9 minute read 8 Mar 2022
Detail shot of the lens of a microscope in a lab

The CEO Imperative: Why life sciences focus on supply chain, M&A, ESG

Arda Ural, PhD

EY Americas Industry Markets Leader, Health Sciences and Wellness

Co-author of numerous whitepapers and a frequent speaker about biopharmaceutical strategy at industry conferences. Married father of two.

Evan Sussholz

EY US Strategy and Transactions Partner

Global client services partner and experienced transaction advisor who helps clients enhance shareholder value by making better decisions around capital strategy. Dedicated husband and father.

9 minute read 8 Mar 2022

The 2022 EY CEO Survey finds M&A firepower fueling life sciences initiatives to redesign supply chains and focus on sustainability.

In brief
  • The majority of life sciences CEOs say their companies are either stronger or unchanged in the wake of the COVID-19 pandemic.
  • Most life sciences companies are adjusting their supply chains as security and resiliency are under the spotlight.
  • M&A intentions for life sciences companies are rebounding to normal levels, according to the EY CEO Survey 2022, after a big drop a year ago.

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.

As security, sustainability and agility are now all on the risk radar, companies are looking to bring some capabilities closer to the market. Life sciences executives want to expand their sourcing base and create optionality to help make sure key inputs and products are reliably available in their pipeline:

  • More than three-quarters (78%) of life sciences respondents say their companies have adjusted or are planning to adjust their global operations or supply chains.
  • Of those, 39% say they have adjusted their supply chain to reduce logistics costs and uncertainty and 26% say they have boosted the number of suppliers to increase resilience.

Reshoring the supply chain is a long-term commitment and life sciences companies need to consider which parts of the chain are essential for them to own. These can include some manufacturing and packaging, depending on the type and strategic importance of the product. Other functions — including clinical trials and data collection, distribution and some manufacturing — might be more successful with alliance partners with more expertise or operations already up and running in key markets. Even R&D can be accelerated through investments in smaller biotech companies.

Turning some parts of the supply chain over to alliance partners in an asset-light2 approach can help free up both capital and management time to focus on what is core to the company’s long-term strategy. It’s essential to remember, though, that decisions on what to own and what to outsource need to take into account the operating model to facilitate the company’s trade and tax optimization objectives.

Even if manufacturing is outsourced, companies need to find reliable contract development and manufacturing organizations (CDMOs) in the market. Companies likely also will need to improve how they monitor the supply chain as changes take place. The emergence of artificial intelligence and machine learning capabilities has accelerated the ability for companies to predict potential issues and take preventative actions.

The benefits for those that take steps to improve their supply chain are many, including reducing lead times, increasing agility to react to changing market conditions and optimizing inventory in the value chain. Another benefit to reshoring is helping to ensure supply chain resiliency to better serve customers and avoid costly delays in sourcing materials and shipping products.

Sustainability need grows; investors skeptical

Investing in sustainability joins investing in digital transformation, accelerating organic growth, and value creation as areas where life sciences companies are focusing their capital. Also, more industry CEOs report accelerating climate change impacts and increasing pressure to build sustainability as one of the most critical risks to their future growth strategy.

While life sciences companies historically have played a pivotal role in environmental, social and governance (ESG) because of the social benefits their products offer patients, there is still an opportunity to have a more positive impact on the environment. A 2019 analysis of the global pharmaceutical industry’s top 15 companies revealed they emitted 55% more greenhouse gas emissions per million dollars of revenue than the automotive sector.3 Medical waste also became a major concern during the pandemic, especially with the proliferation of single-use personal protective equipment and testing kits.

Still, less than a third (30%) of life sciences CEOs said becoming a leader in sustainability will be a competitive advantage, though another 13% said it is the foundation of their long-term strategy.

Taking steps to reduce emissions can lead to cost savings, while the industry could also help with collecting and reusing medical equipment, a step some companies have already taken.

As sustainability moves higher on the agenda for leadership, convincing investors of the benefits may be essential: 57% of CEOs say they have encountered investor resistance to their sustainability transition, with costs and the potential long-term returns of the strategy coming into question.

