7 minute read 1 Apr 2020
Scientist woman with glasses working reserch and conducts experiments by synthesis compounds in laboratory and the test tube

How life sciences companies can rethink strategies and M&A for a post-COVID-19 world

By 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.

7 minute read 1 Apr 2020

Life sciences companies can address the business impact of the current pandemic in three distinct phases.

Life sciences companies are dealing with an unprecedented crisis, though with some backstop that not all industries have. The COVID-19 pandemic is lowering the demand for chronic treatments, narrowing the bandwidth of healthcare providers, disrupting global supply chains and internal business operations, and affecting the wellness of employees. COVID-19 is imposing a massive burden on the corporate ecosystem unlike prior recessions, including the 1991 savings and loan crisis, the dot-com bust aggravated by the 9/11 attack, or the financial crisis of 2008. There is no off-the-shelf handbook for managing the systemic impact of this pandemic.

But life sciences companies are not just the recipients of these seismic shocks. They also provide solutions, with rapid diagnostic testing and treatments today, and the development of vaccines in the midterm. At the same time, the demand for treatments is inelastic, as patients still need to take medications. These two factors may be a backstop for the life sciences industry.

A history of resilience

If the past three recessions are any indication, the industry in aggregate should survive the immediate financial impact of the crisis thanks to financial firepower measured at US$1.2t in the beginning of the year. In fact, that firepower, representing the industry’s combined capacity to fund its operations and M&A transactions based on balance sheet strength, still stood at US$1t in mid-March.

Our research indicates that the life sciences industry is less susceptible to market dynamics during recessionary periods. Its business has been driven primarily by its intrinsic innovation cycle during the past three recessions. We have observed that life sciences companies execute deals at higher volumes than companies in other industries.

  • Specifically, in 1991, life sciences deal volume grew 54%, while deal volume for all other sectors combined declined by 2.4%.
  • In 2001, life sciences deal volume grew 18%. Deal volume for all other sectors declined by 32%.
  • Finally, in 2008, life sciences deal volume declined by 25%, but that was still better than the 30% decline in deal activity for all other sectors.
Life sciences deal volume chart

We recommend life sciences companies address the business impact of the pandemic in three distinct phases.

1. Contain the chaos

This period will test the resiliency of the life sciences industry. Initially, the situation will be driven by episodic events that are not controlled by the companies. Management will be predominantly in a reactive mode to respond to day-to-day issues, ranging from managing employees who tested positive to facility shutdowns ordered by the federal or state government. The financial markets will continue to gyrate, driven by a rapidly changing news cycle. The impact on the workforce will be significant as employees try to stay focused, managing work remotely while grappling with priorities at home.

In the short term, the goal is to contain the chaos and create seamless connectivity between functions that are interdependent on each other’s decisions and reactions.

Different leaders need to take charge of specific actions:

  • CEOs need to immediately establish a crisis command center to enable connectivity across the enterprise and manage the effects of this shock.
  • CFOs must build a scenario-driven dynamic financial model, while also identifying and quantifying cost containment measures. They need to have some view of what will be a sizeable impact on earnings. It is critical to predict cash flow while securing near-term liquidity based on the degree of leverage.
  • Business leaders need to quickly understand and quantify how demand elasticity will change for their therapeutic areas, especially when sales representatives are no longer able to access their target physicians and patients have a hard time leaving their homes to fill prescriptions. Product launches have to be thought through and preparedness and timelines need to be revalidated.
  • Chief HR Officers must not only help facilitate effective employee communications. They also need to work with other functions to come up with impromptu protocols to sanitize infected locations and resume production without back orders of high-demand medications or medical supplies or risking the lives of other co-workers.
  • Supply chain leaders need to secure alternative sources of active product ingredients and excipients. It is paramount to stay in control of almost daily sales and operations planning in order to optimize manufacturing and distribution, avoiding a massive working capital aftershock.

