In Vivo: strategic insights for life sciences decision-maker...
By Lucie Ellis 24 Feb 2020
The biopharma sector is often accused of a being a slow-moving engine, but a look back over the last 20...
Disruption is a fact of life in today’s biopharma enterprise – addressing it requires first identifying the type of disruption and then building a structured response consisting of three distinct dimensions of a new approach to innovation: the science of treatment, the science of technology and the science of the expectant patient.
An expert analysis by Accenture Life Science Research, Accenture LLC, contends that a rigorous approach to R&D focused on frontier science, unmet patient needs and new health technologies, reinforced by identifiable characteristic markers or archetypes, results in investments that are not only better targeted to patients, but offer higher sustained revenues and return on investment over time.
So what? New science is a high-octane growth strategy that upends standard organizational behavior in tradition-bound big pharma. But the risks are worth considering given the lagging productivity of many internal R&D operations.
Finding innovative ways to adapt the biopharma business model to external and internal challenges is a key competitive differentiator for today’s C-suite leadership. The stark choice is to disrupt – or be disrupted. Accenture’s work with numerous life sciences companies over the past few years reveals there are two typical types of disruption, each requiring a different strategic and organizational response. The first is that intuitively self-evident “big bang” disruption where a new innovation revolutionizes an entire industry and causes major and immediate change. The second is “compressive disruption” where a series of smaller innovations slowly build over time, and depending on other external factors, are often unnoticed and lead ultimately to a crisis of decreasing profits in the disrupted companies.
Our conclusion is that compressive disruption is the bigger threat to the health of the biopharma business model because it allows for complacency when what is really needed is proactive initiative and a change in mindset, both of which are difficult to implement in large organizations that tend to be resistant to change. In contrast, the response to compressive disruption demands a turnaround in basic strategy on how a company’s research output – the science – is evaluated, resourced and conducted.
We call it “New Science,” where new management and operations approaches are integrated around a more focused strategy. To stem the slow decline to organizational inertia exemplified by compressive disruption, companies must establish a work culture that is relentless in generating value from every investment it makes, from the discovery phase right through to patent expiry, and involving a range of inputs that include applied tools and technology as well as the products of scientific discovery and research.
Accenture recently published a white paper, New Science: Biopharma’s New Growth Machine, to showcase the merits of how New Science can itself be the antidote to compressive disruption by keeping companies fixated on being first to “get to what’s next” in unmet medical need – staying on the vibrant edge of science, rather than safely in that middle ground of institutional status quo. Often too much focus is given to the hottest cutting edge science, while incremental areas of growth are overlooked. This article drills down into how to approach the innovative impulse structurally, by identifying several “archetypes” that life science companies should emulate in institutionalizing New Science to generate a predictable – and progressive – gain in revenues from their biopharma investments. By applying this construct to their own operations, management can anticipate, track and assess the strategic imperatives shaped by these archetypes – and bridge that transition gap from old science to the new.
As a concept, New Science denotes a multitude of innovations that capture value simply by advancing the science beyond where it is today. To effectively benchmark and diagnose the industry in this context, we have split New Science into three recurrent drivers of organizational coherence and commercial success: New Treatment Science, New Patient Science and New Tech Science. Each is defined by separate archetypes, capturing the key types of innovation which is, or has been recently, new. Exhibit 1 outlines the dimensions of New Science, and their three archetypes.
In each dimension, New Science goes beyond the latest cutting-edge therapies or trends, capturing all the incremental changes leading to improved value and patient outcomes, these are often beyond traditional clinical outcomes. The whole industry, its therapeutic areas, indications and the individual companies involved, can be assessed through these three dimensions. This allows for bench-marking and analysis, and gives the opportunity to identify areas of strength, weakness and opportunity. Importantly it enables one to redirect investment for a purpose, whether that be revenue or an unmet medical need.
As the science in the pharmaceutical industry is broken down into its constituent parts, products can be categorized by the type of science, and the type of “New." Exhibit 2 provides an overview of the historic and projected revenues for launched products in the prescription pharmaceutical industry categorized by the dimension of science affecting the treatment or patients. Tech Science has not been included in this analysis as its application is more complex and the field is comparatively very new, but its general characteristics are summarized below.
