2006 Fut Lif SCN RPT FINAL

The future of the
life sciences industries:

strategies for success in 2015
A Deloitte white paper developed in collaboration

with the Economist Intelligence Unit
Audit . Tax . Consulting . Financial Advisory.
The future of the life sciences industries:

Table of Contents
Foreword ......................................................................................... 1
Preface ............................................................................................. 2
Executive summary ........................................................................ 3
Strategic priorities ......................................................................... 5
Upgrading skills and proficiencies ............................................... 7
Research and development ........................................................... 9
Emerging markets ........................................................................ 13
New methods of commercialisation .......................................... 16
New business models .................................................................. 17
Working within health systems ................................................. 18
Conclusion .................................................................................... 19
Appendix A: Survey results ......................................................... 21
Appendix B: Executive roundtable participants ....................... 32
36

Foreword
Over the next decade, the life sciences industries will be faced with
sweeping demographic shifts, increasing globalization, mounting
health care costs, the rise of emerging markets, and accelerating
convergence between industry sectors. The life sciences industries
are clearly poised for a period of massive shifts, and the most
successful players in 2015 will be those whose strategies not only
reflect these trends, but also adapt to and take advantage of them.
To do so, life sciences companies must first clearly understand the
forces that are changing the industries, and the issues that they will
need to overcome in order to be successful in 2015.
To help understand how companies are aligning themselves for
success, Deloitte Touche Tohmatsu, in collaboration with the
Economist Intelligence Unit, has completed a research programme
that culminates in the following white paper, entitled The Future of
the Life Sciences Industries: Strategies for Success in 2015. As the
research makes clear, positioning for success will require many
companies to challenge their strategies regarding business models,
markets, products, alliances and other areas. And in some cases,
broad transformation of critical aspects of the business may be
needed. I trust that this document will provide compelling insight
into those issues and strategies that will dominate the corporate
agenda for the next decade and beyond.
Robert Go
DTT Life Sciences and Health Care Industry Group Leader
Deloitte Consulting LLP

Preface
The future of the life sciences industries: strategies for success
in 2015 is a Deloitte Touche Tohmatsu (DTT) whitepaper developed
in collaboration with the Economist Intelligence Unit (EIU). The
findings and views expressed in this report are drawn from three
research initiatives; a global survey, roundtable discussion and
individual interviews.
During March to April 2006, DTT and EIU professionals conducted a
global online survey of 193 senior executives of the life sciences
industries. The survey asked executives to predict how rapidly and in
what ways their companys business would change over the next
decade and what strategies they would adopt to achieve continued
success.
On June 27, 2006, we held an executive roundtable in London
consisting of key opinion leaders from across the life sciences and
health care sector to discuss the survey findings.
We also conducted individual interviews with board level executives
in the life sciences industries.
Our thanks are due to all survey respondents, forum participants and
industry interviewees for their time and insights.
The Economist Intelligence Unit bears sole responsibility for this
report, which was written by Alexandra Wyke, in collaboration with
Jacques Mulder, U.S. Pharmaceutical R&D Practice Leader, Principal,
Deloitte Consulting LLP, and Robert Go, DTT Life Sciences and Health
Care Industry Group Leader, Principal, Deloitte Consulting LLP.
December 2006

Executive summary
The research undertaken for this report leads to one main
conclusion: Over the next decade, life sciences companies will likely
face a great deal of upheaval, and they will need to reinvent their
strategies to achieve success. Those companies that fail to respond to
the new challenges will fade from view. The only constant factor
between 2006 and 2015 is the way companies will measure success:
profitable growth, a high reputation and the strength of the pipeline
of products.
In summary, the research identified the following shifts in the shape
and direction of the industry and key strategies for success:
The future of the life sciences industries will depend on products
and services not yet found in their offerings. Companies will need
to determine how they can successfully deliver these innovations.
Emerging markets will play a major part in the future of the
industries. Companies will have to significantly expand investment
in emerging markets across a wide range of activities, including
Research and Development (R&D).
Traditional sales and marketing approaches will need to be
modified to be better focused on the health care consumer.
The life sciences industries will continue to converge.
Currently, companies are not proficient in the activities judged to
be critical in 2015. Companies will need to dramatically improve
their proficiency in many core areas, and recruiting and retaining
top talent will be imperative.
Why this report?

It is hard to think of any other industries more important than
life sciences. These industries are critical to peoples futures,
not just in rich countries but in the developing world. They
are also industries capable of creating great wealth. At the
same time life sciences industries are directly affected by all
the cross currents of the global economy, in terms of
regulation, globalization and in terms of innovation in
science.
Dr. Daniel Franklin, Executive Editor, the Economist,
at the Executives roundtable June 27, 2006.
The life sciences industries Dr. Franklin is talking about include

pharmaceuticals, medical devices and biotechnology. Massive change
is taking place in the life sciences environment: dramatic
demographic shifts in the age-profile of populations, alterations in
the landscape of disease, the entry of new technologies, health care
cost inflation and much more.
But despite universal recognition that the business habitat is set for
upheaval, life sciences companies have appeared unclear about what
their specific corporate priorities should be to secure success in the
future decadelet alone how these priorities should be addressed.
Life sciences companies need new business models to face future
challenges. Hence the present report, which helps spotlight potential
problems in the life sciences business and proposes strategies to
overcome them.
Significant revenue growth is unlikely to be achieved organically,

mergers and acquisitions will continue, and partnerships/alliances
will emerge as an important means of revenue generation.
Companies will need to leverage the fact that partnerships will be
ubiquitous and may include cross-sector partnerships and tie-ups
with payers (public and private) as well as academia. This will draw
new players into the sector.
Traditional commercialization strategies, based on reach frequency
and saturation, will not be effective companies will need to
develop novel approaches toward the commercialization of
products that engage users of products as well as regulators of the
industry.

Research methodology
To achieve a greater understanding of the future of the life sciences
industries, the Economist Intelligence Unit, in collaboration with DTT,
undertook a three-stage approach to the research:
An opinion survey of 193 senior executives and managers within
the life sciences industries was undertaken in March-April 2006.
The participants in the survey came from companies with annual
incomes of less than US$500m to more than US$15bn. Survey
participants were located all over the world. The online survey
asked executives to predict how rapidly and in what ways their
business would change by 2015and what strategies their
companies would adopt to secure success. [For full survey results,
see Appendix A]
A roundtable with key health care and life sciences opinion
leaders took place in London, on June 27, 2006. Roundtable
participants included regulators, medical professionals, academics,
researchers, payers and professionals from the life sciences
industries. [For a full list of participants of the roundtable, see
Appendix B]
Interviews with CEOs and board-level executives of global
pharmaceutical, medical device and biotechnology companies
were conducted in the spring of 2006. Interviewees were
challenged to forecast the future of their companies and the
future of the life sciences industries.
This report supplements a previous research report completed in May

2005, by the Economist Intelligence Unit in collaboration with DTT:
The future of the life sciences industries. This report highlighted
future changes in the life sciences industriesnotably an
accelerating pace of innovation, continued convergence in the
industries and a speedier expansion of Asian markets compared with
those in the West. Predictions in 2005 were that the life sciences
industries would continue to consolidate as a result of the
convergence of the biotechnology and pharmaceutical sectors, and
this has indeed been the case.

