries have encountered challenges when facing disruptive technologies," said John Rhodes, DTT Life Sciences Leader. "In the case of life sciences, these companies will survive and prosper by addressing new customer needs, whether economic, health or both. Companies have to be willing to move away in some cases from past things that made them great to the new realities of delivering innovative medicines and devices within the economic realities of today's markets."
"The results of this survey clearly indicate that life sciences companies are now realizing that their business models must change," said Terry Hisey, vice chairman and U.S. industry leader of Deloitte LLP's Life Sciences Industry Group. "The full implications of these shifts have yet to be wholly understood; however, life sciences companies may be facing the prospect of strategic transformation as an ultimatum rather than an option. They will be challenged to work together with regulators and payers over the next decade to find new approaches that work for everyone in order to thrive."
Of the 360 executives responding to the 2008 survey, 40 percent came from North America, 24 percent from Western Europe, 22 percent from Asia-Pacific, 7 percent from Eastern Europe and 7 percent from the rest of the world. Participants represented different sectors within the life sciences industry, including healthcare services (23 percent), pharmaceutical research and development (22 percent), biotechnology (11 percent), pharmaceutical manufacturing (11 percent), medical devices (9 percent) and contract research (6 percent). Thirty-eight percent of respondents' organizations had annual revenue greater than US$500 million and 38 percent had revenues less than US$100 million. Board members and chief executive officers comprised 19 percent of respondents. Chief financial officers, chief technology officers and other C-level executives made up 12 percent of the panel. Senior vice presidents, vice presidents, directors, heads of business units and departments and managers made up the remainder of the respondent panel.
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Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in 140 countries, Deloitte brings world-class capabilities and deep local expertise to help clients succeed wherever they operate. Deloitte's 165,000 professionals are committed to becoming the standard of excellence.
About Deloitte Touche Tohmatsu (DTT) Life Sciences and Health Care (LSHC) Industry Group
The DTT LSHC Industry Group, made up of the LSHC specialists from DTT member firms, comprises more than 4,000 professionals in over 47 countries. Their understanding of the industry's challenges and their ability to quickly respond with integrated, comprehensive services put the DTT member firms in a unique position to help clients. Member firm LSHC professionals work with their clients to help them shape the evolution of the industry. These professionals can help companies in their efforts to bring discoveries to life and improve the quality of care while they create and sustain long-term, bottom-line profitability. DTT member firms provide professional services to 80 percent of the life sciences and health care companies in the Fortune Global 500.
About The Economist Intelligence Unit
The Economist Intelligence Unit, the business information arm of The Economist Group, publisher of The Economist, is the world's leading provider of country intelligence, with over 500,000 customers in corporations, banks, universities and government institutions. Its mission is to help companies do better business by providing timely, reliable and impartial analysis on market trends and business strategies.
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