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Increasing Economic and Business Risks Will Transform the Global Life Sciences Industry

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," ( 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:

  • One in four respondents believes that their entire company will have to change to face future risks; more than three-quarters recognize that their companies will have to undergo a major transformation, at least in some parts of the organization.
  • Thirty percent of executives surveyed from pharmaceutical R&D companies say their companies will have to change completely to face future risk.
  • In Western Europe, where markets have experienced slow growth since 2001, 31 percent of responding executives call for a complete makeover of their companies.
  • Eighty-two percent of executives surveyed from biotechnology companies say that major changes will be needed in some or all parts of their company to address future risk.
  • In the United States, nearly one in five survey respondents predict that their organizations will have to undergo a wholesale transformation to address future risk.
  • Outsourcing will also become more critical with 44 percent of surveyed executives saying that over the next decade, most discovery and early-stage research will be conducted outside large life sciences companies.
  • When asked to identify where they believe risk will rise most sharply in the next 10 years, respondents highlighted the areas of pricing and sales, marketing, regulatory affairs, talent management and R&D.

"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."

Survey Demographics

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.

About Deloitte

Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, and its network of member firms, each of which is a legally separate and independent entity. Please see for a detailed description of the legal structure of Deloitte Touche Tohmatsu and its member firms.

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.

For more information about the DTT LSHC Industry Group, email or visit the website

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.

    Contact: Marykate Reese                Madonna Jarrett
             Public Relations              Public Relations
             Deloitte                      Deloitte Touche Tohmatsu
             203 257 0452                  212 492 3738

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