What about the conventional way of approaching science, or what we refer to as Old Science in New Science: Biopharma’s New Growth Machine? Although relatively stable in value, Old Science makes a steadily decreasing contribution to the total growth of the industry, while the future growth of industry revenues is largely driven by the introduction of New Science Products. Therefore, trade-offs must be made to navigate the span between Old and New Science.
Within New Science there is a stable proportion of revenue from New Patient Science by itself (i.e. around 6%), but the proportion of revenue from New Patient Science increases when combined with New Treatment Science (25%, or $170bn, in 2018; rising to 29%, or a projected $252bn, in 2022). This suggests that although using Old Science methods in new indications still retains some value, most of the growth in New Patient Science is from the combination with New Treatment Science. Therefore, we conclude there is only limited value in tackling a new patient group using standard methods, but that using new methods to tackle new patient groups could be a substantial engine for growth.
New Treatment Science by itself is slowly increasing as a proportion of pharmaceutical revenue, as well as increasing in value ($88bn in 2012 to $127bn in 2018) but s the fastest growth in New Treatment Science is seen when it is combined with New Patient Science. All forms of New Treatment Science made up 43% of revenue in 2018 and are projected to reach 48% of revenue in 2022, making this a very valuable dimension of science in total.
Although all of the sections analysed here increase in value over time, the fastest growing archetype for projected market share and projected value is the combined New Patient Science and New Treatment Science. The size of the effect of New Science on current and projected prescription pharmaceutical revenues suggests that valuable insight can be gained by breaking each dimension down into its constituent archetypes.
Each Dimension of New Science can be described using various different archetypes and can be analysed in different ways, and at different points in the value chain. Archetypes may include drug combinations. This section describes the different archetypes of New Science, and their application.
The Different Archetypes Of New ScienceSource: Accenture Research
New therapeutic targets are a common aspect of New Treatment Science, and much of the traditional methodologies of driving growth in the pharma industry can be attributed to R&D in this area. New mechanisms of action are a closely related and a frequent source of New Science, but requiring a more innovative approach than new targets, for example the use of Exon skipping through novel platform RNA splicing to treat Duchenne muscular dystrophy.
At a higher level, but much less frequently, new therapeutic classes can drive New Science, with RNAi drugs as a prominent example. Another frequent source of New Science is innovation around new formulations which drive improvements into patient care. For our analyses, reformulations that do not drive patient outcomes are not considered new.
New Treatment Science is changing the industry beyond creating more therapies. With the rise of cell and gene therapies, there has been a rise in companies serving those markets, including biotech companies with active R&D programs as well as technology companies working to improve research tools and methods. Another example is the rise of biosimilars, creating an entirely new segment of the biopharma industry, with its own distinct regulatory, competitive positioning and price impacts.
The traditional angle of addressing new patient populations is to move into new indications. Although this remains a substantial revenue generating archetype, revenues for this archetype are slowly becoming a smaller proportion of the total prescription pharma market. Exhibit 4 illustrates this, with first-to-indication drug revenues, a historically important growth area, being roughly stable from $77bn in 2012 to $76.6bn in 2018 and a projected $74.3bn in 2022, but with a decreasing percentage of the total pharma market: from 13% in 2012 to 11% in 2018 and a projected 8% in 2022.
In the context of the number of untreated indications decreasing over time, and a commercial focus on treating the more profitable indications leading to less profitable indications remaining, this suggests two things:
First, focusing on new indications and untreated populations still maintains value for those who choose to continue R&D in these areas.
Second, it will be increasingly difficult to grow market share; stagnation is likely if investors don’t pivot into a new scalable growth strategy.
Although the core focus of trying to treat the untreated indications will maintain revenues for a while, failure to think long-term and make investments into research and development or strategic acquisitions to drive new areas of New Science now, could lead to eventual decline, irrelevance, and business failure.
One area of New Patient Science is focusing on areas of unmet need, or where drugs can have a large impact on the standard of care. The needs of patients for expediated approvals for serious conditions, or drugs which potentially have a large impact on the standard of care has been recognized by the FDA, which since 2012 can assign breakthrough therapy designation to development programs. Since inception of the classification, approved breakthrough therapies have rapidly gained share in volume and value, and by 2022 breakthrough designated therapies are forecast to make up 15% of total prescription pharma revenues.
