Is 2022 the Pharma Industry’s ‘Call of Duty’ Moment?

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Taking the massive Microsoft acquisition of videogame company Activision Blizzard as his jumping-off point, Shawview Consulting’s Brendan Shaw lays out six key life science industry trends to watch in the coming year and wonders whether 2022 will be pharma’s ‘Call of Duty’ moment.

 

A few weeks ago, 2022 started with the news that Microsoft planned to buy Activision Blizzard for USD 75 billion.

After the last two years where the life science industry saved the developed world, at least, from COVID-19, the news that the creator of computer games like ‘Call of Duty’, ‘World of Warcraft’ and ‘Candy Crush’ was valued more than just about every major acquisition in the life sciences industry in recent years shows where the world wants to spend its money.

This, after the worst global pandemic in a century.

It shows how much work there is to do for life science companies as we head into 2022.

 

Value of health and the health industry finally get recognised

Despite the ignominy of having ‘Call of Duty’ acquired for more than most life science acquisitions, 2022 could be the year where the life sciences industry earns its moment in the sun.

Probably more than ever before, the life sciences industry is now in the global spotlight.

It has taken a global pandemic, but world leaders, economists, bean counters in government finance departments and organisations like the IMF now finally ‘get’ the value of health spending and the health technologies that go with it

Governments, insurers, payers and international agencies readily acknowledge the value of vaccines, medicines and the companies that make them. Economists are now (finally) calling vaccines ‘economic policy’ and many ordinary people in the streets all over the world can name brands and pharma companies and understand the difference between a phase 2 clinical trial and regulatory approval in ways that we would never have imagined.

It has taken a global pandemic, but world leaders, economists, bean counters in government finance departments and organisations like the IMF now finally ‘get’ the value of health spending and the health technologies that go with it.

Expect to see health policy debates at global meetings like the World Health Assembly, G7 and G20 meetings, and United Nations General Assemblies discuss how to rebuild health systems and invest more in health care in the future.

These meetings will include discussions about where to invest health care finances. Does investing more in preventative public health care mean less investment in treating chronic disease? Does investing in built-in redundancy for pandemic preparedness mean shedding traditional efficiency measures and old cost-effectiveness frameworks? Does it make more sense to invest in primary care compared to specialist care?

Don’t expect this to be plain sailing. Governments and insurers are needing to rebuild their balance sheets after a financial shellacking from the pandemic. But the lesson on the value of investing in health care has been heard.

Whether governments and payers act on that, though, is another question.

The life sciences industry should be prepared to argue its case.

If the world is prepared to pay USD 75 billion to buy a company that makes fantasy video games where customers can pretend to kill people, then the world should be prepared to invest more in medical technologies that protect peoples’ lives in the real world.

 

Greater scrutiny of life sciences industry

2022 also began with the conviction of the former Silicon Valley CEO of Theranos for fraud. This reminds us that all parts of the industry may have to lift their game.

The newfound post-pandemic visibility and community awareness of the life science industry will bring greater scrutiny of individual companies and the broader industry.

While being under the spotlight will be a major opportunity for life science companies and the industry more generally, it will come with its own challenges

The ‘start-up, Silicon Valley’ end of the life sciences sector has perhaps managed to avoid some of the scrutiny, standards and thorny ethical debates that the larger pharma sector has experienced for years.

That all may be about to change.

While being under the spotlight will be a major opportunity for life science companies and the industry more generally, it will come with its own challenges.

Like an unforgiving bathroom light that shows up one’s wrinkles and blemishes in the mirror, any company or industry credibility deficit will stand out more under the glare of public scrutiny. The decision for companies will be whether to run and hide from this or embrace it as part of a broader shift to ESG business models in the 21st century.

The pharma industry was already experiencing a ‘pandemic reckoning’ in 2021, and this is likely to accelerate into 2022.

The sight of investment funds and analysts insisting on ESG-like strategies from pharma companies for things access to medicines issues and climate change is an example of things to come.

One credibility gap that will need to be resolved quickly is the unconscionable lack of access to COVID vaccines and medicines in poor countries compared to rich countries.

While this is the fault of governments more than companies, the life sciences industry must be part of the solution to fix this. This will be a big issue in 2022.

 

Supply becomes everything

The ability to supply and manufacture medicines and vaccines will be a key focus for companies, national governments, regional groupings and international agencies.

Getting access to the ‘stuff’ will be a key theme this year, be it people in low-income countries who want to be vaccinated against COVID but can’t, or governments wanting pharmaceutical and vaccine manufacturing in their country.

