Making Life Sciences a Magnet for Talent

Making ‘life sciences’ a magnet for talentby Dominic Graham

EMEA

Following years of growth and favourable market trends, the global life sciences industry now finds itself facing a ‘new normal’. By any measure it is still a stand-out performer globally, and a key strategic area for the EMEA region. However, markets are changing.

Life science companies must adopt new business models to achieve the following:

1. Counter slowing sales growth

2. Stem profitability challenges

3. Deliver patient outcomes that reflect higher consumer expectations

4. Position the industry for future success and innovation.

Making these adjustments successfully will come down to individual companies’ ability to find,

engage and retain the right people. For the most part, the challenge is about talent and the

ability of each organisation, regardless of location, to source it.

Here, we look at the top five issues facing the industry and how organisations in the region can respond.

IntroductIon /02

/03

Europe is the world’s second largest market for pharmaceutical sales. It directly employs more than 660,000 people in the EMEA region, and around four times this number indirectly.

660,000+pharmaceutical

employees

EconoMIc FActors crEAtE HEAdwInds For r&d

Strained public purses and regulatory barriers continue to put pressure on R&D investment in

Europe, and emerging economies are gaining a greater share of this investment worldwide.

For life science companies in the eurozone, the challenge is to invest wisely in R&D activities

– to combat some of the other significant challenges facing the industry – while keeping costs

contained and becoming more competitive.

Although the Treaty of Lisbon target of assigning three per cent of EU gross domestic product

(GDP) to research and development activity by 2010 was not met (largely due to broader

economic factors), it remains one of five key targets in the Europe 2020 strategy1.

Governments and businesses know that R&D investment is a clear determinant of the overall

strength of the pharmaceutical market, as shown by the following graph comparing R&D

investment in the EU with that of the US and Japan (Figure 1). However, even though some

individual countries are investing heavily in R&D activities namely Finland (3.87% of GDP in

2010), Sweden (3.42%) and Denmark (3.06%) – the concentration of investment is disparate and

inequitable across the region.

the top fIve Issues facIng the Industry /04

1 http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/R_%26_D_expenditure

1

/05

r&d investment2

FiGure 1:

the top fIve Issues facIng the Industry

2 http://epp.eurostat.ec.europa.eu/statistics_explained/images/c/c3/Gross_domestic_expenditure_on_R%26D_in_the_Triad%2C_2000-2010_%28%25_share_of_GDP%29.png

Source: Eurostat (online data code: tsc00001), OECD

(1) Break in series, 2008(2) Excludes most or all capital expenditure(3) Estimates

Japan (1)

united States (2)

eu-27 (3)

4

3

2

1

0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Eurozone life science companies are facing constraints in some local markets given the large

variations in investment across the region. Lifting the longer-term outcomes for the industry partly

depends upon more effective and innovative R&D investment decisions.

However, it no longer appears that governments alone can change the dynamics associated with

R&D investment across the region, so companies themselves must focus on finding innovative

solutions to meet the R&D challenge and boost competitiveness. Among these solutions must

be innovative approaches to accessing R&D talent that has traditionally been concentrated in

specific locations (where investment is high). Better management of the R&D talent supply chain

will require new collaborative models of research and access to a global talent network that can

deliver knowledge and insight across geographical boundaries.

/06the top fIve Issues facIng the Industry

/07

Pharmaceuticals face a future with lower growth: the combined Us and eurozone share of spending will shrink from 61% in 2005 to 44% in 2015.

Yet, the world’s pharmaceutical market is growing. It was worth an estimated 614,583 million euros in 2011.

61% 2005

44% 2015

17% reduction over 10 years

Us and eurozone share of spend 2005 to 2015

/08

GEnErIcs tAkE tHE lEAd

For some time now, big pharmaceutical companies have been losing patent protection and the

generic market has boomed. In 2011, the global generics market was estimated to be worth

approximately $225 billion. By 2016, it is expected that this will have risen to $358 billion,

representing more than 18% of all pharmaceutical sales.

Nowhere is the generics market growing faster than in emerging economies,

creating a two-fold challenge for many large pharmaceutical companies operating within

the EMEA region.

If the cheaper, generic drug market is to be dominated by companies in emerging nations, the

model of relying on one or two ‘blockbuster’ drugs is no longer viable and all organisations are

challenged to find more diverse sources of revenue.