Strategic priorities
The executives surveyed overwhelmingly indicated that developing a
robust R&D pipeline (74%), forming alliances and partnerships
(52%), talent management (41%), developing closer relationships
with customers (37%) and streamlining commercialization processes
(36%) are key strategies for success in 2015.
Of the many internal and external factors that could influence future
success, specifically revenue generation, life sciences executives
responding to the survey emphasise the importance of increasing
corporate reputation and companies abilities to produce life-saving,
affordable medicines and technologies. Of the two, new drug
development is considered paramount. Furthermore, survey
participants say that harnessing benefits from the growing health
consumer movement will greatly benefit revenue growth.
Given these factors for success, our research also identified those
elements of the life sciences businesses that need a strategic focus.
Top of the list are:
Transforming research and development to create robust R&D

pipelines. 74% say that developing a robust R&D pipeline is the
most important strategy for success through 2015.
Upgrading skills and proficiencies. 94% of respondents indicate
that their company will have to become proficient in development
to reach their business objectives in 2015 while 84% feel the same
way about basic research.
Leveraging emerging markets. When surveyed, 40% of
respondents thought that penetration of emerging markets was a
key strategy for success.
Implementing new methods of commercialisation. 91% say they
will need to be proficient in sales and marketing, compared with
only 53% who say they are proficient now.
Defining new business models.
Dealing with regulators.
Which of the following strategies will be the most important in securing your companys continued success through 2015?
(% respondents)
Develop a robust R&D pipeline
74
Form alliances and/or partnerships with pharma/biotech/medical device firms
52
Recruit and retain top-tier managers and scientists
41
Develop a closer relationship with our customers
37
Streamline and shorten the commercialisation process
36
Acquire strategic businesses
33
Fuel growth of core businesses with volume and price increases
20
Focus on in-house product discovery
19
Develop information networks (e.g., data on patient profiles)
17
Improve the companys ethical and financial reputation
17
Cut operating costs
16

Top executives at large pharmaceutical companies are confident they

can overcome the challenges. John Patterson, Executive Director of
Development at AstraZeneca, the worlds sixth largest pharmaceutical
company, says: In 2015, AstraZeneca will have a robust pipeline. We
will look different from today. There will be no big mergers and
acquisitions, rather, a network of interactions with academics and
outsiders. And Daniel Vasella, chief executive of Novartis, the
worlds seventh largest pharmaceutical company, states: In ten years
time I hope that Novartis will be an adaptive company, based on an
understanding that we really deliver value to our customers, the
primary customer being the patient. As the environment will
continue to evolve I do not know how exactly we will achieve this
goal, so we will have to remain an adaptive organization. Our target
is to be world class in whatever we do, which is the basis of how we
will attain both financial reward and a leading position in
innovation.
Cutting costs?
Executives from life sciences industries are acutely aware of the
need to manage expectations of those outside their companies,
given the extent to which ethical reputations will influence
corporate profitability. Chief among their concerns is the publics
access to health care. But the rise in global health inequities has,
in part, been ascribed to rising product costs and prices. At the
June 2006 DTT/EIU Roundtable, Thomas Lnngren, Executive
Director of the European Medicines Agency (EMEA), which is
responsible for approving all new medicines made available
throughout the EU, pointed out: What we have seen over a
couple of years now is a declining number of new medicines
coming out onto the market. At the same time, you have the
highest amount of money spent in research and development in
the pharmaceutical industry ever. No one will be able to afford to
buy drugs any more. This is an issue for the pharmaceutical
industry to solve. Sir Alan Langlands, principal and vicechancellor of the University of Dundee and former head of the
National Health Service (NHS) in England noted that the rising
costs of, and demand for, treatment mean that European
governments guarantee to provide universal health care is under
threat.
Life sciences companies do not seem sure how they intend to
tackle such criticism. The vast majority of senior executives who
participated in the survey do not believe it is a high priority to
develop low-cost structures in R&D or to cut operating costs in
order to be successful in the future.

Upgrading skills and proficiencies

The newly acquired skills will be put to good use. Product safety, a
top concern for the industry, will be improved by setting up the
correct infrastructure and technology to track adverse events from
providers, patients and payers. Expertise in flexible manufacturing
will enable companies to maintain a low-cost production base and to
avoid continual capital investments when product portfolios
changeobjectives for forward-thinking companies over the next
decade. Novartis, for one, is trying to build its consumer-oriented
marketing skills internally. The companys current head of
pharmaceutical was a former executive at PepsiCo.
To meet new challenges and retain profitability, companies will

certainly have to upgrade their skills base. As one interviewee put it,
To recognise excellence outside a company, you need expertise
within a company. Not only did over 40% of survey respondents
feel that recruiting and retaining top managers and scientists was a
key strategy for success in 2015, but executives in the survey also
think that most of their companys operations are not where theyll
need to be in 2015, with the possible exception of compliance and
research. The areas in greatest need of improvement, say
respondents, are management processes, sales/marketing and
information systemsand in the case of medical device and
pharmaceutical companies, product discovery.
How proficient is your company in the following areas today? (Top blue line of data)
How proficient will your company need to be in the future to achieve 2015 objectives? (Bottom green line of data)
27%
42%
23%
37%
52%
21%
38%
22%
50%
12%
11%
29%
36%
33%
44%
48%
34%
10%
36%
43%
9%
35%
9%
18%
5%
15% 4%
29%
33%
31%
30%
9%
41%
45%
44%
17%
30%
58%
8%
36%
42%
15% 3%
38% 4% 2%
12%
18% 4%
41%
34%
47%
Proficient
Somewhat proficient
Less proficient
Not proficient
Very proficient
Proficient
Somewhat proficient
Less proficient
Not proficient
11%
5%
3%
18% 3%
10%
6%
33% 4% 4%
38%
Very proficient
12% 2%
5% 3%
10% 3%
14% 3%
31%
36%
43%
55%
9%
16% 4%
11% 3%
34%
45%
56%
5% 3%
9% 2%
13% 4%
8% 2%

Projected increase in proficiency required to meet 2015 objectives.

Sales/marketing
Management processes
Development
Information systems
Product discovery
Research
Compliance
Supply chain
Operations and production
Manufacturing
0%
10%
20%
30%
40%
50%
60%

Research and development

Goals and solutions
A new era of medical breakthroughs?
Since their inception in the 1920s, following the discovery of

penicillin, the modern life sciences industries have looked to R&D as
its engine for success. This remains true today. Senior executives who
took part in the 2006 DTT/EIU survey are certainly banking on the
development of a robust R&D pipeline. They went so far as to say
that the future of the life sciences industries will depend on products
and services not yet found within their portfolios. No less than 52%
of respondents expect at least half of their 2015 corporate revenue
will be generated from products and services that are not available
from their companies today. Yet in 2005, research productivityin
pharmaceuticals, at leasthad fallen to an all-time low.
Non-industry members of the roundtable believe that a new era of

major breakthroughs will take time. Professor Mark Walport, Director
of the Wellcome Trust, said, I think theres a sense that were
looking for a magic bullet that will somehow greatly simplify drug
development, and actually Im not convinced there is one. Instead,
these roundtable members felt that there would be a series of
incremental advances, such as the development of targeted therapies
that match pharmaceuticals to genetically appropriate patients. Nonindustry roundtable members also predicted that there would be an
industry-wide effort to make these products more user-friendly or to
develop combination therapies to enhance their effectiveness.
By 2015, what share of your companys revenues do

you think will be derived from new products and services
(e.g., products and services that are not available from your
company today)?
Dont know
3%
1 to 25%
13%
76 to 100%
21%
26 to 50%
31%
51 to 75%
31%
None
1%
But within the life sciences industries, business confidence appears to

be on the rise, at least among the most senior executives. Companies
not only believe that their R&D pipelines are going to become
stronger, but there is a high level of optimism about the emergence
of genuinely innovative products, according to the senior executives
interviewed for this paper. They believe that the pace of innovation is
increasing, and some go so far as to say we are likely to make more
progress in the next two decades than in the past two decades.
According to Dr. Vasella, Looking at the innovation situation today,
we do know that the number of compounds in Phase I [early stage
clinical testing] have doubled between 1995 to 2005 across the
global pharmaceutical industry, from 1,000 to 2,000 compounds.
Phase III [late-stage clinical testing] remains at 400 and we still have
to see change there. Dr. Vasella envisages that the Novartis portfolio
will contain products that will have a profound effect on disease and
disability. He cites Novartis research drug, anti-Nogo, which has the
potential to stimulate nerve growth after a spinal injury. It is difficult
to predict as many drugs fail in development, but the hope is that
the drug will help paraplegics regain movement and be rehabilitated
in months, even walk, says Dr. Vasella.

Dr. Patterson is also optimistic. Evidence within companies,

including my own, is that there are many more products in the early
pipeline. The number of new candidate medicines is more than I
have seen in my 30 years within the pharmaceutical industry. With an
explosion of science it is now possible to synthesise active molecules
without large numbers of chemists. In the field of oncology there
have been some significant developments already.
For all the bullish talk, life sciences companies recognise that they
must improve their ability to translate research ideas into products.
Nearly two-thirds of the senior executives participating in the survey
say this ability is extremely important for speeding up the processes
between discovery and taking a product to market. This is essential if
firms are to change their product portfolios as radically as

respondents say they need to. For these reasons, survey participants
place great emphasis on recruiting top-tier scientists as well as
establishing long-lasting R&D partnerships and networks with firms,
NGOs and the academic community, to provide the means for
improving R&D productivity. And attendees at the roundtable agreed
that by 2015, networking is set to become the hallmark of life
sciences activities. Since the market for top-tier talent is a global one,
not all such skills will be in the regions that are regarded as scientific
hotspots today. Therefore, life sciences companies will have to
develop the ability to conduct R&D in remote and far-flung parts of
the world.
In 2015, how significant do you think the following will be in determining your companys discovery-to-market timeline?
Ability to translate research ideas into viable products
63%
26%
9%
Slower regulatory approval

31%
33%
22%
10%
4%
Need to tailor products to a more diverse market

25%
37%
24%
10% 3%
Availability of patients for clinical trials

21%
38%
24%
10%
7%
More complex demands of data management and product safety

19%
48%
25%
6% 3%
Difficulty accessing large-scale funding

15%
24%
37%
16%
8%
Reduction in number of products given fast-track approval

15%
26%
33%
21%
5%
Increased development time for broader indications

13%
37%
35%
12%
4%
New regulations not related to clinical testing (eg, concerning patient privacy)
9%
Major positive impact
10
32%
Some positive impact
No impact
36%
Some negative impact
Major negative impact
16%
6%

Which of the following strategies do you expect your company will employ to maximize the returns
on its R&D investments by 2015?
Form long-lasting R&D partnerships/networks with other firms
64%
Collaborate with non-profits and the academic community
58%
Increase in-house R&D budget
47%
Increase outsourced R&D
46%
Explore product types that bring together different

scientific disciplines (e.g., material and biological sciences)
42%
Recruit more/better scientists
39%
Increase offshore R&D and/or clinical activities
36%
Acquire R&D-oriented firms
33%
Tax-aligned ownership and exploitation of intellectual property

Other, please specify
None
18%
3%
1%
11

A question of affordability
From big pharmas perspective, the financial rewards for developing
medical breakthroughs are obvious. According to Dr. Vasella, The
levels of sales generated by some blockbusters have gone up
substantially. For example, Lipitor (the cholesterol-reducing drug
produced by Pfizer) brings in an annual income of US$12-13 bn.
But health care systems will have to find ways to pay for the new
therapeutics. Policymakers and health care payers remain aghast at
the cost of developing just one drugabout US $1bnassuming
the cost of dead ends and blind alleys is included in the price tag.1
Life sciences companies are being forced to find ways to reduce
their R&D costs, thus far with limited success. Executives of life
sciences companies balk at such demands. I would love to get my
costs down, but it is easy to say and hard to do. We are trying to
get the attrition rates lower. But we are in a risk-taking business. If
you take fewer risks you are accused of not being innovative
enough. There are conflicting forces, says Dr. Patterson.
Risk is only one of the reasons, however. Another is the lack of
proficiency noted earlier in discovery activities and drug
development. Hiring a larger number of talented people is not the
complete solution for this; companies will also have to improve their
processes and their governance in order to increase efficiency.
There are other aspects of the high cost of drug development. For
example, Dr. Vasella maintains that one of the reasons for the
increased spending on drug discovery and development is larger
trials. The cost of health care, by contrast, is driven by the changing

demographics. The market is growing. The issue is not drug costs,
but an escalation in the need for treatment of conditions such as
dementia, which has translated into increasing costs for health
services. Health services now account for 80% of the total health
spend versus just 10%-20% for drugs. In fact, you could argue that
the health care expenditure is partially contained by effective
treatments. It is inevitable that increased demands will lead to
increased costs for health care systems. With rising need, you cant
have a society where expenditure remains flat or you have to limit
access, he says.
Life sciences companies argue that health care systems could achieve
far greater efficiencies by changing their infrastructure. In the U.S.,
the annual cost of medical litigation is US$110bn.2 The litigious
nature of U.S. health care means that companies are acting
defensively by conducting unnecessary tests. Billions of dollars are
wasted, and this expense outweighs the costs of drug development.
But this is not an argument that carries much weight with national
governments and payers of health care.
In an environment where cost-cutting seems to be the order of the
day, companies will have to find a way of balancing the imperative of
fiscal prudence against the need to make investments that improve
quality and safety, be it data-mining or early detection analyses. 69%
of respondents say that increased spending and staffing on quality
and safety activities will be needed. Much of this spending will be
done not just in the developed world but in emerging markets also.
The life sciences industry has been faced with product and safety issues in the last decade. How do you think future
leading companies will prevent such incidents?
Increased spending and staffing on quality and safety activities
69%
Increased spending on and use of data mining and early detection analysis
60%
Controlling patient access through increased risk screening
55%
Improved treatments through personalised medicine
53%
Increasing number and duration of clinical trials
52%
Using external service providers to monitor quality and safety
42%
Reducing the number of indications sought for initial approval

Other
12
33%
4%

Emerging markets
Emerging markets are expected to play a significant role in the future
fortunes of life sciences industries. Over half of all of the survey
participants expect that by 2015 emerging markets will account for
more than 25% of their companies total revenue, necessitating big
initial investments in the geographic region. This is a dramatic
increase in 10 years and will entail significant changes in the business
model. Survey participants also anticipate that by 2015 their
companies are likely to significantly increase the percentage of
certain core activities that are performed in these markets, including
R&D. More than half of the survey participants from the biotech
sector judged that their companies would be conducting research in
emerging markets by 2015.
increasing at such an alarming rate that the epidemiologists are

predicting the region will witness 2 million new cases of smokingrelated cancer cases per year by 2025, according to the American
Cancer Society. This compares with something like 40,000 to 50,000
per year in the UK and around 250,000 cases in the U.S. The
forecasted increase in the number of patients with diseases such as
cancer in emerging markets, may lead to fast growth in the size of
their markets.
Once again, alliances and partnerships are seen as the preferred

mechanism to gain entry into these emerging markets. Just over
60% of respondents believed that an increase in the number of
mergers, acquisitions and partnerships would be driven by a need to
enter new markets.
Central Europe, voted in second place, is an economically robust and

stable market, able to produce life sciences goods and services at low
cost. India, which came third, not only has a large domestic market
but a potential for commercial synergy within R&D. According to Dr.
Brian Tempest, chief mentor and executive vice-chairman of the
board at Ranbaxy (Indias top pharmaceutical company), the number
of FDA-approved facilities in India has grown considerably. The
country also has a significant science base, particularly in bench
chemistry.
When asked about the relative importance of different emerging

markets to their companies, survey participants voted China into top
place. The countrys vast population, low costs and rapid economic
growth could be the main reasons. And, as was pointed out at the
roundtable discussions, the consumption of tobacco in China is
In fourth place is Eastern Europe, including Russia, which also has a

large number of skilled technicians and researchers in medical
science as well as being an inexpensive place to work. Latin America
came last, possibly due to its less rosy economic prospects than that
expected for Asia and Central Europe.
What portion of your companys revenue currently comes from emerging markets, such as China, India, and Eastern Europe? What
portion of your companys revenue do you expect will come from emerging markets by 2015?
70%
Current
By 2015
60%
50%
40%
30%
20%
10%
0%
None
1 to 25%
26 to 50%
51 to 75%
76 to 100%
Dont know
13

How important do you think the following will be as drivers of M&A and alliance activity for life sciences companies in the
next 10 years?
Critically important
Very important
Somewhat important
To-date, life sciences companies have looked at emerging markets

primarily as a way of bolstering product sales. For Medtronic, the
most important objective is to increase patient access and to ensure
that patients, wherever in the world, can benefit from medical
technology to alleviate their pain, restore their health and extend
their life. Today, Medtronic does business in over 120 countries
around the world. While the prevalence of medical problems that our
products address is greater outside the U.S., approximately twothirds of our revenues are generated inside the U.S. As a result, we
have major efforts underway to better address significant market
potential in countries outside the U.S., says Michael DeMane,
Medtronics Senior Vice President and President Europe, Canada,
Latin America and Emerging Markets.
% of respondents saying that the folowing operations in emerging
markets comprise more than 10% of global activities
14
Today
In 2015
Research
18
44
Product discovery
11
36
Clinical development
26
59
Manufacture for export
26
54
Manufacture for domestic use
28
46
Sales
38
71
Less important
Not important
Yet Dr. Tempest of Ranbaxy expects that life sciences companies will
eventually work out how to use emerging markets, not just as a
domestic customer base, but as a locus for R&D of products destined
for the developed world. Countries like India not only offer a low
cost base but have an indigenous entrepreneurial population that
can help support the development of the R&D pipeline for developed
countries, Dr. Tempest asserts.
Dr. Tempest is certain that the only limiting factor, as far as emerging
markets are concerned, is knowledge awareness, There is an innate
fear because people dont know about India. Some pharmaceutical
companies have been in India for decades, like GSK or Pfizer. Others
like Bristol Myers Squibb and Merck pulled out of the country 20
years ago and are now trying to get back as fast as they can. High
profile CEOs and heads of research have been visiting India, some
begrudgingly. But once they see facilities and the quality the country
can offer they go back and rethink what can be achieved.
But not all are equally enamoured with the notion of India as a
center of R&D activity. On the negative side, Indian salaries have
gone up substantially. Between January 2005 and January 2006
there was a 12-13% across the board increase in wages,3 with Indian
IT and financial services hardest hit. And although many Chinese and
Indian PhDs are graduating from America, they demand Western
salaries when they return home.

Bureaucracy and a lack of transparency are other hurdles. Following

a number of newspaper articles regarding the alleged misconduct of
foreign companies in the country, Indian regulators are erecting
barriers to prevent multinational companies from entering its market.
Some Indian companies are even going abroad to conduct their
Phase I trials to complete them faster. There will need to be a lot of
political will to bring about regulatory change. There are also
enforcement problems regarding intellectual property rights, an
important obstacle for big pharma investment in most emerging
markets.
A reduction in the cost of R&D is not the only reason firms are
interested in emerging markets. Companies will have to design new
business models in order to make a profit in developing countries to
sustain their growth and revenue as price and margins come under
increasing pressure in developed countries.
It is probably for these reasons that Dr. Vasella scoffs at the idea that
emerging markets will reduce the overall cost base of R&D, You
invest in research in Chinabut dont pay less for research. This is
expansion, not a replacement. We are not willing to close down
facilities in the western world. I do not believe emerging markets
offer that solution. This is different from locating manufacturing
production in productive places. Investment for R&D is made as there
is a necessity to find global and multiple ways of innovation.
Increased sales/marketing efforts, with a local presence

(distribution channels), to focus on doctors.
Whatever rationale companies may have for expanding into

emerging markets, they will need a strategy to grow there.
According to the majority of survey participants, those strategies are
likely to entail the following:
Development of key relationships with government, which is why

companies will target those countries with established medical
structures.
New business models in the form of affiliations with local
companies.
Dr. Patterson, though more positive, still sees too many obstacles to
enable emerging markets to evolve into a low-cost alternative venue
for R&D. Like most other pharma companies we are already out
there. We have a significant percentage of business both in China
and India. But such markets cannot challenge the R&D effectiveness
of the U.S. The American government places huge investment in its
government national institutes. There is entrepreneurial money in
America. Together these forces make the USA the natural hub of
medical R&D for life sciences companies.
15

New methods of commercialisation

More than 80% of survey participants expect an increase in health
consumerism will have a positive impact on companies revenue by
2015. And survey respondents state that companies which hope to
sell their medicines and other health care services in 2015 will not
only have to be closer not only to physicians and regulators, but to
patients as well.
Indeed, sales and marketing are at the top of the list for much
needed proficiency improvements. Over 90% of the participants in
the survey claim that by 2015, they will have to be proficient in sales
and marketing to secure success. This means that the industries
current tactics of premium pricing and door-to-door selling to
physicians will no longer suffice. New methods of commercialisation,
directed at end-users, will be required. Instead companies will have
to develop relationships with patients, providers and government by
providing services, such as patient information, supporting the
management of disease and treatment (for example, in partnership
with payers) and through increased collaboration with regulatory
groups. Competitive pricing will also play a part in any successful
sales/marketing strategy.
Michael DeMane of Medtronic believes that ensuring appropriate

patient access will prove to be the life sciences industries toughest
challengebut one that will prove most rewarding, Creating and
increasing patient access will be a key challenge for the medical
industry. It is clear that medical technology will advance much more
quickly in the coming decade compared to the last. As a result, the
number of people who have the potential to benefit from these
advances will also expand rapidly. On the other hand, we face
significant economic, legal, social and political challenges that will
severely limit patient access unless dealt with in different ways than
in the past. Finding solutions to increase the access will take more
communication and better collaboration among the interested
parties including industry, physicians, hospitals, government and,
ultimately, the patients themselves. If we can formulate and then act
on new collaborative solutions, there is tremendous upside potential
to serve patients.
How important do you think the following will be as sales and marketing strategies to commercialize the products
emerging from your company?
16
Very important
Somewhat important
Less important
Not important

New business models

Over the past two decades, companies frequently pursued mergers
and acquisitions (M&A) to spur growth and resolve other challenges.
In 2006, survey participants, from all-sized companies, did not
believe that either organic growth or mergers and acquisitions will
provide the complete solution. M&A, our respondents believe, will
add only one-fifth to the expected increase in sales over the next
decade.
Survey participants say that in the new era of medical innovation, the
main method for securing growth will be collaborations and
partnerships. Such alliances, they report, will be the most important
way to bolster R&D, expand into emerging markets, develop
marketing channels, and build relationships with governments. Most
respondents also think that those who are best at leveraging such
alliances and partnerships will pose the greatest competitive threat
in other words be most successful. The implications of such
transformations are clear. Health care sectors will converge, as
various parts of the life sciences industries team up to deliver
innovative treatments at costs acceptable to payers.
Already there are signs of diverse relationships forming between one
life sciences subsector and another. One member of the roundtable
commented, The range of partnerships appears to be broadening
widely and to include NGOs, academics, their peers, small firms and
larger firms. These collaborations are going to support both new
R&D and their new marketing efforts, whatever that might be.
Which of the following types of companies/organizations do you think will pose a serious competitive threat to your
companys success by 2015?
Companies best leveraging alliances and partnerships
62%
Your corporate peers
54%
Manufacturers of generics
44%
Companies based in emerging markets
41%
Vertically integrated companies
34%
New entrants not widely viewed as significant current competitors

(e.g., Proctor & Gamble)
33%
Mid-market companies
Diversified conglomerates
Public-sector organisations
Companies selling consumer-branded products
23%
15%
14%
13%
17

Working within health systems

Survey respondents, though generally optimistic about their
companies long-term outlook, felt severely threatened by the
possibility of greater government intervention. Their main fears,
relate to the increasing tendency of governments and other health
care payers, to contain or even reduce their health care bills.
In 2003, Germany tightened up its therapeutic reference pricing
programme. (Reference pricing is when equivalent therapeutic
products are reimbursed by health care payers at the lowest price to
be found in the market). The revised scheme included patented as
well as generic drugs. In consequence, the price of Pfizers Lipitor
was reduced to the same level as other generic cholesterol-lowering
drugs. The company saw sales plummet and ultimately pulled its
drug out of the German market, reportedly because of the effect
that the lower prices in Germany might have on pricing in other
European countries.4 In the meantime, other developed markets,
spearheaded by the UK, have introduced a fourth hurdle of product
approval, where new medical technologies need to prove that they
are cost-effective as well as safe and effective.
Sir Christopher ODonnell, Chief Executive of Smith & Nephew,
believes government intervention has led to some bizarre pricing
practices, because they do not involve individual patient choice. Sir
Christopher believes instead that the individual has to get involved
with the economic side of health care.
18
According to Dr. Patterson, While governments such as the UK

insist that all care is free at the point of services it is hard to see how
they can control their bills any other way but by rationing. The USA
has tiered co-payment systems and most other countries are going
that way. But from the pharmaceutical industrys perspective, most
co-payment systems only look at medicines and not where the real
costs take place in hospitals. So patients get a distorted view of the
economic picture of their treatment, explained Dr. Patterson.
Given the predicted surge in R&D output, executives within life
sciences industries are deeply concerned that regulators will be
unable to keep up with the fast pace of change. Even the most
ambitious corporate effort to thrive will be seriously undermined by a
hard regulatory pricing environment, as well as the capacity issues
that regulatory groups will face as the number of products increases,
assuming company predictions regarding innovation ring true.
Given the fact that the industrys prospects will be closely tied to the
structure and reform of health care systems, some senior executives
such as Dr. Vasella, say that life sciences companies need to take
note and adapt accordingly. As Dr. Vasella points out, I agree the
reality is that health ministries are looking at how to contain costs,
force price decreases. But if governments pay less, you get less,
which affects our bottom line. It is seen in many areas, with novel
cancer drugs where there is interventionism from authorities. For this
reason, it is important to consider these factors when looking at the
business portfolio and include customer needs: to have branded
drugs but also generics, vaccines [for prevention] and over-thecounter drugs.

Conclusion
The DTT/EIU research reveals that the life sciences industries are in a
vulnerable state. Companies are under extreme pressure to scale up
their R&D productivity while reducing their cost baseto overcome
the new regulatory hurdle of running economical operations. And
business conditions may be growing tougher. High-pressure
salesmanship is becoming politically unacceptable. In the past,
pharmaceutical companies pushed marketing and sales as hard as
possible from the moment of product launch, to maximise product
revenue from day one. Increasingly, programmes of phased
development are taking place. Governments are insisting upon it.
According to Dr. Patterson, AstraZeneca recently launched Crestor
(the cholesterol-lowering drug) in Japan. But we were only allowed
to do so in certain hospitals. We are required to undertake post
marketing surveillance, proving safety data. Only then are we
permitted to increase product availability.
The time in which a product has to recoup the investment in its
development and make a profit has dwindled substantially, but not
because of therapeutic competitors. Such competition enables
companies to grow markets together. Rather, the duration of the life
cycle is largely determined by the speed with which companies
introduce a product and the eventual appearance of generics.
Sir Christopher ODonnell believes that there is a real danger that life
sciences industries, and the rest of the health care sector, will
respond to its challenges by simply maintaining the status quo.
Everybodys operating in a series of straight-jackets. The pharma
industry is operating in a sort of statistical, clinical, financial straightjacket about why drugs cost so much and therefore you cant
participate in the smaller drugs. The regulators are in a straightjacket which relates to consumer safety and political influence and
the ever rising complexity of the issues involved. The health services
are operating in a straight-jacket, which is: how on earth do we
afford this? And the political straight-jacket is that peoples
individual, economic and consumerist choices, arent really being
taken into account. In the midst of all of this, everybodys reputation
is declining. The pharma industrys reputation is declining. The
regulators reputation is falling. The government and the health
services reputation is declining. So the whole things heading for
melt down.
A sense of urgency should prevail within the life sciences industries;
they need to find new ways of working within the modern complex
health care business environment. Clearly, companies need to
transform themselves andwhatever strategies are adoptedthe
primary goal of any life sciences company must be to build an
effective R&D pipeline. They will also need to forge many more
partnerships among pharmaceutical, biotech or medical device

businesses, as well as academia, and recruit and retain more top-tier
managers and scientists; develop closer ties with customers; further
streamline their operations; and continue acquiring strategic
business. By 2015 core activities will need to be strengthened and
novel products, not in evidence a decade ago, are likely to be
transforming medicine and peoples lives.
A new way of doing business

Thankfully, this research identifies a number of useful case studies
that point to ways life sciences companies might proceed, and
ultimately defines some strategies for success in 2015.
Bolstering R&D through collaborative agreements. Academics
can be effective partners, providing toxicology services, expertise in
pharmacogenomics new biomarkers and diagnostic services. The
University of Dundee has research contracts with nine out of the
top ten pharma companies in the world. Novartis has tie-ups with
some 100 biotech/academic outfits. Of note is its genomics centre
based at the research site of Scripps in California. The company
conducts internal research, but not exclusively so. AstraZeneca
already has, and continues to have, many collaborative
agreements, particularly in areas such as basic chemistry. If you
include everything from a days consulting with an academic to
licensing in products, then AstraZeneca has around 1,000 such
alliances per year, says Dr. Patterson. The number is likely to
grow substantially over the next decade. Sometimes the
networking becomes quite complex where several teams are
involved. For example we have an oncology program in Phase I
where we have contracted three different teams to work together
on the project.
Improving R&D Efficiency. Both unilaterally and in co-operation
with regulators, life sciences companies are looking at ways of
improving R&D efficiency, and, in turn, reducing R&D costs.
According to Dr. Patterson, research areas such as monoclonal
antibodies have managed to reduce their attrition rates. The
economic issue of drug development is vexing regulators such as
the U.S. Food and Drug Administration (FDA) as well as EMEA,
which normally avoid getting involved in cost and pricing matters.
The FDA has launched its Critical Path initiative, which is
attempting to find ways of unplugging bottlenecks in the clinical
trial process to hasten drug development and cut down on the
financial outlays that go into clinical testing. EMEA is working with
the EU and the pharmaceutical industry to improve predictive
technologies, such as data mining, which should increase the
19

productivity of the clinical trial process. According to Dr. Lnngren,

The attrition rate in the clinical process is far too high, with just
two out of a hundred products being commercialisedand health
care systems having to cover the cost of failures.
Focused expansion into emerging markets. According to Dr.
Tempest, Already pharma companies are passing over their
discovery molecules to Indian firms to optimize these potential
products in readiness for phase two clinical testing. GSK, for
instance, has a discovery alliance with Ranbaxy. GSK has some
early leads, and we are looking at the molecules, specifying which
are suitable for clinical trial. India also offers a clinical testing
environment. Pharma companies such as GSK, AstraZeneca and
Pfizer are conducting a proportion of clinical activity in India at
Centres of Excellence for core products. The issue for big pharma
is to ensure that they can retain control over the clinical testing
procedures at these centres.
Sales and marketing aimed at consumers of health care, by
getting closer to the end-user. Michael deMane predicts a
future where implantable devices will increasingly be used to
monitor various medical/physiological processes continuously,
automatically transmitting data over the internet to a central
monitoring computer. The computer will raise the alarm or call
emergency assistance in case the patient is encountering a life
threatening condition. This approach of implanting diagnostic
devices is expected to help prevent more serious conditions from
developing later. Implanting such a monitoring device in the
majority of people at risk, for example men above 60, might well
become the only effective way of reducing sudden cardiac death.
Most sudden cardiac deaths occur at home and in patients
without known prior cardiac problems, he stated. In an effort to
tighten ties to end users, the industry is seeking ways to provide
patients with unbranded therapeutic information within national
legal frameworks. In many countries, the commercial sector is
prohibited from advertising prescription products directly to
consumers, so the information must at least appear to be neutral.
20
Collaborating and partnering with payers (public and

private) in imaginative networks. The Bio Industry Association
(BIA) that represents the interests of innovative enterprises in the
UKs bioscience sector is trying to develop a Public Private
Partnership (PPP) arrangement within the NHS with some of its
members. According to Ainsley Burnan, BIAs chief executive, The
PPP brings the health side and access to patients and perhaps
some of the new technology, alongside perhaps some of the small
indigenous companies doing their research within the NHS, and
tries to marry these things together. United HealthEurope, part of
the second largest U.S. insurer, is helping NHS bodies plan and
design better health care by emphasizing quality and prevention.
The organisation has been selected as a preferred provider for
primary care services in several areas across the NHS.
New commercialisation strategies to secure continued
marketplace success. In the U.S., asthma patients benefit greatly
when they work alongside trained care-givers (paid for by
pharmaceutical or other life sciences companies and many healthinsurance firms), who advise on best management practices of the
medical condition. Two-thirds of survey participants believe that
disease-management programmes will be an important part of
their sales and marketing strategies by 2015. These programmes
help patients achieve better adherence to, prescribed treatments.
Given that levels of patient compliance with chronic oral therapies
are only 40-60%, there is massive wastage. Better monitoring,
perhaps through telemedicine, will help keep patients on track.
Robert Go, Global Life Sciences & Health Care Leader, DTT, and a
Deloitte Consulting LLP Principal, remarked at the roundtable, The
next 10 years will really shape the future of companies for many
more years to come. If you look at the results of the survey, there are
significant forces at play. One is the new technologies that are in fact
up-and-coming, that will cause significant change in the industry.
There are new and emerging markets, such as central Europe, as well
as India, China and other parts of the world, that will also reshape
the industry dramatically. And in the minds of some, the most
pervasive force that will play on the industry is the shift towards
consumers and the importance that consumers will play in decisionmaking. Many companies today simply are not prepared for that.

Appendix A: Survey results

What do you think will be your companys key success criteria
in 2015?
(% respondents)
Now choose the item that you think will be the single most
important factor.
(% respondents)
Profitability growth/Shareholder value
Ability to produce life-saving, affordable medicines and technologies

26
63
Profitability growth/Shareholder value
High ethical reputation/Consumer perception
21
47
Ability to produce life-saving, affordable medicines and technologies
Ability to produce marketable products

13
46
Revenue growth
Revenue growth
12
43
Access to key platform technologies (via acquisitions, licences, etc.)
Penetration of emerging markets (eg, India or China)

8
42
Access to key platform technologies (via acquisitions, licences etc)
Ability to produce marketable products
42
High ethical reputation/Consumer perception
Penetration of emerging markets (e.g., India or China)
40
Share of relevant life sciences markets
Share of relevant life sciences markets
36
Low cost structure
Low cost structure
20
Other
Other
Which of the following strategies will be the most important

in securing your companys continued success through 2015?
(% respondents)
Develop a robust R&D pipeline
74
Form alliances and/or partnerships with pharma/biotech/medical device firms

52
Recruit and retain top-tier managers and scientists

41
Develop a closer relationship with our customers

37
Streamline and shorten the commercialisation process

36
Acquire strategic businesses

33
Fuel growth of core businesses with volume and price increases

20
Focus on in-house product discovery

19
Develop information networks (e.g., data on patients profiles)

17
Improve the companys ethical and financial reputation

17
Cut operating costs

16
21

How proficient is your company in the following areas today? (Top blue line of data)
How proficient will your company need to be in the future to achieve 2015 objectives? (Bottom green line of data)
27%
42%
23%
37%
52%
21%
38%
22%
50%
12%
11%
29%
36%
33%
44%
48%
34%
10%
36%
43%
9%
35%
9%
18%
5%
15% 4%
29%
33%
31%
30%
9%
41%
45%
44%
17%
30%
58%
8%
22
36%
42%
15% 3%
38% 4% 2%
12%
18% 4%
41%
34%
47%
Proficient
Somewhat proficient
Less proficient
Not proficient
Very proficient
Proficient
Somewhat proficient
Less proficient
Not proficient
11%
5%
3%
18% 3%
10%
6%
33% 4% 4%
38%
Very proficient
12% 2%
5% 3%
10% 3%
14% 3%
31%
36%
43%
55%
9%
16% 4%
11% 3%
34%
45%
56%
5% 3%
9% 2%
13% 4%
8% 2%

Which of the following strategies do you expect your

company will employ to maximise the returns on its R&D
investments by 2015?
(% respondents)
By 2015 what share of your companys revenues do you think

will be derived from new products and services (e.g., products
and services that are not available from your company today)?
(% respondents)
Form long-lasting R&D partnerships/networks with other firms

64
None 1
Collaborate with non-profits and the academic community
1 to 25% 13
Increase in-house R&D budget
58
47
26 to 50% 32
Increase outsourced R&D
51 to 75% 31
46
76 to 100% 21
Explore product types that bring together different scientific disciplines

(eg, material and biological sciences)
Dont know 3
42
Recruit more/better scientists

39
Increase offshore R&D and/or clinical activities

36
Acquire R&D-oriented firms

33
Tax-aligned ownership and exploitation of intellectual property

18
Other
3
In 2015, how significant do you think the following will be in determining your companys discovery-to-market timeline?
Ability to translate research ideas into viable products
63%
26%
9%
Slower regulatory approval