Meanwhile, pharma companies are feverishly checking their medicinal archives for anti-viral activity for COVID-19 using innovative combinations. In parallel, diagnostic companies are racing to get rapid tests approved and scaled up, working through private-public partnerships. Medical supply manufacturers and distributors are scrambling to avoid backlogs and get personal protective equipment and medical supplies to healthcare professionals who are in dire need.

2. Stabilize the enterprise

In the midterm, the picture will look less volatile. It is conceivable that the management team will feel more in control and have better forward-looking visibility. This is the period where the leaders need to stabilize the enterprise, start developing a longer-term view of the post-pandemic period and determine the implications of the actions taken to contain the chaos.

There will even be opportunities to pursue bolt-on acquisitions of late-stage assets that were too expensive prior to the onset of the current pandemic. Some biotechs and smaller MedTechs or biopharma companies with a promising pipeline but that cannot afford sustainability due to cash flow and liquidity concerns could be appropriate targets.

The biopharma industry is facing a new wave of loss of exclusivity, with an estimated impact of US$180b in 2020-2024. As a consequence, this period may provide the unique opportunity for replenishing the top-line or the pipeline.

Uncertainty will not fully disappear, however, as COVID-19 may return after the summer months, as happened in 1918 when the Spanish Flu (H1N1 strain) came surging back in October of that year.

3. Normalize for growth

When the immediate impact of the crisis diminishes and market volatility stabilizes, life sciences companies need to prepare for the post-crisis world and rethink their growth strategies with a fundamentally different mindset.

Here is a set of new avenues we propose for consideration:

  • Portfolio re-optimization:  Portfolio performance, valuation and expectations will lead to new portfolio gaps in the post-pandemic world. The crisis may have exposed even bigger and diverse capability gaps. At the same time, anti-infectives and anti-viral treatments as well as vaccines, may take priority.
  • Pipeline timeline adjustments: Clinical trials already in-flight have been stalled. The pause in patient enrolment, the FDA’s decision to cancel or delay future advisory committees, the inability for clinical trial monitors to visit sites and the FDA’s inability to monitor sites will cause material delays on pipeline timelines. Companies need to reconsider their existing approval and launch timelines.
  • Supply chain repatriation: Globalization of supply chains driven by cost reductions over the prior two decades may be reversed. Governments may demand biopharma companies to secure local (i.e., national) supplies of key medicinal product devices and medical supplies. There is already activity in Europe and a potential bill in the US Senate is shaping up to incentivize supply chain repatriation.
  • Digital customer interactions: Digital interactions between providers and patients will have achieved a critical inflection. In-person access to target physicians was already waning before the crisis. A new digitalization wave should be planned for, with lessons learned from the current situation. There may be a bonanza of remote accessing, virtual detailing and conferencing opportunities. Telehealth has emerged as a proven healthcare intervention modality and life sciences companies need to incorporate this emerging channel into their mix.
  • IT: With collaboration applications now deployed at a massive scale, there will be a stickier shift towards virtual meetings and the expansion of digital capabilities. A cybersecurity diagnostic should be considered a high priority since vulnerabilities may have already occurred during the first few months following the onset of the pandemic.
  • Business contingency planning: Enterprise risk will need to be reconsidered and scenario planning will be a higher priority, rather than addressing a remote possibility. Trying to capture the lessons learned and codifying them in future potential pandemics will need to be accomplished in a timely fashion, while the shock of the events is still in recent memory.


The COVID-19 pandemic will test the resiliency of the life sciences industry, though the past three recessions offer some encouragement that the life sciences sector seemed to be more immune to economic slowdowns as measured by the number of transactions.

The time ahead requires critical actions to manage over the mid- and immediate terms to contain the crisis and stabilize the enterprise during the next several months. The industry’s strong firepower and intrinsic demand inelasticity will help. Winners and losers will be determined by the key strategic rethinking and positioning for renewed growth in the years to come.


The COVID-19 pandemic will test the resiliency of the life sciences industry and its M&A deal volumes, though past recessions offer some encouragement that the sector seems to be immune to economic slowdowns.

About this article

By 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.