The Helix report: Is biopharma wired for future success?

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The biopharmaceutical industry has remarkably improved disease treatment over the past decade. Immunotherapies have become the mainstay for treating many cancers, most cases of hepatitis C are curable, and treatments for diseases such as multiple sclerosis can now alter the course of the disease. The industry’s response to COVID-19—developing and deploying multiple vaccines within a year of the initial pandemic designation—marked a triumphant conclusion to the decade. But what about the next one? The Helix report argues that if companies are to make another leap forward, they may need to recalibrate their formula for success.

We arrive at that conclusion by looking back and examining the industry’s performance from every angle—its impact on patients, its financial record, how it has developed its workforce and capabilities, and its wider impact on society and the environment. There is much to be proud of. But the scrutiny also uncovers areas where ambition could be higher.

Take patient impact, the most important marker of success. The industry has launched more than 500 new molecular entities in the past decade, many of which have transformed millions of lives, while generics have massively extended the reach of top-selling drugs in both developing and developed countries. In the United States, the number of patients benefiting from statins, antipsychotics, and antidepressants increased by roughly 50 percent between 2010 and 2020, from some 40 million to 60 million.1

There are countless other achievements, but there are limitations too. For example, R&D is increasingly focused on specialty diseases with relatively small patient populations, often leaving the needs of those with more prevalent, chronic conditions unmet. Today, eight of the 20 top-selling drugs are for cancer treatments. Hence, while revenue from the top 20, excluding vaccines, rose some 25 percent in the US market to roughly $100 billion between 2010 and 2020, the number of patients receiving those treatments fell by 80 percent. That implies a sixfold increase in revenue per patient.2

Biopharmaceutical leaders need to determine whether this strategy will remain successful. The industry’s financial record has been strong, with returns to shareholders in the past decade largely matching those of other high-performing industries, excluding tech, even while R&D spending as a percentage of sales has risen.3 But it could prove hard to build or even maintain that record, given that development costs continue to rise and productivity has stalled. The chances of bringing a Phase I drug successfully to market are about 11 percent—the same as a decade ago.

A growing reliance on a few large markets—China, Germany, Japan, and particularly the United States—is also worth noting. Twelve of the 15 biggest biopharmaceutical companies now derive 53 percent of their revenues from the US market, up from 43 percent a decade ago. Only three of these companies have reduced their reliance on the US market over the past ten years.4 That emphasis may have paid off to date, as there is a correlation between a company’s concentration in the United States and its profitability. But could profits be at risk from pricing reforms? Also, bear in mind that most of the roughly two billion people born in the next ten years will live in developing markets.5 Companies oft-characterized as global are increasingly out of sync with global demographics.

Then there’s the industry’s record on building skills and capabilities. The geographic makeup of the workforce has changed to reflect the growth of the Chinese market—AstraZeneca now employs more than 14,000 people in China. But the overall size of the workforce has not changed much in the past three years as additions in China have been countered by a shrinking field force elsewhere, reflecting a stronger focus on secondary rather than primary care. The ten largest companies now employ some 750,000 people.6

The 15 biggest biopharmaceutical companies now derive 53 percent of their revenues from the US market, up from 43 percent a decade ago. Only three of these companies have reduced their reliance on the US market over the past ten years.

The industry has worked to correct gender imbalances at the top: on average, women account for a third of the board members at the 20 largest companies, up from 14 percent in 2011. Minority representation has risen more slowly, however, from 9 to 16 percent.7

The industry has also worked to build new expertise in medical, commercial, manufacturing, and R&D sectors and embed new disciplines such as data science and data engineering. But it is hard to argue that it is a magnet for the tech talent needed to build next-generation capabilities. With some exceptions, the industry has made timid progress in increasing its digital prowess.

A more compelling employee value proposition that delivers on postpandemic expectations such as more autonomy, more development opportunities, and a stronger sense of purpose could help the industry compete for the talent it needs, though rankings of the best places to work suggest Big Pharma has more of a problem than biotech.8

Improving the industry’s social and environmental impact could also play a role. The industry has, without a doubt, responded to environmental concerns. Even so, many companies have still to set and deliver on bold ESG agendas.

Additionally, racial or ethnic minorities are underrepresented in clinical trials, suggesting limitations to the relevance of the data; research prioritizes Western concerns—three to five times more trials are under way for prostate and colorectal cancer, more common in the United States, than liver or gastric cancer, more common in China9; and the industry invests less than 2 percent of R&D on female-specific conditions beyond oncology.10Unlocking opportunities in women’s healthcare,” McKinsey, February 14, 2022. Meanwhile, COVID-19 has demonstrated the extent to which access to innovation depends on a country’s ability and willingness to pay. As of December 2021, 7 percent of Africa’s population had been vaccinated against the virus, compared with 60 percent in high-income countries.11

It is against this backdrop that we urge executives to consider nine questions, the answers to which could determine which companies will be the industry’s future leaders. What, for example, might executives need to do to meet broader patient needs? Can they transform R&D to deliver breakthrough medicines faster and at a lower cost? Do they feel comfortable depending on a few large markets? And have they identified the bold moves needed to sustain value creation? All nine questions are listed below.

The act of examining the past should fill industry leaders with great pride. It should also, however, make clear what might need to change to capture still greater achievements. Looking back can help power the next leap forward.

Nine questions to consider

  1. How can biopharma companies meet broader patient needs rather than overemphasizing already crowded areas with the greatest economic returns?
  2. Will biopharma companies transform R&D to deliver breakthrough medicines faster at a lower cost? Or will they be stuck with rising development costs and lower asset net present values (NPVs)?
  3. How can companies escape “pilot purgatory” to fully harness the power of digital and analytics and start viewing investments in digital and analytics through an R&D lens?
  4. What changes in strategy and operating model are required to realize the global opportunity? Will companies continue to depend on select large markets such as the United States?
  5. How can biopharma companies rely more on ecosystem partners, create more flexible and resilient operating models, and overcome their preference for owning capabilities and capacity outright?
  6. How can the industry play a larger role in driving patient outcomes and realize the full potential of innovative therapies?
  7. What bold actions can the industry take to fully leverage its capabilities and resources and be at the forefront of meeting rising standards in ESG?
  8. What actions must companies take to build on their record of value creation, especially in light of a changing policy environment (for example, Inflation Reduction Act)?
  9. What changes must biopharma companies make in their organizational and operating models? How must they evolve value propositions to attract talent?
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