It’s 40 years since JK Galbraith wrote ‘The Age of Uncertainty’, shortly after OPEC’s first oil price shock shook the economies of the world. Yet, looking back at 1977 from the perspective of 2017, it doesn’t look too turbulent compared to what we’re experiencing now. During their careers, few industry leaders will have faced the levels of uncertainty that we see around the world today. In the face of so many political and economic unknowns and such rapid technological change, this is as true for pharma and biotech as for any other industry.
Despite this, I’ve already found that the sector is focused and energised to make 2017 another year of significant progress. Whatever the macro-events in play, the momentum and appetite from investors, companies and advisors feel like an unstoppable force.
Of course, the pharmaceutical industry is used to high levels of risk which, to a degree, are within its control and experience. Now that external events are shaping the future of the industry to a far greater extent than usual, successful leadership will be key to ensuring companies’ success.
Some of the challenges
In the US, there is a new president who is yet to set out his policies, but he has made a commitment to repeal the Affordable Care Act. It seems highly likely that big pharma will be asked to subsidise some of that repeal.
Around the world, immigration is becoming more challenging and this can make people reluctant to move to take on new roles. With the best talent in short supply, that could seriously impact small and large companies alike.
To add to this is the recent election in France and the upcoming election in Germany this year, bringing the possibility of new governments and the certainty of new policies. Running through all of this is Brexit, which is likely to bring changes in UK regulations and drug pricing among other things.
Globally, we’re witnessing the growth of an ageing population, that’s putting health systems under pressure. Some of the most immediate consequences involve cost-cutting by governments and insurers.
Geopolitical forces can’t stop the train
Despite this apparent maelstrom of change there is, nevertheless, still plenty of room for optimism. As every industry and investor conference that I’ve been to this year has shown, there is a high level of appetite for organic growth, licensing deals and M&A from investors, companies and advisors.
In the UK, the Government has put the life science sector at the heart of its new industrial strategy, and the UK’s strong science base will continue to see it lead, seeding innovations and new companies.
Looking beyond the industry’s traditional markets in the US and Europe, China’s total expenditure on healthcare innovation now exceeds that of the US. It has recognised the value of new technology and is investing across the world, commonly finding European businesses more affordable than those in the US, but rapidly becoming involved everywhere. Moreover, the Taiwan stock exchange is seeing a boom in life science sector listings. This level of Chinese involvement is a pivotal moment for the industry as there is no shortage of great science and good technology for it to buy for the benefit of patients and the life science sector as a whole.
And if there is one sector that again caught the attention above all others as offering radical and exciting progress, it’s digital health. The dramatic explosion in genomics testing, wireless technology and (big) data analytics has made possible unforeseen combinations of actionable healthcare and research-ready data.
In the US, the new administration is strongly encouraging and incentivising firms to repatriate offshore funds. In doing so, they will have more to invest in high growth companies, partly driven by continuing low interest rates and the growing number of investment opportunities within and beyond the US.
The key to pharma and biotech success is people
The science is advancing at an unprecedented pace and the money is there for big pharma and investors to pump in. As ever, it’s the talent of the people that will determine if the money is put to best use. To a large extent, it’s a self-fulfilling prophecy. The talent, confidence and energy of the people leading this industry is undeniable, and will ensure that they are the authors of their own success. The challenge for investors and companies is finding the best talent and the best teams, especially as talented leaders remain, as ever, in short supply. Attracting, selecting and supporting executive talent is vital, and these important decisions need to be evidence-based to make sure that every hire is right.
Which skills do leaders need to win?
This is undoubtedly time for people who can ‘dance on a moving carpet’ and who thrive on dealing in uncertainty. Such circumstances call for leaders with agile minds and imaginations who have an international perspective on the macro-environment in which they’re working and the local expertise to make change happen, for example, CFOs who know how to list on more than one exchange based on their multi-country experience.
Then there are the specific skills needed to lead vertical aspects of the industry. When change is happening so fast, we need to look beyond the usual pool of talent. For example, the emergence of digital health means that bringing in talented people from other sectors is a leading change driver. The logistics of global supply chains also need to be optimised as this directly impacts profitability. Success may lie in drug companies looking at the skills found in the fast-paced world of consumer products to help them adapt.
Looking further afield and into the future
Asia holds a relatively untapped source of talent, with the possibility of new and innovative collaboration. We’re used to thinking first of the Europe/North America axis, as many of us have travelled and worked in both continents. Far fewer have lived and worked in Asia and that’s perhaps why, in the past, Asia has been further down the list for life science companies when it comes to talent searches and building brand recognition.
Looking strategically to the future, the HR function and executive search specialists must start to think more of Europe/Asia relationships. Benefits will be had for those of us from Europe and the US who spend time working in Asia, enabling the development of a better understanding of the people there and the opportunities they bring for the life science industry. The tech industry has already understood this because it’s selling its products directly to consumers and it’s gaining quicker market feedback to develop solutions and products.
Getting the culture right
Moving to a less predictable world also means cultural change. Senior leadership and sponsorship is needed to help large pharma accept that it needs to live and work differently if it is to survive and thrive. Some firms won’t survive, but those that do will represent a new brand of pharma, who will enjoy the opportunities that come hand-in-hand with disruption and change.
Adapt and thrive
So, all in all, there’s a lot of change coming – changes of practice, thinking and behaviour – all of which represents challenge and opportunity. Those who recognise it and adapt will, as ever, be the ones that succeed.