Making Life Sciences a Magnet for Talent
 

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Following years of growth and favourable market trends, the global life sciences industry now finds itself facing a ‘new normal’. By any measure it is still a stand-out performer globally, and a ...

Following years of growth and favourable market trends, the global life sciences industry now finds itself facing a ‘new normal’. By any measure it is still a stand-out performer globally, and a key strategic area for the EMEA region. However, markets are changing.

Life science companies must adopt new business models to achieve the following:

Counter slowing sales growth
Stem profitability challenges
Deliver patient outcomes that reflect higher consumer expectations
Position the industry for future success and innovation.
Making these adjustments successfully will come down to individual companies’ ability to find, engage and retain the right people. For the most part, the challenge is about talent and the ability of each organisation, regardless of location, to source it.

Here, we look at the top five issues facing the industry and how organisations in the region can respond.

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Making Life Sciences a Magnet for Talent Presentation Transcript

  • 1. EMEA Making ‘life sciences’ a magnet for talent by Dominic Graham
  • 2. Introduction Following years of growth and favourable market trends, the global life sciences industry now finds itself facing a ‘new normal’. By any measure it is still a stand-out performer globally, and a key strategic area for the EMEA region. However, markets are changing. Life science companies must adopt new business models to achieve the following: 1. Counter slowing sales growth 2. Stem profitability challenges 3. Deliver patient outcomes that reflect higher consumer expectations 4. Position the industry for future success and innovation. Making these adjustments successfully will come down to individual companies’ ability to find, engage and retain the right people. For the most part, the challenge is about talent and the ability of each organisation, regardless of location, to source it. Here, we look at the top five issues facing the industry and how organisations in the region can respond. /02
  • 3. /03 Europe is the world’s second largest market for pharmaceutical sales. It directly employs more than 660,000 people in the EMEA region, and around four times this number indirectly. 660,000+ pharmaceutical employees
  • 4. the top five issues facing the industry 1 Economic factors create headwinds for R&D Strained public purses and regulatory barriers continue to put pressure on R&D investment in Europe, and emerging economies are gaining a greater share of this investment worldwide. For life science companies in the eurozone, the challenge is to invest wisely in R&D activities – to combat some of the other significant challenges facing the industry – while keeping costs contained and becoming more competitive. Although the Treaty of Lisbon target of assigning three per cent of EU gross domestic product (GDP) to research and development activity by 2010 was not met (largely due to broader economic factors), it remains one of five key targets in the Europe 2020 strategy1. Governments and businesses know that R&D investment is a clear determinant of the overall strength of the pharmaceutical market, as shown by the following graph comparing R&D investment in the EU with that of the US and Japan (Figure 1). However, even though some individual countries are investing heavily in R&D activities namely Finland (3.87% of GDP in 2010), Sweden (3.42%) and Denmark (3.06%) – the concentration of investment is disparate and inequitable across the region. Figure1: R&D investment 1 http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/R_%26_D_expenditure /04
  • 5. the top five issues facing the industry /05 Figure 1: R&D investment2 4 3 2 1 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Japan (1) United States (2) EU-27 (3) (1) Break in series, 2008 (2) Excludes most or all capital expenditure (3) Estimates Source: Eurostat (online data code: tsc00001), OECD 2 http://epp.eurostat.ec.europa.eu/statistics_explained/images/c/c3/Gross_domestic_expenditure_on_R%26D_in_the_Triad%2C_2000-2010_%28%25_share_of_GDP%29.png
  • 6. the top five issues facing the industry Eurozone life science companies are facing constraints in some local markets given the large variations in investment across the region. Lifting the longer-term outcomes for the industry partly depends upon more effective and innovative R&D investment decisions. However, it no longer appears that governments alone can change the dynamics associated with R&D investment across the region, so companies themselves must focus on finding innovative solutions to meet the R&D challenge and boost competitiveness. Among these solutions must be innovative approaches to accessing R&D talent that has traditionally been concentrated in specific locations (where investment is high). Better management of the R&D talent supply chain will require new collaborative models of research and access to a global talent network that can deliver knowledge and insight across geographical boundaries. /06
  • 7. /07 Pharmaceuticals face a future with lower growth: the combined US and eurozone share of spending will shrink from 61% in 2005 to 44% in 2015. US and eurozone share of spend 2005 to 2015 17% reduction over 10 years Yet, the world’s pharmaceutical market is growing. It was worth an estimated 614,583 million euros in 2011. 61% 2005 44% 2015
  • 8. the top five issues facing the industry 2 Generics take the lead For some time now, big pharmaceutical companies have been losing patent protection and the generic market has boomed. In 2011, the global generics market was estimated to be worth approximately $225 billion. By 2016, it is expected that this will have risen to $358 billion, representing more than 18% of all pharmaceutical sales. Nowhere is the generics market growing faster than in emerging economies, creating a two-fold challenge for many large pharmaceutical companies operating within the EMEA region. If the cheaper, generic drug market is to be dominated by companies in emerging nations, the model of relying on one or two ‘blockbuster’ drugs is no longer viable and all organisations are challenged to find more diverse sources of revenue. /08