It can be expected that the effect of a new regulatory process increases from inception, but what is quite telling is the continuous increase in value and proportion of sales, neither of which show signs of slowing. This indicates that breakthrough designated therapies could become a major source of revenue for the pharmaceutical industry even more so than they are now, and therefore that investment into areas with high unmet need will continue to be lucrative.
Similarly, areas with low number of patients, such as rare diseases, are another growth area for New Science. Orphan designated diseases are in increasing part of the pharmaceutical industry, currently providing 18% of revenue, and estimated to rise to 22% by 2022.
Another area of new patient science is looking into opportunities presented by populations with high unmet need due to the levels of income, or area specific diseases. According to a May 2019 10-year analysis by the Access to Medicine Foundation, people living in low- and middle-income countries (83% of world population, but only 25% of projected 2020 pharma spend) may struggle with access to medicine. An estimated two billion people currently have no proper access to medicine. The same report discusses the trends in some pharma companies into R&D to tackle these issues, including neglected tropical diseases. In an increasingly competitive environment, with increasing societal pressures, this new area of interest could become an important investment to protect revenues.
Other areas of New Patient Science not explored here include areas of high unmet need in patient subgroups, or in different lines of therapy, or where the drug supply is insufficient for the patient populations, with the notable exception of manufacturing related supply shortages.
Of course, New Patient Science has implications largely for the patients, but also drives investment into companies attempting to tackle orphan or rare diseases, many of which are genetic, as well as anti-infectives and vaccines. Added benefits from New Patient Science include improving patient visibility in an environment where the patient voice is increasingly important, as well as improving public perception of the pharmaceutical industry in an environment subject to increasing societal and regulatory scrutiny.
These technological innovations are an emerging dimension, driving patient value in improving treatment, care and access. As a relatively new area, the impact is more difficult to measure, however we expect the opportunity to be very large.
The biopharmaceutical industry is slowly moving from a one-size-fits-all approach to one where treatments are personalized to each patient. This is considered an area where substantial improvements can be made in treatment outcomes, and regulatory authorities have recognized these by committing to accelerating personalized medicines. Significantly, 42% of medicines approved by the FDA in 2018 received this designation (see Exhibit 6). Personalized medicines include innovations such as using unique biomarkers or personalized molecular targets.
Digital interventions targeted at improving patient access and experience is another area of New Tech Science. The first wave of tech-based interventions in medicine were focused around home monitoring and diagnostics, but now we see an increase in tech-based innovations to improve patient access and patient adherence, often designed to work closely with the treatment regimen. In practice, this can be seen with Abilify MyCite, an oral pill that is embedded with sensors to track patient adherence, and with disease management systems such as WellDoc, which helps patients manage their diabetes and interfaces with health care professionals. Other innovations include companion diagnostics, and point-of-care tests.
Wearable technologies are another rapidly growing sub-archetype of New Tech Science. Innovations such as Quell, an FDA-cleared device, have shown to be effective at helping to alleviate symptoms of patients suffering from chronic pain.
The digital interventions archetype of New Tech Science is a relatively nascent area of growth but shows rapid growth prospects with increased venture and private investments into the space. According to CBInsights, in 2018 alone, health technology received $7.9bn in venture investments.
New Tech Science extends further than just new digital and new devices. Other technological innovations are included, such as new analytics and new evidence, including the use of real-world evidence (RWE). RWE is an area of great interest and has been successfully used in improving clinical studies and pharmacovigilance. Its applications will eventually extend to improving efficacy of drug discovery and reducing timelines. The use of analytics extends into genomics and can be applied to drug development. Early movements here include the partnership between 23&Me and GlaxoSmithKline PLC.
New Tech Science has implications for both patient outcomes, pharmaceutical revenues and for the discovery of new therapies. Already increased adherence can be seen with products like AdhereTech’s smart pill bottle, which in partnership with Diplomat Pharmacy has shown a 12% increase in patient retention, an increase in the number of refills per patient, and a decrease in the number of days without treatment. Investment into analytics can be seen in the Bristol-Myers Squibb Co. and Concerto partnership to use eurekaHealth, Concerto’s AI and machine learning platform. Concerto’s tool uses real-world data to accelerate insights through novel health economic outcomes and clinical development studies. Concerto has also been partnering with other companies, including Pfizer Inc..
