Growth in the Life Sciences sector expected this year

• DLA Piper survey shows majority of respondents expect growth of between 5-20%
• US seen as most attractive place to do business followed by EU and China
• Only 13% said sustainability and ESG are a significant priority for their business
• Only around a third (36%) say leveraging AI and Machine Learning is a strategic priority

The future of Life Sciences companies across the globe is bright according to the inaugural Life Sciences Index report carried out by DLA Piper. Almost all respondents (95%) of the survey of 200 anticipated that their annual business revenues would increase compared to the previous full year. Of these, the majority (67%) were predicting growth of between 5-20%, with medical device companies being the most optimistic.

When considering the best market to do business as a Life Sciences company, the US came out as the most attractive (6.1 on average, based on a 7-point Likert scale). The States is a leading light for the sector, with many top companies based there, with easy access to talent and supported by a country that invests heavily in R&D as a percentage of GDP. 

The EU and China were viewed jointly as the second most attractive markets (scoring 5.3 each). China’s Life Sciences sector is fast-growing thanks to increasing consumer demand, an enormous manufacturing capability and increasing investment in R&D.  When asked which EU market is the most attractive for fostering life sciences innovation and growth, 56% (71 of 126 respondents) stated Germany. Germany recently released a “Strategy Paper 4.0” outlining how it intends to increase pharmaceutical investment by, amongst other things, improving clinical trial approval speeds, ensuring faster access to medicines and reducing bureaucracy. It is also seen as one of the most attractive markets worldwide for foreign direct investment.

Just under half of the 200 respondents (49%) predict deal activity to increase compared to the previous 12 months. Access to capital and the need to fill product pipelines were seen as the main drivers for activity amongst larger companies. For smaller players, access to capital remains challenging which provides larger companies with the opportunity to acquire them at favorable prices. In terms of the types of deals being prioritised, strategic partnerships or alliances for R&D purposes are at the top of the list. This confirms an industry trend towards greater collaboration and as a way to partly outsource innovation without the higher commitments and risks of in-licensing.

ESG issues are often a key factor for a wide group of stakeholders, such as investors, employees and patients, when deciding which Life Sciences companies to engage with. Embedding ESG is also crucial for companies to retain their licence to operate in the mid to long term. It is, therefore, surprising that only 13% of respondents said sustainability and ESG are a significant priority for their business. Add to this the worrying fact that 48% said that ESG-readiness was still only a work in progress for their Boards. More specifically, when asked which areas of ESG were most important to business growth, product safety and quality along with access to and affordability of innovations were ranked top. Environmental themes, such as decarbonisation, featured at the bottom of the rankings. 

Looking at the future use of technology, only just over a third of respondents (36%) say leveraging AI and Machine Learning is a strategic priority for their business. Given the intrinsically innovative nature of the Life Sciences sector it is surprising that this proportion is not higher. The biggest barriers to wider adoption of intelligent technology are seen to be a lack of appropriate infrastructure (55%) and concerns about safety and accuracy when used in a clinical setting (52%). 

The longer-term future of the Life Sciences sector seems to lie in the provision of holistic packages of support - additional products, services and tools that go ‘beyond the pill’ to help optimise the patient and healthcare professional end to end journey. 79% of respondents agree that life sciences innovators will increasingly and routinely offer such packages alongside their innovations. The introduction of intelligent technology will help to facilitate and accelerate this trend. By 2034, 80% of respondents agreed that the industry will be supported by a seamless data and tech infrastructure that in turn allows patients to move seamlessly from one step in their care journey to the next. Without the appropriate IT infrastructure in place, many goals of the healthcare and life sciences industry will struggle to be achieved.

Marco de Morpurgo, Global Co-Chair of DLA Piper’s Life Sciences sector, commented “It is encouraging to see key players in the Life Sciences sector looking positively at the next 12 months. Both revenue growth and corporate deal activity are expected by many to rise and countries around the world are well placed to support this growth. However, the pace of change and increasing complexity of the regulatory landscape, combined with persistent macroeconomic headwinds, continue to apply pressure on growth. We look forward to helping our clients identify, decide and act on the options available to them going forward.”