  • 9. the top five issues facing the industry To do this, companies will need broader and more diverse strategies, as well as new skills to bring those strategies to fruition. Specifically, these skills will include: • Technology skills to improve global collaboration and enhance data capture systems • Big data analysis skills to lower risk and identify new opportunities • Community engagement and management skills – communities want and expect a greater say in health outcomes and how government funds are spent. Figure 2: Major Generics Markets, through 2016 ($ billions) /09
  • 10. the top five issues facing the industry /10 Figure 2: Major generics markets, through 2016 ($ billions) 120 100 $ Billions 80 60 40 20 0 2010 North America Emerging markets Major Europe Japan Rest of world 2011 2016
  • 11. /11 The number of ‘generic equivalents’ occupying a position in the top 10 prescription drugs in the US increased from two (in 1990) to six (in 2003) 3. Growth of ‘generic equivalents’ 1990-2003 300% increase over 13 years 2 6 1990 2003 3 http://www.ncbi.nlm.nih.gov/pubmed/16428148
  • 12. the top five issues facing the industry 3 Emerging markets are driving growth IMS forecasts show that global spending on medicines will reach $1.1 trillion by 2015, but that revenue growth will slow (from approximately 6% between 2005 and 2010, to 3% between 2010 and 2015). And the combined US and European share of spending will shrink from 61% in 2005 to 44% by 2015 as emerging markets grow from 12% in 2005 to 28% by 2015. The impact of $120 billion of product revenues losing patent protection in major western markets from 2011–2015 will leave emerging market and generic growth as the main drivers of global pharmaceutical spending. In fact, aggregate emerging market revenues are forecast to grow at a compound 14% between 2010 and 2015. If the pressure on the US and EU markets lessens after the ‘patent expiration cliff’, and low levels of growth return (say 3%), global growth would then be around 4% between 2015 and 2020. Either way, the gap between the two markets is clear. The simple message is that the pharmaceutical market globally is still growing, but that profit margins are declining and a larger share of investment and growth is to be found in emerging markets. /12
  • 13. the top five issues facing the industry For life science companies, the challenge is to balance growth and investment across emerging and developed markets, and to ensure that their access to the right talent and research (as well as other key capabilities) matches the market opportunities. The key question companies need to ask themselves now is, ‘How well-positioned are we to capture growth in emerging markets and are we adapting our staffing strategies to match?’ Figure 3: Estimated growth 2010–2015 (compound annual growth rates) /13
  • 14. the top five issues facing the industry /14 Figure 3: Estimated growth 2010-2015 (compound annual growth rates) North America Sales $357.4 bn Growth 1.5% 5.3% Europe (EU countries) Sales $237.4 bn Growth 2.2% 12.2% South East & East Asia Sales $147.1bn Growth 15.3% Japan Sales $120.6 bn Growth 3.3% 1.5% Latin America Sales $100.9 bn Growth 12.2% 15.3% 15.3% CIS Sales $33.5 bn Growth 12.2% 3.3% Indian subcontinent Sales $32.1 bn Growth 15.3% Europe (non-EU countries) Sales $27.6 bn Growth 5.3% Africa Sales $25.0 bn Growth 7.9% 12.2% 7.9% Oceania Sales $16.7 bn Growth 3.9% Middle East Sales $15.4 bn Growth 7.4% 3.9% *Ex-manufacturer prices at CER. Source: IMS Health, IMS Market Prognosis 2011-2015
  • 15. the top five issues facing the industry 4 ‘Trust’ and individual solutions are key strategic issues For better or worse, the internet has fundamentally changed healthcare. Consumers now have far greater access to information about their healthcare options, and this has altered the task facing pharmaceutical companies today. Not only must pharmaceutical organisations be far more transparent in the way in which they research, test and deliver drugs to market, they must provide better, faster and more holistic health solutions. Communities and individuals now have higher expectations about what science can deliver (and how quickly). The key strategic issue of building trust in pharmaceutical products now complicates the communication and engagement challenge facing large pharmaceutical companies globally. Life science companies must now achieve the following: • Skilfully open the dialogue with consumers, and enhance communication and transparency in the way that new treatments are brought to market; and • Deliver personalised health solutions in a timely and affordable way. /15
  • 16. the top five issues facing the industry Consumers now seek collaboration and detailed insight regarding the way their treatment is managed, and pharmaceutical organisations need to be part of facilitating this. Industry leaders must build relationships and connectivity with medical practitioners and consumers to improve communication and enable patient centricity. Trust in the life sciences industry as a whole is a key reputational issue, and it has a flow-on effect for attracting and retaining talent. Not only must companies address the key reputational issues that have occurred in communities over recent decades, they must equip their workforces with new competencies to help organisations adapt to this era of ongoing collaboration and communication. Communication is now a priority, and it is the key to rebuilding trust in a growing and critically important industry that must deliver better, cheaper and more sustainable personalised medical solutions. /16
