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Rethinking the life sciences value equation

By Pete Mooney - December 01, 2011

Life sciences and health care - pharmaceuticals - pill bottleThe Financial Times, in association with Deloitte, will host the Global Pharmaceutical and Biotechnology Conference 2011 in London next week. As DTTL’s Global Managing Director for the Life Sciences and Health Care industry, I am extremely interested in engaging life sciences and health care executives while I’m there to gain a better understanding of their most pressing issues.

A topic that fascinates me is the so called pharmaceuticals innovation crisis. I am sure during the course of this conference someone will show the ubiquitous chart comparing rising cost to develop a new drug compared to declining new molecular entity (NME) productivity. First, I’ve seen this chart about 500 times; it’s old news. Second, I argue that it is merely an example of measuring the wrong thing. In fact, I think it is hard to argue that the last decade has not been one of the most innovative in human history. Think about the cracking of the human genome, our growing understanding of genetic predisposition, and our increasing knowledge on the complexity of protein interactions in the human body, not to mention advances in scientific disciplines like nanotechnology and robotics that will certainly have a positive impact on overall human health. So, I’m going to start calling this chart the “lack of imagination chart” rather than the “innovation crisis” chart.

The question that really needs to be addressed by this conference is “can the industry re-invent itself fast enough to start creating value again?” By way of example, if you had hypothetically invested US$100 in most of the major global pharmaceuticals players on 1 January, 2000 that investment would, in general, be worth on the order of US$70 to US$80 today. The value engine just isn’t working. The blockbuster model is obviously defunct and patents are now expiring at a furious rate. Healthcare systems are stretched to the limit and are looking for innovative ways to manage cost without sacrificing patient outcomes. Comparative effectiveness and other techniques to manage drug value will become the norm. Generics are not going away. Pricing in the industry is certainly not going to get better. So, we are back to re-invent yourself or become redundant. I come back to the need for imagination, not continued wringing of hands about crisis.

I am looking forward to engaging with industry executives at the conference and hearing their perspectives as we re-think the life sciences value equation.

Learn more about how Deloitte's Global Life Sciences and Health Care industry group strives to support clients in addressing challenges that impact the industry.

LSHC_Pete_Mooney_56x56Reynold W. (Pete) Mooney is DTTL Global Managing Director for the Life Sciences and Health Care industry. A corporate strategy consulting professional with over twenty-seven years of experience, Pete has focused on assisting senior corporate and business unit executives to take advantage of growth opportunities in segments undergoing dramatic change, transition and globalization.


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In their bid to replenish their faltering R&D pipelines, life science companies are resorting to an ever broadening range of innovative financing and partnership models which are allowing them access to promising early stage research and to share the risks and costs of new drug development. In so doing, they are rewriting the rules of competition in the industry, transforming their capital base, and potentially laying the grounds for more stable and long- term funding for innovation. As pharma companies continue along the path of open innovation, is the new era of competition in life sciences "the battle of the networks" ?

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