Building resilience into supply chains and addressing the growing importance of sustainability issues are two areas that life sciences CEOs are focusing on not only to address current needs but to gain a long-term competitive advantage.
M&A is also resuming strategic importance for a sector that many CEOs say has changed for the better during the COVID-19 pandemic, according to the life sciences results of the 2022 EY CEO Survey.
The strength of the sector contrasts with that of many other industries: 62% of the 250 life sciences CEOs in the survey say the pandemic has fundamentally reshaped the industry for the better or had no impact on the industry. That compares with 27% for all industries in the survey.
The life sciences industry has developed novel treatments and tools to fight the pandemic. Revenue from these products, such as vaccines and diagnostic kits, helped life sciences companies build up capital: M&A firepower — defined as the capacity to conduct acquisitions based on the strength of the balance sheet — in the biopharma industry reached nearly US$1.2 trillion in 2021 for the first time in seven years.
Still, the pandemic has disrupted all aspects of business across the value chain, including drug discovery and development, operations, supply chain and commercialization.
Life sciences companies can use strong balance sheets not only to address key strategic issues through acquisitions and alliances, but also to make internal investments to overhaul key functions and strengthen the long-term value they can provide to all stakeholders.
Developing resilient, secure supply chains
Nowhere is this truer than in the supply chain, a system that had been predominantly focused on sourcing from low-cost geographies. This system was disrupted by government shutdowns to prevent the spread of the coronavirus; bottlenecks in transportation; and trade tensions. The magnitude of this low-cost geography focus can be seen in the building blocks for medications: according to the FDA, 72% of the facilities manufacturing active pharmaceutical ingredients (API) for the US market were located outside the US as of August 2019.1 The pandemic also has caused some governments to secure domestic supply of essential drugs and supplies.