New Tech Science has many implications for the industry, which is creating more and deeper partnerships to take advantage of this new area. Products such as companion diagnostics also require joint regulatory approval. Digital medicines also allow different types of companies to develop and operate in the industry, reducing barriers to entry.
New Science: Biopharma’s New Growth Machineoutlines the current leaders in New Science which are investing heavily into digital, data and genomics, and the biotech companies which generate a sizable portion of New Science.
For the immediate future, these leaders are increasing investment, partnerships and acquisitions into the existing areas of New Science. Over the long-term, real leadership may require a more proactive approach involving integrated New Science development platforms linked to advanced predictive analytics and intelligent solutions software.
Integrating New Science development approaches will involve moving expertise which is currently external in-house. Partnerships with external companies work well for short-term solutions, or to take advantage of low-hanging opportunities, but many such external providers do not have access to knowledge and expertise unique to the life sciences sector. Innovations coming from the external side often focus on simple concepts or reinforce a small angle of expertise of the founders, applied through existing infrastructure. To lead in the future, expertise in digital needs to be embedded in the organization to take advantage of valuable opportunities. In other words, biopharma companies need to start treating digital R&D similarly to that of their drug R&D, chiefly by accepting the risk profile required for new ideas to be tested.
Intelligent solutions provide further opportunities to lead in the future. Many products are logic-led, starting with what we know and investigating that for tracking or predictive capabilities, potentially then with intelligent solutions. This is great for taking advantage of what is already known, however that uses a fraction of the information available in what is a data-rich environment. Future leaders should look to use what we do not know and have data lead New Science. Intelligent platforms with integrated data sources, could identify opportunities, in prediction and evidence to discover relationships between variables which may otherwise not be obvious. This would allow for more innovative design of New Science products. Pharma companies have been looking at this for a while with therapies, but data leading New Tech Science, or data leading New Patient Science, could become very valuable.
The current discussion on US pharmaceutical pricing also has a number of potential effects on the winners from New Science. Personalized medicine is unlikely to have a lower price threshold than many alternatives. In fact, New Patient Science is unlikely to be low cost where patient pools are small. Thus, the conclusion is that not only is New Science fueling the debate on pricing, it is also impacting investment decisions, with potential effects on the patient interest in keeping the progress around innovation alive.
In conclusion, our analysis of launched products has demonstrated that a large proportion of recent pharmaceutical market revenues have originated from New Science. Each dimension is a growing part of the pharmaceutical industry, with different growth characteristics. Although New Treatment Science contains many traditional directions for innovation the greater potential of this dimension can be realized when combined with New Patient Science, which itself is an area of increasing potential. New Tech Science is an emerging area of increasing interest to the industry and has already been able to demonstrate improved patient outcomes, even in these early stages.
Seeing The Shift In OperationsSource: Accenture Research
All told, New Science in each dimension is a driver for growth and opportunity in an increasingly complex biopharma industry. This is driving improvements in patient outcomes, the ability to address unmet need in different populations, and is driving the formation of start-up enterprises as well as acquisition of companies innovating in New Science.
The fact is the New Science dimensions and archetypes will allow the C-suite to obtain a fuller understanding of the present and future states of their company and the wider industry that surrounds it. This analysis observes company’s moving across simpler product models to more advanced models. At the foundation, the determination of where they land is the combination of New Science in their portfolio.
About The Authors: Sanskriti Thakur (firstname.lastname@example.org) is Accenture’s global life science research lead. Gordon Murphy (email@example.com) is Accenture’s research manager.
In Vivo: strategic insights for life sciences decision-maker...
24 Feb 2020
“Growth gaps” were the driver for a record-breaking M&A year – but CEOs must remain disciplined when pursuing opportunities, or...
Whether you’re a small biotech start-up, research firm, generic manufacturer or a global pharmaceutical giant, you need focused, independent insight and opinion on market developments.
Our team is always happy to hear from you. Please call us at:
Have an immediate and specific information need?
Browse and buy from 1000s of analysis and research reports now: