2023 Trends in the Life Sciences Industry
As another year has ended, we find ourselves looking ahead at what is on the horizon for the life sciences industry. We have gathered some data and information to keep you informed; here are ten trends in the life sciences industry to watch in 2023:
1. Artificial Intelligence
Artificial Intelligence (AI) has already transformed how other industries operate – we’ve heard of virtual bots in finance and customer service, cloud-based platforms in education, automated manufacturing processes, traffic detection in transportation and many others. For the life sciences industry, the use of AI is increasing, and it is bringing the industry to the next level. In research and development (R&D), data science and data analytics have remarkably improved the way research professionals conduct their R&D, providing them with quick and big data and valuable insights that help in drug discovery or drug improvement. In clinical trials, automation has reduced a lot of manual and repetitive tasks in the process and made clinical trials quicker and less expensive. In health care, AI transformed health care delivery by assisting health care professionals in diagnoses and the course of patient treatment. And as driven by the pandemic, it is predicted that there is a continued rise in use of AI in patient care, such as virtual visits, and the use of robotics in the field of surgery. The use of AI is undeniably going to expand in 2023 and will continue to add significant value in the life sciences industry.
2. Big Data Analytics
The Food and Drug Administration (FDA) is already using real world data (RWD) to support their regulatory decision-making. The approval of a new use for Prograf (tacrolimus) in July 2021 was based on a well-designed, non-interventional study relying on fit-for-purpose RWD and it demonstrated how RWD can play a significant role in FDA’s regulatory decision-making.¹ According to the FDA, RWD are the data relating to patient health status and/or the delivery of health care routinely collected from a variety of sources – for example, electronic health records, claims and billing activities, product and disease registries, patient-generated data including in home-use settings and data gathered from other sources that can inform on health status, such as mobile devices. Life sciences companies have also started using RWD, as it provides them valuable insights to improve the way they develop their drugs, design their clinical trials or even help them understand how patients respond to a treatment. The power of big data is truly amazing and the use of RWD is predicted to increase in 2023 and beyond.
3. Digital Marketing
Life science companies desire to win new customers and boost their revenues; to achieve these goals it is important to stay on top of marketing trends. Social media and the pandemic have transformed how industries market their brands, products, and services – i.e., through digital marketing. Similarly, digital marketing in the life sciences industry is going to evolve in 2023. Based on a survey that was published online, one-third of life sciences executives plan to spend more than half of their marketing budget in digital marketing.² And creating compelling and effective video content targeted to the right audience is at the top of the strategies to do so. Digital user experience is also given importance and so website upgrades and mobile-friendly websites and making them accessible by all categories of people are other digital marketing trends.
4. M&A Opportunities
For the year ahead, it is predicted that the trend toward mergers and acquisition (M&A) activity in the life sciences industry is going to continue but not the same as what we have witnessed in 2021. Initial public offerings (IPOs) and de-SPAC transactions in the life sciences industry in 2022 slowed down, which created a backlog of life sciences companies going public. According to U.S. Life Sciences M&A: Key Trends and Their Impact on Dealmaking, published by Covington & Burning LLP³, this current backlog creates opportunities for both buyers and investors who consider an M&A exit as an alternative to an IPO or a de-SPAC transaction, but puts increased pressure on deal certainty and risk allocation issues.