  • 17. /17 2005: There were 329 pharmaceutical and biopharmaceutical companies with market capitalisations of around US$150 billion. Biopharmaceutical companies 27% reduction over 5 years 2010: There were only 240 companies worth more than US$50 million. 329 240 2005 2010
  • 18. the top five issues facing the industry 5 Collaboration between smaller entities is a necessity One of the issues facing life science companies globally, and which is partially responsible for driving the trend towards higher investment in emerging economies, is the need to lower costs. Prices are under pressure from governments as they struggle to maintain and deliver highquality healthcare to large, ageing populations. A key strategic response to this has been for small and medium-sized enterprises to account for a larger share of total business sector R&D. As Figure 4 below shows, firms with fewer than 250 employees already account for some 22% of total business sector R&D in the EU, 14% in the US and 8% in Japan. The trend towards complex and specialist tasks being outsourced to smaller, niche organisations is increasing in the life sciences sector (as well as elsewhere) and the EMEA market looks wellpositioned to capitalise on that trend. Figure 4: Business R&D by firm size (% of business sector R&D, 2005 or latest) /18
  • 19. the top five issues facing the industry /19 Figure 4: Business R&D by firm size (% of business sector R&D, 2005 or latest) 40 35 30 25 20 15 10 5 0 Japan US Firms with 50 to 249 employees Firms with fewer than 50 employees * Czech Republic, Slovakia, Poland and Hungary Source: OECD EU-27 EU Big 4 EU-15 other NMS-4*
  • 20. the top five issues facing the industry Retaining focus on core business activities while reducing fixed costs on other tasks is something many organisations in other industries have been doing for sometime – now life sciences organisations are tasked with adjusting their business models to do this too. How individual organisations engage with talent and restructure work to be able to raise productivity and lower fixed costs in this way is a key strategic issue going forward. It will critically challenge core concepts of intellectual property, competitive advantage and the role of talent in delivering return on investment. /20
  • 21. /21 Around one in ten firms in Europe collaborate with a partner for their innovation activities4. OECD 2002–2004 4 http://aei.pitt.edu/32615/1/54._R%26D_in_Europe.pdf
  • 22. the top five issues facing the industry What does this mean for talent? Life science companies are facing significant market shifts and challenges to their existing business models. The market is growing, but not in the ways it did previously. The need for new business models (from mass market to niche and targeted) translates into the need for different skill-sets, and new pools of talent across more geographical locations. It also requires companies to change the way they operate, as well as how they engage with the communities they operate within. If the life sciences industry is to become the destination for talent that it simply must become to meet its challenges, it should engage the broader talent community in its mission to deliver better, faster and more personalised health solutions. The key issues for attracting and retaining talent in the industry are: • Engaging with talent clusters: R&D and STEM skills have formed regional and local clusters that are often self-reinforcing. Investment in a specific location often leads to more investment, which attracts more talent as well as more competition. Companies need to find ways to access the talent within these clusters and to develop new clusters where required without always needing to compete for the same talent in the same locations. Building their own talent pipeline requires longer-term planning and analysis, and new partnerships. /22
  • 23. the top five issues facing the industry • Distinguishing between productivity and cost-cutting: Boosting productivity and output must be done through innovative workplace practices. Low staff ratios in critical research and development roles leads to high turnover and higher recruitment costs overall. The need to lower costs is real, but it must be achieved sustainably. • New skill-sets to open dialogue and improve collaboration: Consumer demands and expectations are changing, and the kinds of skill-sets required must adapt to address these. • Competition must be balanced with community needs: Competition must not come at the expense of faster, better health solutions, and collaboration across traditional competitive landscapes is critical to addressing this. Addressing community concerns through innovative business models is critical to rebuilding trust and engaging new talent pools (as well as new consumers). /23
  • 24. For more thought leadership go to talentproject.com About the Author Dominic Graham heads up the Professional and Technical division of Kelly Services in the UK, where he oversees the Kelly Scientific, Kelly Engineering and Toner Graham brands. He studied Biological Sciences at the University of Birmingham, which he put to practical use in his early career before transferring his skills to the specialist recruitment sector. Dominic has extensive experience in a range of industries dealing with large multinationals through to small start-up biotech companies. About Kelly Services® Kelly Services, Inc. (NASDAQ: KELYA, KELYB) is a leader in providing workforce solutions. Kelly® offers a comprehensive array of outsourcing and consulting services as well as world-class staffing on a temporary, temporary-to-hire, and direct-hire basis. Serving clients around the globe, Kelly provides employment to more than 560,000 employees annually. Revenue in 2012 was $5.5 billion. Visit kellyservices.co.uk and connect with us on Facebook, LinkedIn, and Twitter. Download The Talent Project, a free iPad app by Kelly Services. This information may not be published, broadcast, sold, or otherwise distributed without prior written permission from the authorized party. All trademarks are property of their respective owners. An Equal Opportunity Employer. © 2013 Kelly Services, Inc. EXIT