2

/09

To do this, companies will need broader and more diverse strategies, as well as new skills to

bring those strategies to fruition. Specifically, these skills will include:

• Technologyskillstoimproveglobalcollaborationandenhancedatacapturesystems

• Bigdataanalysisskillstolowerriskandidentifynewopportunities

• Communityengagementandmanagementskills–communitieswantandexpectagreater

say in health outcomes and how government funds are spent.


/10

Major generics markets, through 2016 ($ billions)FiGure 2:


north america

emerging markets

major europe

Japan

rest of world

120

100

80

60

40

20

0

$ B

illio

ns

2010 2011 2016

/11

The number of ‘generic equivalents’ occupying a position in the top 10 prescription drugs in the Us increased from two (in 1990) to six (in 2003) 3.

3 http://www.ncbi.nlm.nih.gov/pubmed/16428148

2 1990

6 2003

300% increase over 13 years

Growth of ‘generic equivalents’ 1990-2003

/12

EMErGInG MArkEts ArE drIvInG GrowtH

IMS forecasts show that global spending on medicines will reach $1.1 trillion by 2015, but that

revenue growth will slow (from approximately 6% between 2005 and 2010, to 3% between 2010

and 2015). And the combined US and European share of spending will shrink from 61% in 2005

to 44% by 2015 as emerging markets grow from 12% in 2005 to 28% by 2015.

The impact of $120 billion of product revenues losing patent protection in major western

markets from 2011–2015 will leave emerging market and generic growth as the main drivers of

global pharmaceutical spending. In fact, aggregate emerging market revenues are forecast to

grow at a compound 14% between 2010 and 2015. If the pressure on the US and EU markets

lessens after the ‘patent expiration cliff’, and low levels of growth return (say 3%), global growth

would then be around 4% between 2015 and 2020. Either way, the gap between the two

markets is clear.

The simple message is that the pharmaceutical market globally is still growing, but that

profit margins are declining and a larger share of investment and growth is to be found in

emerging markets.


3

/13

For life science companies, the challenge is to balance growth and investment across emerging

and developed markets, and to ensure that their access to the right talent and research (as well

as other key capabilities) matches the market opportunities. The key question companies need

to ask themselves now is, ‘How well-positioned are we to capture growth in emerging markets

and are we adapting our staffing strategies to match?’


/14

Estimated growth 2010-2015 (compound annual growth rates)FiGure 3:


1.5%

12.2%7.9%

5.3%12.2%

15.3%

3.3%15.3%

3.9%

Source: IMS Health, IMS Market Prognosis 2011-2015

north america Sales $357.4 bn Growth 1.5%

europe (eu countries) Sales $237.4 bn Growth 2.2%

South east & east asia Sales $147.1bn Growth 15.3%

Japan Sales $120.6 bn Growth 3.3%

Latin america Sales $100.9 bn Growth 12.2%

ciS Sales $33.5 bn Growth 12.2%

indian subcontinent Sales $32.1 bn Growth 15.3%

europe (non-eu countries) Sales $27.6 bn Growth 5.3%

africa Sales $25.0 bn Growth 7.9%

oceania Sales $16.7 bn Growth 3.9%

middle east Sales $15.4 bn Growth 7.4%

*Ex-manufacturer prices at CER.

/15

‘trUst’ And IndIvIdUAl solUtIons ArE kEY strAtEGIc IssUEs

For better or worse, the internet has fundamentally changed healthcare. Consumers now have

far greater access to information about their healthcare options, and this has altered the task

facing pharmaceutical companies today.

Not only must pharmaceutical organisations be far more transparent in the way in which they

research, test and deliver drugs to market, they must provide better, faster and more holistic

health solutions. Communities and individuals now have higher expectations about what

science can deliver (and how quickly). The key strategic issue of building trust in pharmaceutical

products now complicates the communication and engagement challenge facing large

pharmaceutical companies globally. Life science companies must now achieve the following:

• Skilfullyopenthedialoguewithconsumers,andenhancecommunicationandtransparencyin

the way that new treatments are brought to market; and

• Deliverpersonalisedhealthsolutionsinatimelyandaffordableway.


4

/16

Consumers now seek collaboration and detailed insight regarding the way their treatment is

managed, and pharmaceutical organisations need to be part of facilitating this. Industry leaders

must build relationships and connectivity with medical practitioners and consumers to improve

communication and enable patient centricity.

Trust in the life sciences industry as a whole is a key reputational issue, and it has a flow-on

effect for attracting and retaining talent. Not only must companies address the key reputational

issues that have occurred in communities over recent decades, they must equip their workforces

with new competencies to help organisations adapt to this era of ongoing collaboration

and communication.