31%
33%
22%
10%
4%
Need to tailor products to a more diverse market

25%
37%
24%
10% 3%
Availability of patients for clinical trials

21%
38%
24%
10%
7%
More complex demands of data management and product safety

19%
48%
25%
6% 3%
Difficulty accessing large-scale funding

15%
24%
37%
16%
8%
Reduction in number of products given fast-track approval

15%
26%
33%
21%
5%
Increased development time for broader indications

13%
37%
35%
12%
4%
New regulations not related to clinical testing (eg, concerning patient privacy)
9%
32%
No impact
36%
16%
6%
23

By 2015, which of the following factors do you think will prove to be most important in your company's approach to
manufacturing? Select four.
(% respondents)
Maintaining a low cost base
55
Increasingly flexible and modular manufacturing facilities

to adapt to the variable demands of the market
46
Contract manufacturing (outsourcing)
40
Providing different formulations to suit market needs
38
Protection of intellectual property in developing countries
32
Sourcing raw materials and/or intermediates
28
Not applicable - my company does not manufacture products
22
Risk management to avoid concentration
18
Favourable tax policies, such as tax incentives and credits
15
Reduction in the number of large, dedicated manufacturing plants
13
Other country-specific regulatory factors

Other
Now choose the item that you think is the single most
important factor.
Other country-specific
regulatory factors
Reduction in the number
12%
of large, dedicated
manufacturing plants
Protection of
13%
intellectual property
in developing
Favourable policies,
countries
such as tax
32%
incentives and
credits 15%
Other
2%
Sourcing raw
materials and/or
intermediates
28%
24
Risk management
to avoid
concentration
18%
Not applicable-my
company does not
manufacture products
22%
12
2

How important do you think the following will be as sales and marketing strategies to commercialize the products
emerging from your company?
Very important
Somewhat important
Less important
Not important
How important do you think the following will be as drivers of M&A and alliance activity for life sciences companies in the
next 10 years?
Very important
Somewhat important
Less important
Not important
25

Approximately what proportion of revenue growth at your

company do you expect to come from the following categories?
60%
Past five years
Next five years
50%
40%
30%
20%
10%
0%
Organic Growth
Traditional M&A
In-licensing and
product acquisition,
partnering
Please rank the following emerging markets by how important they will be to your company in 2015.
1
China
42%
Central Europe (eg, Czech Republic, Hungary, Poland)
33%
India
13%
25%
Eastern Europe (eg, Belarus, Bulgaria, Russia)
7%
20%
Latin America
4%
12%
15%
26
23%
19%
15%
27%
16%
28%
185
32%
25%
12%
7%
14%
7%
15%
20%
51%

What portion of your companys revenue currently comes from emerging markets, such as China, India, and Eastern Europe? What
portion of your companys revenue do you expect will come from emerging markets by 2015?
70%
Current
By 2015
60%
50%
40%
30%
20%
10%
0%
None
1 to 25%
26 to 50%
51 to 75%
76 to 100%
Dont know
For the following activities, please estimate the percentage of overall activity that your company currently performs
in emerging markets. (Top line of data)
For the following activities, please estimate the percentage of overall activity that your company will perform in emerging
markets in 2015. (Bottom line of data)
None
1 to 10%
11 to 20%
21 to 30%
31 to 40%
41 to 50%
Over 50%
Dont know
27

How important do you think the following strategies are for your company to be successful in emerging markets?
Develop local sales presence to focus on physicians
37%
33%
15%
6%
9%
Develop key relationships with governments

35%
32%
23%
6% 3%
Develop marketing channels

29%
43%
21%
5% 3%
Build affiliations with local companies

20%
44%
11% 3%
22%
Target countries with government-supported medical infrastructures

16%
45%
24%
8%
8%
Acquire local companies

14%
24%
28%
20%
14%
Build local manufacturing facilities

13%
23%
23%
23%
18%
Contribute medicines or products

13%
32%
31%
13%
12%
Recruit scientist local to the region

11%
33%
Very important
Important
31%
Less important
15%
11%
Unimportant
Which of the following types of companies/organizations do you think will pose a serious competitive threat to your
companys success by 2015?
Companies best leveraging alliances and partnerships
62%
Your corporate peers
54%
Manufacturers of generics
44%
Companies based in emerging markets
41%
Vertically integrated companies
34%
New entrants not widely viewed as significant current competitors

(eg, Proctor & Gamble)
33%
Mid-market companies
Diversified conglomerates
Public-sector organisations
Companies selling consumer-branded products
28
23%
15%
14%
13%

What impact do you think the following factors will have on your companys revenue by 2015?
Corporate reputation
33%
41%
21%
5%
Increase in health consumerism

32%
50%
13%
4%
The pace of innovation in information technology and science

31%
43%
14%
9%
Product safety issues

23%
31%
24%
17%
5%
Changing demographics
22%
42%
26%
6%
4%
Government intervention in product pricing

20%
17%
17%
23%
23%
Rising competition
17%
24%
25%
23%
11%
Government intervention in relationships between companies and healthcare stakeholders

17%
36%
17%
24%
6%
Government intervention on intellectual property rights

14%
29%
28%
20%
10%
Limitations on certain scientific practices for ethical reasons

7%
22%
41%
22%
8%
Growth in parallel importing and counterfeiting

6%
17%
32%
No impact
31%
14%
The life sciences industry has been faced with product and
safety issues in the last decade. How do you think future
leading companies will prevent such incidents?
(% respondents)
In which life sciences subsectors is your company?

(% respondents)
Increased spending and staffing on quality and safety activities
Biotechnology
69
Increased spending on and use of data mining and early detection analysis
60
Controlling patient access through increased risk screening

55
Improved treatments through personalised medicine

53
Increasing number and duration of clinical trials

52
Using external service providers to monitor quality and safety

42
Reducing the number of indications sought for initial approval

33
Other
4
Pharmaceuticals R&D
43
38
Pharmaceuticals manufacturing
35
Pharmaceuticals wholesale/retail
17
Medical devices manufacturing

14
Health services
13
Medical devices wholesale/retail

7
Health insurance
2
Other
9
29

Which of the following best describes your title?

(% respondents)
What are your organisations global annual revenues in US dollars?

(% respondents)
SVP/VP/Director
21
CEO/President/Managing director
Less than $100m 34

19
$100m to $500m 7
Manager
$500m to $2bn 16
17
Head of Department
$2bn to $5bn 11
15
$5bn to $15bn 11
Head of Business Unit
More than $15bn 17
CIO/Technology director
Not applicable 5
Other C-level executive

5
Board member
3
CFO/Treasurer/Comptroller
3
In which country is your company headquartered?

(% respondents)
Other
5
United States of America

41
Germany
In which region are you personally based?

(% respondents)
11
Switzerland
9
Western Europe
41
United Kingdom
7
North America
27
France
3
Asia-Pacific
21
Australia
3
Eastern Europe
5
India
3
Latin America
4
Italy
3
Middle East & Africa

2
Canada
2
Other
19
30

What are your main functional roles?