Despite the initial high-minded notions of us ‘all being in this together’, things like vaccine nationalism and mad scrambles for PPE and rapid antigen tests over the last two years have shown that we haven’t got this right

For a start, governments of low-income countries are already pretty pissed off their citizens have missed out on the first few ‘waves’ of COVID vaccines. Leaders like South African President Cyril Ramaphosa and Kenyan President Uhuru Kenyatta have already blamed the West for ‘vaccine apartheid’.

Ouch.

Despite the initial high-minded notions of us ‘all being in this together’, things like vaccine nationalism and mad scrambles for PPE and rapid antigen tests over the last two years have shown that we haven’t got this right.

The pandemic exposed the limited supply chain diversity in an open, global trading system when countries like China and India could not supply the world with medicines when needed. The result is that today efforts are being made all over the world to diversify the supply of medicines. Governments from the US, the EU and Africa are all talking about ‘reshoring’ and building domestic manufacturing capability.

Pfizer’s plans to manufacture in South Africa in 2022 and launches of new manufacturing facilities in that country a few weeks ago are examples of efforts to localise manufacturing in Africa.

More generally, the policy debates this year about ‘reshoring’ will revolve around the extent to which countries should use protectionism and favouritism to build their own industrial capacity, versus supporting stronger global integration and encouraging their industrial sectors to innovate and embrace global markets.

 

New technologies, new companies and new countries in the industry

COVID-19 has catalysed a rapid re-orienting of the global life sciences industry. Technologies that were quietly developing for years, like cell therapies and mRNA technologies, have suddenly come to the fore.

This, in turn, has triggered the development of new companies and business models in record time. Companies like BioNTech and Moderna have come from relative obscurity to become industry giants in the space of two years.

The geographic map of the global pharmaceutical industry is also being rapidly redrawn on the back of substantive economic, industrial and geopolitical changes.

Expect 2022 to see more ‘upstart’ new entrants in the industry coming from new technologies, new countries and even new sectors

Markets and suppliers in Asia, including those in China and India, will continue to evolve this year.

Chinese companies like BeiGene and Innovent, already part of the surging development of China’s innovative life science sector, are part of a broader emergence of the Chinese industry on the global stage. The number of Chinese innovative medicines approved in overseas markets has increased from 4 to 65 in the last decade.

Meanwhile, India’s pharmaceutical and life sciences industry is rapidly pivoting to research and innovation, with the government there announcing major new initiatives to support this shift.

Expect 2022 to see more ‘upstart’ new entrants in the industry coming from new technologies, new countries and even new sectors.

 

Technology drives greater returns

Things like digital technologies and artificial intelligence are quickly changing the dynamics within the industry.

Witness recent examples where AI has helped rapidly speed up the pace of drug development and clinical trials, turbocharging the development of treatments for obsessive compulsive disorder and new antibiotics. Things like novel trial design and real-world evidence are going to become more mainstream this year.

Such technologies are helping to rapidly reduce the costs and risks of drug development, opening the door for new players to enter a market where traditional high entry barriers have in the past prevented companies from entering the domain of large pharma companies.

Will 2022 be the year where other Big Tech firms like Amazon, Apple or Meta take the big step to enter the life sciences sector?

Alphabet’s announcement at the end of last year that it will launch an AI drug discovery venture built on its work with its DeepMind could be the shape of things to come.

Like Microsoft’s purchase of Activision Blizzard, this is an example of a tech giant entering into a market that is already undergoing structural changes driven by data, digital power and the growth of new markets and services.

Will 2022 be the year where other Big Tech firms like Amazon, Apple or Meta take the big step to enter the life sciences sector in a similar way?

Whether companies can capitalise on this will depend on their ability to embed digital transformation strategies in health and convince payers of their credibility (there’s that word again).

 

Collaboration becomes central to business growth

If the pandemic has taught life science companies anything, it is the enormous business potential from being able to successfully navigate unusual collaborations outside their normal comfort zone.

Whether it is increasingly using external sources for innovation, partnering with regulators and payers to invest in drug development to develop new markets or collaborating with NGOs to supply patients in all corners of the world with new medical technologies, how companies approach and manage new partnerships with new players will be crucial to business success.

Now, any company worth its salt is quickly realising that cross-sectoral cooperation is an important business skill

Once upon a time, terms like ‘collaboration’ and ‘partnership’ were seen as warm, fuzzy, feel-good terms that were only relevant to company CSR departments and donation programs.

Now, any company worth its salt is quickly realising that cross-sectoral cooperation is an important business skill. It can be the difference between successfully developing and launching new medicines and vaccines, or spending years shut out of markets and payment schemes in countries around the world.

If companies can learn the lessons of the pandemic and achieve that delicate balance between competition and cooperation, 2022 may see such collaborations become the industry norm.

If they can’t, they should be anticipating the ‘extraction point’ in their exit strategies.

Call of Duty style.


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