5. New Outsourcing Vendors
The biopharmaceuticals and biotechnology companies typically hire contract research organizations (CROs) or other vendors to conduct clinical trials, as they themselves do not have the time, facility, and expertise to perform them. Also, these companies spend higher costs in R&D and clinical trials and outsourcing is cost-efficient and often the only way to go, especially for start-ups and pre-revenue entities. With increasing drug discoveries in the life sciences industry coupled with slowed drug development timelines, clinical trial complexities and challenges in patient recruitment and staff retention, the demand in clinical trial outsourcing is expected to continue to increase in 2023 and beyond. To meet this increasing demand, it is predicted that new CROs and other vendors will rise in 2023.⁴
6. Rise in Cybersecurity Risks
The pandemic spurred health care professionals to provide virtual visits, telehealth services and remote work, which resulted in increased cybersecurity attacks, such as data breaches and ransomware. The life sciences industry is also experiencing an increase in patient use of smart medical devices, continuous innovations to improve the way health care is delivered to patients (i.e., personalized, smart medication), increase in use of big data, and the increased use of cloud technology in their operations. All these great transformations also increase cybersecurity threats. As cybersecurity attacks and the potential regulatory penalties and customer’s loss of trust have increased in recent years, managing cybersecurity risks is going to be a top priority for life sciences executives in 2023.⁵
7. Operational Strategies
The life sciences industry has been faced with many operational issues during the current year, such as supply-chain uncertainty, inflation, and talent shortages. In 2023, companies look to combat these challenges by focusing their operations on long-term responses that can be grouped into four categories: resilience, digital strategy, operating model/ecosystem, and talent strategy. Resilience in their supply chain network will mitigate potential disruptions and limit the impact of those that do occur. Digital strategy and ecosystem will focus on providing end-to-end patient care through partnership with other companies in the industry. Lastly, talent strategy will not only focus on employee acquisition and retention but will also include the potential for automation and organic growth. With these strategic shifts, business leaders can look to protect the continuity of their companies while also operating in an efficient manner.⁶
8. Investment Trends
The investment trends for 2023 place an emphasis on return on investment (ROI) and clinical validation. Now more than ever, investors are looking to pour their funds into companies that can provide actual evidence and demonstrate. that their product or drug is working as intended. Venture capitalists are also paying attention to companies that are utilizing technologies and AI to allow streamlined visitation and medical results directly to customers. Lastly, looking onward to 2023 investors are most interested in clinical startups in the business of cancer care, mental health, neurology, and primary care.⁷
9. Cloud Computing
According to Technavio,⁸ the global health care cloud computing market size is projected to grow by $42.21 billion from 2022 to 2027. Cloud computing is the outsourcing of application development, data storage, and software services to third-party vendors. Outsourcing IT applications may allow life science companies to reallocate funding and time to their research and development initiatives. The R&D data can in turn be uploaded to a centralized data storage center. Centralizing data accelerates the accessibility of information for collaboration, analytics, and regulatory requirements. Finally, the collected data can be uploaded into data analytic software and reviewed for results. With the promising efficiencies that cloud computing can provide, the life sciences industry can focus on their true missions and cultivate cures in a shorter timeframe.
10. Price Regulations
The life science industry is strictly regulated. In August of 2022, the United States passed the Inflation Reduction Act. The Act contains provisions related to federal prescription drug pricing policies, and tax regulations on pharmaceutical companies. Among many other provisions, the Act requires the federal government to negotiate drug prices and provide specific vaccines at no cost for Medicare Part D beneficiaries, and caps Medicare copay monthly costs for insulin at $35.⁹ Pharmaceutical corporations who generate over $1 billion in financial accounting profit will pay a 15% book-income alternative minimum tax.10 Furthermore, publicly traded companies will pay a 1% exercise tax on the value of stock repurchased from the corporation.11
The above trends will certainly impact life sciences entities in one way or another. Staying on top of these trends and being prepared for what’s ahead are important to continue to thrive in this dynamic and innovative industry.
Janina Teoxon is a senior audit manager at EisnerAmper, Nick Connors is an audit manager at EisnerAmper and Kaitlyn Gill is an audit senior at EisnerAmper. Questions? Janina is at Janina.Teoxon@eisneramper.com or 347.735.4705, Nick is at Nicholas.Connors@eisneramper.com or 732.243.7817 and Kaitlyn is at Kaitlyn.Gill@eisneramper.com or 212.891.6868.
Our Current Issue: Q1 2023
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