According to the report, the issues facing the industry are rooted in longer term trends and can therefore be expected to persist long after the upturn, despite the fact that two thirds of life sciences companies interviewed point to a recovery within the next 24 months.
The effects of the current economic climate are putting increased pressure on pharmaceutical companies in particular to contain their costs. Pressure from governments and consumers alike has increased demand for more affordable drugs, which is significantly impacting the performance of manufacturers of branded products. The switch to generic drugs is likely to accelerate wherever there is an alternative to a branded product. Billions of dollars of pharmaceutical sales are expected to be lost as a result of competition from generics.
While some companies may perceive their need for cost reduction as arising from the recession, the industry faces a number of other profitability challenges that will persist into the foreseeable future because of deeper changes in the business environment. Within the pharmaceutical industry, the expiration of patents, a lack of products in late stage development pipelines, pricing pressures and changing market demand are all fundamentally altering the market. Tougher regulatory environments are also expected, particularly when it comes to demonstrating efficacy and safety, necessitating additional trials before new drugs can be brought to market.
Similarly, biotech companies are finding it difficult to obtain funding for continued investment into the research and development (R&D) that will be vital for future success. The agribusiness sector, on the other hand, is still growing significantly and should be careful not falling into the trap of "growth at any cost" and should maintain their focus on cost control. In addition, the crisis might mean that the expected increase in demand will not materialize, leaving the agribusiness companies in a tough battle due to reduced brand loyalty and increased use of generic - as seen in the pharmaceutical industry.
To prepare for the upturn, life sciences companies will need to adopt more radical cost-reduction strategies and transform themselves in ways that go well beyond cost considerations. In a rapidly changing business environment, innovation is key to remaining relevant so that products and services bring in the necessary revenue levels. Taking advantage of innovative technology and business approaches is vital if costs are to be kept under control.
"Pharmaceutical and medical device companies will be fraught with profitability challenges for the foreseeable future," said Hanne Buus van der Kam, Global Life Sciences Lead, Capgemini. "Imminent changes to science, markets and society, and increasing pressure from governments to make cheaper product options easily and widely available, add up to an urgent need for industry transformation that can no longer be postponed."
To access the complete Capgemini's Vision and Reality Report 2009, please visit:
http://www.capgemini.com/resources/thought_leadership/vision_and_reality_8_life_sciences
About the Vision and Reality Report 2009
The study is based on a series of in-depth interviews with over 30 senior industry executives, representing leading pharmaceutical, medical device, biotech and agribusiness companies in Europe and North America. This includes responses from executives at eight of the top 10, and 12 of the top 20 global pharmaceutical companies.
About Capgemini
Capgemini, one of the world's foremost providers of consulting, technology and outsourcing services, enables its clients to transform and perform through technologies. Capgemini provides its clients with insights and capabilities that boost their freedom to achieve superior results through a unique way of working, the Collaborative Business ExperienceTM. The Group relies on its global delivery model called Rightshore®, which aims to get the right balance of the best talent from multiple locations, working as one team to create and deliver the optimum solution for clients. Present in more than 30 countries, Capgemini reported 2008 global revenues of EUR 8.7 billion and employs 90,000 people worldwide. More information is available at www.capgemini.com.
Capgemini Consulting is the strategy and transformation consulting division of the Capgemini Group, with a team of over 4,000 consultants worldwide. Leveraging its deep sector and business expertise, Capgemini Consulting advises and supports organizations in transforming their business, from strategy through to execution. Working side by side with its clients, Capgemini Consulting crafts innovative strategies and transformation roadmaps to deliver sustainable performance improvement. More information is available at www.capgemini.com/consulting.