Communication is now a priority, and it is the key to rebuilding trust in a growing and

critically important industry that must deliver better, cheaper and more sustainable personalised

medical solutions.


/17

2005: There were 329 pharmaceutical and biopharmaceutical companies with market capitalisations of around Us$150 billion.

2010: There were only 240 companies worth more than Us$50 million.

329 2005

240 2010

27% reduction over 5 years

Biopharmaceutical companies

/18

collABorAtIon BEtwEEn sMAllEr EntItIEs Is A nEcEssItY

One of the issues facing life science companies globally, and which is partially responsible for

driving the trend towards higher investment in emerging economies, is the need to lower costs.

Prices are under pressure from governments as they struggle to maintain and deliver high-

quality healthcare to large, ageing populations.

A key strategic response to this has been for small and medium-sized enterprises to account for

a larger share of total business sector R&D. As Figure 4 below shows, firms with fewer than 250

employees already account for some 22% of total business sector R&D in the EU, 14% in the US

and 8% in Japan.

The trend towards complex and specialist tasks being outsourced to smaller, niche organisations

is increasing in the life sciences sector (as well as elsewhere) and the EMEA market looks well-

positioned to capitalise on that trend.


5

/19

Business r&d by firm size (% of business sector r&d, 2005 or latest)FiGure 4:

Source: OECD

* Czech Republic, Slovakia, Poland and Hungary


Firms with 50 to 249 employees

Firms with fewer than 50 employees

40

35

30

25

20

15

10

5

0

Japan US EU-27 EU Big 4 EU-15 other NMS-4*

/20

Retaining focus on core business activities while reducing fixed costs on other tasks is

something many organisations in other industries have been doing for sometime – now life

sciences organisations are tasked with adjusting their business models to do this too. How

individual organisations engage with talent and restructure work to be able to raise productivity

and lower fixed costs in this way is a key strategic issue going forward. It will critically challenge

core concepts of intellectual property, competitive advantage and the role of talent in delivering

return on investment.


/21

Around one in ten firms in Europe collaborate with a partner for their innovation activities4.

oecD 2002–2004

4 http://aei.pitt.edu/32615/1/54._R%26D_in_Europe.pdf

/22

wHAt doEs tHIs MEAn For tAlEnt?

Life science companies are facing significant market shifts and challenges to their existing business

models. The market is growing, but not in the ways it did previously.

The need for new business models (from mass market to niche and targeted) translates into the need

for different skill-sets, and new pools of talent across more geographical locations. It also requires

companies to change the way they operate, as well as how they engage with the communities they

operate within.

If the life sciences industry is to become the destination for talent that it simply must become to

meet its challenges, it should engage the broader talent community in its mission to deliver better,

faster and more personalised health solutions.

The key issues for attracting and retaining talent in the industry are:

• Engagingwithtalentclusters:R&D and STEM skills have formed regional and local clusters that

are often self-reinforcing. Investment in a specific location often leads to more investment, which

attracts more talent as well as more competition. Companies need to find ways to access the

talent within these clusters and to develop new clusters where required without always needing

to compete for the same talent in the same locations. Building their own talent pipeline requires

longer-term planning and analysis, and new partnerships.


/23

• Distinguishingbetweenproductivityandcost-cutting:Boosting productivity and output

must be done through innovative workplace practices. Low staff ratios in critical research and

development roles leads to high turnover and higher recruitment costs overall. The need to lower

costs is real, but it must be achieved sustainably.

• Newskill-setstoopendialogueandimprovecollaboration:Consumer demands and

expectations are changing, and the kinds of skill-sets required must adapt to address these.

• Competitionmustbebalancedwithcommunityneeds:Competition must not come at

the expense of faster, better health solutions, and collaboration across traditional competitive

landscapes is critical to addressing this. Addressing community concerns through innovative

business models is critical to rebuilding trust and engaging new talent pools (as well as

new consumers).


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eXiT

abouT The auThor

domInIc graham heads up the professional and technical division of Kelly services in the

uK, where he oversees the Kelly scientific, Kelly engineering and toner graham brands. he

studied Biological sciences at the university of Birmingham, which he put to practical use in

his early career before transferring his skills to the specialist recruitment sector. dominic has

extensive experience in a range of industries dealing with large multinationals through to

small start-up biotech companies.

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Making Life Sciences a Magnet for Talent