2 minute read 12 Feb 2017
A researcher at a life sciences company looks at a model

Why life sciences is looking to digital deals

By

Pamela Spence

EY Global Health Sciences and Wellness Industry Leader and Life Sciences Industry Leader

Ambassador for outcomes-based performance and healthy aging. Advocate for women.

2 minute read 12 Feb 2017

Digital innovation is fueling transformation in life sciences, and organic strategies to build digital capabilities are not enough.

Across the life sciences sector, and particularly in pharma, digital innovation is fueling transformation, opportunities and challenges. The pace of change means organic strategies alone are not sufficient to build the necessary digital capability. This impact is being felt across the entire value chain.

Our research from February 2017 shows that 70% of life sciences CFOs plan to use inorganic approaches to execute their digital strategy.

The pace of change means organic strategies alone are not sufficient to build the necessary digital capability.

In the last two years alone, Tony Drabble and Chris Wayman, also from our Global Life Sciences Transaction Advisory Services practice, have analyzed over 100 digital deals involving life science companies to determine where and why we are seeing these deals.

One of their key findings was that digital deals are occurring mainly in three areas:

  1. Digital therapeutics (for new or improved therapies)
  2. Real-world data (for greater disease insights and patient understanding)
  3. Advanced analytics (to maximize value from data)

Also, deals involving chronic diseases – particularly diabetes and respiratory diseases – are experiencing the most digital deal activity. Nearly half of the deals we observed are seeking to spur innovation and product development.

Across the deals reviewed, a wide variety of deal structures are being employed – the vast majority (approximately 74%) being non-equity-based partnerships and alliances rather than traditional M&A.

Questions companies should be asking

Understanding the digital ecosystem, selecting the right partners and structuring deals to both protect intellectual property and extract maximum value are important to success in navigating the digital economy. To get started, consider the following questions:

  1. How is digital affecting your business?
  2. Have you identified the gaps in your digital portfolio?
  3. Do you know who you want to partner with? 
  4. Which deal types suit your current and future business model?
  5. How will you measure the success of your digital strategy?
  6. How will you integrate digital solutions into your organization and be confident of delivering the business benefits as well as the adoption of a digital culture?

DEALMAKING

100

The number of “digital deals” involving life science companies that have taken place in 2016-17.

Which deal type suits your current, and future, business model ?

There are a number of joint ventures set up between pharma and the technology companies.
A close look shows that there are at least three broad strategies being pursued:

  1. Partnership with an established technology expert to improve and existing product or service
  2. Partnership with a “medical device startup” to develop a new product or service
  3. Acquisition/M & A of the enabling medical devise and platform

Summary

A variety of deal structures are being employed with the vast majority being non- equity- based partnerships rather than traditional M & A.

About this article

By

Pamela Spence

EY Global Health Sciences and Wellness Industry Leader and Life Sciences Industry Leader

Ambassador for outcomes-based performance and healthy aging. Advocate for women.