Please choose no more than three functions.
(% respondents)
Strategy and business development
47
General management
41
Marketing and sales

25
R&D
23
Finance
13
Information and research

12
IT
10
Customer service
7
Operations and production

7
Risk
5
Procurement
3
Supply-chain management
3
Human resources
2
Legal
2
Other
7
31

Appendix B: Executive roundtable

June 27, 2006 participants
Helen Alexander
32
Chief Executive
The Economist Group
Nicholas Beazley
Group Strategy and Development Director, Company Secretary
BUPA (British United Provident Association)
Nigel Brooksby
Chairman and Managing Director
sanofi-aventis UK
Aisling Burnand
Chief Executive Officer
BioIndustry Association, UK
Malcolm Carlisle
Group Managing Director
Eschmann Holdings
Frank Condella
SkyePharma
Jon Court
Fulcrum Pharma
Bill Emhiser
Whatman
Daniel Franklin
Executive Editor
The Economist
Robert Go
DTT Life Sciences and Health Care Industry Group Leader
Deloitte Consulting LLP
Nigel Holloway
Director, Executive Services, Americas
The Economist Intelligence Unit
Dr. Anil Kapur
Managing Director
World Diabetes Foundation
Dr. Mihly Kkny
President
Heath Commission of the Hungarian Parliament
Harpal Kumar
Cancer Research Technology
Dr. Mayur Lakhani
Chairman of Council
Royal College of General Practitioners, UK
Sir Alan Langlands
Principal and Vice-Chancellor
University of Dundee
(Former Head of the UK National Health Service)
Thomas Lnngren
Executive Director
European Medicines Evaluation Agency
Sir Christopher ODonnell
Chief Executive
Smith & Nephew
Steve Poulton
Business Partnerships Director
Pfizer UK
Dr. Richard Smith
Chief Executive
UnitedHealth Europe
Mark Walport
Director
Wellcome Trust
Alexandra Wyke
Contributing Editor
Economist Intelligence Unit

Endnotes
1
Demasi, J.A., Hansen, R.W. & Grabowski, H.G. The price of

innovation: new estimates for drug development costs. J. Health
Economics 22, 151-185 (2003). | Article http://dx.doi.org/
10.1016%2FS0167-6296%2802%2900126-1
http://aspe.hhs.gov/daltcp/reports/medliab.htm]
Financial Times, Are India and China up to the job? July 18 2006
and http://www.ft.com/cms/s/82beabec-1787-11db-abad0000779e2340.html and Tuesday July 18 2006 http://
www.eweek.com/article2/0,1895,1991783,00.asp
www.iht.com/articles/2006/09/27/business/drug.php and
International Herald Tribune, EU is dealt a defeat in fight over drug
prices, James Kanter, September 27, 2006.
Acknowledgements
The following individuals, along with our colleagues from the
Economist Intelligence Unit, were key contributors in the
development of this research program and the resulting analyses:
John Rhodes (Deloitte & Touche LLP, United States), Stuart
Henderson (Deloitte & Touche LLP, United Kingdom), Terry Hisey
(Deloitte Consulting LLP, United States), Pete Mooney (Deloitte
Consulting LLP, United States), and Patsy Bolduc (Deloitte & Touche
USA LLP, United States).
Additionally, DTT and the Economist Intelligence Unit would like to
express thanks and appreciation for comments and advice from a
number of colleagues including: Linda Heitzman (Deloitte
Consulting LLP, United States), Ajit Kambil (Deloitte Services LP,
United States), Homi Kapadia (Deloitte Consulting LLP, United
States), Larry Nieterman (Deloitte Consulting LLP, United States),
Diana OBrien (Deloitte Consulting LLP, United States), Ellen StaffordSigg (Deloitte Consulting LLP, United States), and Chris Wellinger
(Deloitte AG, Switzerland).
Thanks also to Nigel Holloway from the Economist Intelligence Unit
for his editorial assistance.
DTT Life Sciences and Health Care

Industry Group
The DTT Life Sciences and Health Care (LSHC) Industry Group, made
up of the LSHC practices of Deloitte member firms, is comprised of
more than 3,500 member firm industry professionals in over 40
countries. The LSHC practices understanding of the industrys
challenges and their ability to quickly respond with integrated,
comprehensive solutions put Deloitte member firms in a unique
position to help. The Deloitte member firm LSHC practices work
with their clients to shape the evolution of the industry. Together,
they can help bring discoveries to life and improve the quality of
care while working to create and sustain long-term, bottom-line
success. Deloitte member firms provide professional services to over

80% of the life sciences and health care companies in the Fortune
Global 500. For more information about the DTT LLSHC Industry
Group, email dttlshc@deloitte.com or visit the website
www.deloitte.com/lifesciences.
For more information about the DTT LSHC Industry Group,
contact dttlshc@deloitte.com:
DTT Life Sciences and Health Care
Robert Go
Deloitte Consulting LLP (United States)
+1 313 324 1191
rgo@deloitte.com
DTT Sector Leader Life Sciences
John Rhodes
Deloitte & Touche LLP (United States)
+1 973 683 7296
jorhodes@deloitte.com
DTT LSHC Consulting
Larry Neiterman
+1 617 437 2600
lneiterman@deloitte.com
Asia Pacific
Keiji Watanabe
Deloitte Touche Tohmatsu (Japan)
+81 3 6213 3493
Keiji.watanabe@tohmatsu.co.jp
Europe, Middle East and Africa
Stuart Henderson
Deloitte & Touche LLP (United Kingdom)
+44 1223 259392
stuhenderson@deloitte.co.uk
U.S. Sector Leader Life Sciences
Terry Hisey
+1 215 246 2332
rhisey@deloitte.com
U.S. Consulting Sector Leader Life Sciences
Pete Mooney
+1 617 437 2933
pmooney@deloitte.com
U.S. Pharmaceutical R&D Practice Leader
Jacques Mulder
+1 212 618 4642
jacqmulder@deloitte.com
33
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While every effort has been taken to verify the accuracy of this information, the Economist Intelligence Unit can not accept any responsibility or liability for
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Copyright 2006 Deloitte Development LLC. All rights reserved.

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The future of the

life sciences industries:

A Deloitte white paper developed in collaboration

Audit . Tax . Consulting . Financial Advisory.

The future of the life sciences industries:

The future of the life sciences industries:

The future of the life sciences industries:

The future of the life sciences industries:

Why this report?

The life sciences industries Dr. Franklin is talking about include

Significant revenue growth is unlikely to be achieved organically,

The future of the life sciences industries:

This report supplements a previous research report completed in May

The future of the life sciences industries:

Transforming research and development to create robust R&D

Form alliances and/or partnerships with pharma/biotech/medical device firms

Recruit and retain top-tier managers and scientists

Develop a closer relationship with our customers

Streamline and shorten the commercialisation process

Acquire strategic businesses

Fuel growth of core businesses with volume and price increases

Focus on in-house product discovery

Develop information networks (e.g., data on patient profiles)

Improve the companys ethical and financial reputation

Cut operating costs

The future of the life sciences industries:

Top executives at large pharmaceutical companies are confident they

The future of the life sciences industries:

Upgrading skills and proficiencies

To meet new challenges and retain profitability, companies will

The future of the life sciences industries:

Projected increase in proficiency required to meet 2015 objectives.

The future of the life sciences industries:

Research and development

A new era of medical breakthroughs?

Since their inception in the 1920s, following the discovery of

Non-industry members of the roundtable believe that a new era of

By 2015, what share of your companys revenues do

But within the life sciences industries, business confidence appears to

The future of the life sciences industries:

Dr. Patterson is also optimistic. Evidence within companies,

firms are to change their product portfolios as radically as

Slower regulatory approval

Need to tailor products to a more diverse market

Availability of patients for clinical trials

More complex demands of data management and product safety

Difficulty accessing large-scale funding

Reduction in number of products given fast-track approval

Increased development time for broader indications

Major negative impact

The future of the life sciences industries:

Collaborate with non-profits and the academic community

Increase in-house R&D budget

Increase outsourced R&D

Explore product types that bring together different

Recruit more/better scientists

Increase offshore R&D and/or clinical activities

Acquire R&D-oriented firms

Tax-aligned ownership and exploitation of intellectual property

The future of the life sciences industries:

trials. The cost of health care, by contrast, is driven by the changing

Controlling patient access through increased risk screening

Improved treatments through personalised medicine