Tecnimede Group

Bruno Ruas

When I think about the evolution during my last 16 years as a CFO in the Pharmaceutical Industry and what is to come for the next 5 to 10 years, I enter a whirlwind of questions and uncertainties.

Risk, complexity, and unpredictability define the business environment of the next decade. Expectations are high, and changes are disruptive.

Buzzwords force us to explore completely new environments that are not yet well known, but they are here to stay. Usually, buzzwords also represent large investments and cash needs.  

Words like Digitalization, AI, Big Data, Machine Learning, and Biotech are coming like a storm, and we quickly need to adapt/adjust.

The role of the CFO is to plan, fund, and control the business while driving financial performance, managing investors' expectations, and ensuring compliance with tax and regulatory requirements.

 The big four topics in pharma 

There are some areas, in addition to the most obvious, which are people and strategy, that, due to the risk they represent, should be analyzed by the CFO together with the board in the long term.

In the pharmaceutical industry, I would like to highlight four that are already changing and will continue to change in the coming years. 

R&D

Research and Development (R&D) is the most critical area for assuring the future of a Pharma Company.

This is not consensual, but just to give an idea to the reader, based on the study done in 2017 by Vinay Prasad and Sham Mailankody, the cost of a single cancer drug would be, on average, $648.0 million.    

The prevalence of new technologies, orphan drug opportunities and cell therapies will be the driver for commercial innovations in the years to come. The biotech companies have been and will continue to be overall positive, with an escalation in the scale and speed of innovation. For the small and mid-cap companies, the path will be to create niche markets with added-value medicines or to embrace in-licensing arrangements, partnerships, and joint ventures with biotech companies and other pharma organizations.

The AI and big data will be used to decrease the effort and, hopefully, the R&D costs. The problem with using it is the lack of standards and procedures that allow clinical trial organizations and other players involved to accelerate R&D and deliver continued growth.

Supply Chain

The pharmaceutical supply chain poses risks and challenges to both providers and consumers. From raw materials to finished products, the cycle is complex and broad.

Researchers from Operations Research for Health Care have outlined the 10 

most significant challenges faced by the pharmaceutical supply chain, including (1) coordination issues, (2) inventory management, (3) inadequate demand information, (4) reliance on human resources, (5) order management, (6) avoiding drug shortages, (7) drug expiration, (8) warehouse management, (9) temperature control, and (10) shipment visibility.

I would add to the list the recent geopolitical instability and environmental, social, and governance (ESG) concerns.

The context costs are increasing, especially in Europe and the USA.

To mitigate some of these issues, companies are investing in digital tools to reduce costs while increasing the efficiency and traceability of the supply chain.

It is not easy to quantify the gains of these tools and justify the investment, but it´s relevant to do so in order to avoid a “nice to have” or “a trend” and to ensure added value for the future of the company.

Stakeholders

The impact and relevance that different stakeholders have on organizations grow significantly with each passing year.

The most important stakeholder in the pharmaceutical industry is the patient. However, we have a broader healthcare community, our employees, government, non-governmental organizations, business associates, academics, investors and communities.

Pharmaceutical companies have always had a close relationship with the scientific community and academics. However, the ESG plus the social media influence impose a different approach and interaction. 

Communication and company reports must be more carefully prepared. Pharmaceutical companies have to get involved to be part of different communities and contribute to the world's environmental preservation. The actions typically need effort and money and must be seen not as a cost but as an investment to improve life and prepare for the future.

Quality 

The quality of medicines is an absolutely critical pillar in the pharmaceutical industry. In recent years, we have experienced an increase in the number of drugs being launched in the market. As a result of this increase, the need for quality assurance and quality control measures has risen.

To achieve this goal, the use of IoT and AI in the production lines has taken its first steps and will be an enabler to ensure data reliability. 

The application of these technologies has the potential to dramatically increase the efficiency, flexibility, and quality of the industrial production of medicines. 

Nevertheless, this will be difficult to implement, very time-consuming and quite expensive. The Industry 4.0 implementation implies a high upfront investment and payment of licenses “ad interim” and/or a pay-per-use method.

In a time when Governments want to control and reduce the cost of medicines, small and mid-cap companies have to be very aware of these costs, and most probably, they will not be added to the finished product. 

 Overall, be excited and bold but never take success for granted; the speed of innovation is getting faster and faster, and this means that flexibility and adaptability will be key to success.