4 trends shaping middle market biopharma companies

And 4 more to watch

May 25, 2021

Biopharmaceutical companies have had an incredible year of research breakthroughs and drug launches, along with tremendous business growth. From COVID-19 vaccines to new cancer treatments, biopharma has made its mark in the life sciences industry—and history—with an ever-searching eye for the next treatments or life-altering cures just on the horizon.

However, biopharma companies, particularly those in the middle market, also face business challenges as they expand and launch new products. What are the concerns, trends and issues that continue to shape the sector in 2021? Let’s take a closer look.

The value of remote trials

Technology and a virtual environment made the world accessible to us during pandemic-induced shutdowns. In 2020, online became the norm for everything from ordering groceries and visiting with friends to seeing our doctors. Likewise, biopharma companies turned to a remote and digital environment when it came to their clinical trials. This trend will continue in 2021, and middle market companies should welcome it. Why? Remote trials offer an improved swath of patient recruits, for one. Previously, traditional methods meant patients had to schedule visits, arrange for time off from work or allow for commuting time, all conditions that often excluded a more diverse patient population from participating in trials, sometimes skewing results or prolonging trial timing. Now, remote trials, with sophisticated technologies to track and evaluate testing, provide for more robust trial results, many times faster than before, and at a lower cost. And with clinical trials often representing the top expense for biopharma companies, this trend means opportunity for many middle market companies. Better, faster, smarter and cheaper translates to optimally meeting patient-consumer needs, keeping drug prices down while also fostering company profitability. Companies must leverage the right technologies, however, to streamline trial processes while also ensuring cybersecurity to protect sensitive data.

It's all about biologics

Biologic products, like vaccines, gene therapies or allergenics, will continue to expand in the marketplace in 2021 because of their promise of new treatments and interesting ways to expand biopharma business. But, these complex medications require a great deal of capital for development as well. Still, it’s estimated that biologics will make up nearly 35% of new drug development by 2026, something middle market biopharmas will want to be a part of. Companies will need to develop a thought-provoking strategic road map to tell the story of their vision and development needs to attract partners and investors as they expand their biologic pursuits.

Going commercial… on your own

According to McKinsey, biopharmas are now launching their drugs commercially on their own—as opposed to being acquired—at a rate three times higher than they did back in 2010. Self-commercialization is especially the way to go for biopharmas that develop drugs for rare diseases with small, targeted patient populations. In these instances, trials are condensed and the drugs often qualify for expedited approval. Biopharmas in this space often have a smaller manufacturing footprint using contract manufacturing organizations for production. And while a self-launch is doable for many middle market companies, going commercial is an involved process and usually requires help from additional partners to assist with everything from revenue and risk assessments to third-party logistics.

A tougher regulatory tone

Biopharma companies have used mergers and acquisitions as a key strategy for driving growth and advancing development. While this strategy will continue, the Federal Trade Commission may force the sector to consider more broadly the impact of M&A on competition. Earlier this year the FTC sued to stop the merger of  a manufacturer of systems used for analyzing genetic materials and another company focused on cancer screening tools. The commission’s 4 to 0 vote to prevent the deal was only the second time in 40 years it sued to stop a merger that is primarily vertical in nature. Following this, the FTC launched a new working group focused on pharmaceutical company mergers with the goal to examine more broadly the competitive implications of mergers and their effect on drug prices. As our senior life sciences industry analysts indicated in the spring 2021 The Real Economy: Industry Outlook, this environment of heightened M&A scrutiny and a focus on business arrangements that appear to affect access or pricing of drugs should be considered. Although the FTC often focuses on large pharma mergers, middle market biopharma companies that hope to be acquired rather than take their own pipeline commercial will need to pay close attention to the concerns of the FTC and their continued focus on the impact of mergers on drug pricing and competition.

For further consideration

There are a multitude of other trends and issues for middle market biopharma companies to address this year; here are some quick takes on a few key considerations:

  • Personalized care and medicine will continue to evolve and provide opportunities to develop customer-centric treatments with affordable, transparent and value-based pricing. Does this represent an opportunity for middle market biopharma companies?
  • Supply chain will be a concern given the impact of global repercussions, like the COVID-19 surge in India. Will nearshoring be a way to alleviate challenges?
  • Women and minorities continue to be underrepresented in life sciences companies. According to an Informaconnect survey, 34% of the life sciences employee respondents said that minority representation in leadership was the largest issue facing the industry related to diversity and inclusion. What are companies doing to address this gap?
  • Attracting investors will be essential to middle market biopharmas and a key to that is making sure the company is creating value through ESG (environmental, social and governance) efforts and sustainability. Have you formalized and documented your ESG policies and accomplishments?

RSM contributors