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A Site Selection Web Exclusive, May 2014
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Tomorrow's Innovation Roadmap

A new report from Oxford Intelligence offers clear glimpses of the near future.

by JULIA COX

The life sciences industry has been less impacted by the recession than other sectors, and the latest forecasts indicate continued future growth as aging populations and rising purchasing power for medical advances drive the demand for prescription medicines. Julia Cox from FDI specialists Oxford Intelligence reveals, however, that Oxford's new report finds the challenges facing the sector have never been greater.

The MedTech Report 2014 highlights the current significant changes in the industry, with companies forced to devise methods to bring drugs more cheaply to the market as numerous factors converge to demand more cost-effective healthcare. In addition, the need for improved patient care, as well as a shift towards more targeted and personalized medicine, is fueling both the drive for wireless technology and the increasing role of big data and informatics in healthcare.

Traditional business models are being challenged as life sciences and medical technology companies deal with increasing industry pressures relating to tighter regulation, diminished sales in developed markets, rising costs, and a more knowledgeable customer base seeking targeted and safer drugs.

Western governments have been impacted by the financial crisis, and healthcare budgets — one of the largest elements of public expenditure — have been reduced, forcing companies to lower prices or switch to generic products. At the same time, in the West, governments are faced with a rapidly (and long-living) aging population.

The general trend in healthcare is towards personalized medicine that in effect results in companies providing a smaller patient group with a product that still costs billions to bring to market. Companies are forced to seek economies of scale, new and innovative production techniques and new revenue streams as they develop their businesses. Pharmaceutical companies, in particular, are re-examining their R&D value chains, which will result in completely new business models (and in some cases, already has).

Life science executives interviewed by Oxford Intelligence for the report regarding what they considered to be the major business issues and challenges facing their industry today and in five years’ time agreed that economic conditions had improved since the 2011 survey, but that the recession was still resulting in significant problems regarding the availability of funding and had caused significant reductions in public healthcare expenditure. Intensity of competition, pressure on pricing and the search for innovative production techniques were all expected by executives to increase.

Major Business Issues and Challenges in 2014 and in Five Years’ Time

Despite these factors, the life sciences sector continues to be a significant source of global FDI and job creation. Sixty-three percent of company decision-makers interviewed for the MedTech Report 2014 were planning significant investments within the next two years. In the longer term (next five years), developing Asia was the most frequently mentioned location — 23 per cent of respondents had plans for this region.

graph2

In terms of investment in individual countries, in the short term, the highest level of interest among respondents was in Brazil and the United States, with China also attracting significant interest. Singapore and countries in Western Europe — especially Germany, Ireland, Northern Italy and the Netherlands — were also mentioned frequently as attractive regions.

Medical services companies, particularly contract research organizations (CROs), remain strongly focused on investing in emerging countries, especially China, India and Brazil, with new locations in Saudi Arabia and the United Arab Emirates also being considered. China remains a strong investment location for biotechnology and pharmaceutical companies, with Brazil emerging as a developing market. It is clear that interest in the United States has picked up since the economic downturn, but that the investment climate in Western Europe remains depressed, with only the Netherlands, Ireland and Italy figuring prominently in the future international investment plans of companies.

Future Investment Plans by Country and by Industry Sector

chart1

Questioned about the key emerging technology trends, the top five topics cited by respondents were:

  • Increased use of ICT, mobile technology and software
  • Personalized medicine, diagnostics and testing
  • Drug delivery systems
  • Changes in drug development
  • Issues around biomedicine
graph3

Executives perceived the key implications of these business issues and technology trends for the life sciences and medical technology industry as a whole to be:

  • Increased competition and new geographic markets
  • New business models
  • Industry consolidation and re-shaping
  • Technological development
graph4

Finally, within the global MedTech market, the scale and importance of the United States should not be underestimated. The US continues to be the leading source of MedTech projects worldwide, accounting for one in every three global MedTech FDI projects. It also continues to be the leading destination for MedTech FDI projects. The importance of the United States in the global MedTech market is underpinned by the country's commitment to healthcare spending and MedTech VC funding, for which it leads the world in terms of investment, enabling the US to continue to dominate global innovation in the sector. Clearly, any downturn or upturn in the US market will have an immediate impact on MedTech FDI trends worldwide.

The MedTech Report 2014 — the latest in a series of major reports into this key sector from research-led FDI consultancy Oxford Intelligence — highlights the latest developments and trends in the pharmaceutical, biotechnology and medical device/healthcare (MedTech) sectors since 2010 and examines their impact on the industry and their likely influence on global FDI strategies. The report provides key insights into current industry and FDI trends, highlighting emerging growth segments of the market. It examines via in-depth executive interviews with key investors and corporate research how the industry is evolving in terms of global location selection. The report also features unique insights into the implications for development agencies targeting the life sciences sector for investment and invaluable recommendations on marketing and investor development strategies to be adopted.


For more information, or to order the report, click here or contact pollyanna.tr@oxint.com, or call +44 1908 521477.


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