Linking ESG concretely to long-term value creation — including financial value — can help win over investors, yet only a third (32%) of life sciences CEOs say their companies have sustainability KPIs for long-term value creation.

Adding measurable goals for emissions across the value chain, reusing materials in medical devices, sustainable packaging and other KPIs may be a way to underscore the strategic importance of sustainability and other ESG elements, both for discussions with investors and to embed ESG in the corporate culture.

M&A can also be a way to support sustainability by adding environmental expertise and capabilities. In fact, 82% of CEOs named strategic reasons such as long-term value creation and competitive advantage when asked how sustainability factors were driving their M&A agenda.

Sustainability strategies and initiatives can help protect and create value by minimizing regulatory action, such as fines for pollution, and customer backlash. It can also boost brand trust and the ability to attract and retain talent, and reduce the cost of capital.

Using M&A to help reach strategic goals

Overall, M&A is returning to historical norms as a strategic tool: 55% of life sciences CEOs say they plan to actively pursue M&A in the next 12 months, up from 43% in 2021, though still lower than the 59% indicated by all global CEOs in the survey. The top reasons for acquisitions are: increasing operational capabilities (26% of CEOs), bolt-on acquisitions to increase market share (21%) and strengthening ESG ranking, performance or sustainability footprint (20%).

M&A intentions


of life sciences CEOs say they are actively pursuing M&A in the next 12 months.

Still, the life sciences deal landscape has been extremely competitive and 61% of CEOs say they have failed to complete or canceled a planned acquisition in the past 12 months, with disagreements on valuation (34%) and the pandemic (29%) the two most likely reasons.

The market may not be getting any easier: 74% of CEOs say they expect an increase in hostile and competitive bidding in the next 12 months and 75% expect private equity to be a major acquirer in the sector.

As the deal market continues to be highly competitive, life sciences CEOs may look to continue the trend of focusing on alliances, including broader, more strategic partnerships, to access new talent and innovation. In fact, since 2020, major biopharmas have deployed 1.5 times more firepower on alliances relative to M&A. Alliances can also potentially give life sciences companies a closer relationship with early stage companies that could become potential acquisition targets down the road.


At this stage of the pandemic, the life sciences industry is operating from a position of strength compared with some others. It can use this strength, in the form of both financial firepower and executive attention, to turn immediate needs such as supply chain restructuring and sustainability initiatives into long-term value generators. By focusing on activities that can have the most lasting impact and align with the company’s strategy and purpose, they may be able to keep the position of strength to meet coming growth challenges.

Harish Kumar, of Ernst & Young LLP,  contributed to this article.

  • Show article references#Hide article references

    1. “Safeguarding Pharmaceutical Supply Chains in a Global Economy,” U.S. Food and Drug Administration, 30 October 2019.

    2. Ambar Boodhoo, Subin Baral, “Why asset-light strategies are asset right for life sciences companies,” Ernst & Young website (United States), 21 September 2021.  Note: An asset-light strategy or business model involves transferring capabilities, such as people, process and technology, to “better owners” to enable companies to transition fixed costs to a variable cost structure, enhance agility and facilitate a shift of resources that allows a focus on core capabilities.

    3. Lotfi Belkhir, Ahmed Elmeligi, “Carbon footprint of the global pharmaceutical industry and relative impact of its major players,” Journal of Cleaner Production, vol 214, 20 March 2019, pages 185-194.


This report on the life sciences results of the 2022 EY CEO Survey is a part of the CEO Imperative Series, which provides critical answers and actions to help CEOs reframe the future of their organizations.

About this article

Arda Ural, PhD

EY Americas Industry Markets Leader, Health Sciences and Wellness

Co-author of numerous whitepapers and a frequent speaker about biopharmaceutical strategy at industry conferences. Married father of two.

Evan Sussholz

EY US Strategy and Transactions Partner

Global client services partner and experienced transaction advisor who helps clients enhance shareholder value by making better decisions around capital strategy. Dedicated husband and father.