Our experience during the pandemic taught us three simple, yet important lessons. Firstly, global innovation in pharmaceutical and biotech sectors can deliver impressive results. Effectively, it took the world ca 8 months to produce first usable vaccines and carry out their preliminary testing. Compared to the ‘normal’ pharmaceutical and medical innovations that take north of 5 years to deliver, that is lightning speed. Equally revealing is the fact that vaccines development took place in a range of countries, roughly on the same time frame, including emerging and middle-income economies.
While not all new future healthcare innovations can sustain this breakneck development and approvals speed, going back to status quo ante of years-long research cycles is no longer feasible for both regulators and R&D intensive companies in a range of healthcare related sectors. This means that we are likely to see a major push for acceleration in new treatments development in key areas of human health: cancers, cardiovascular disease, diabetes, et al. The risks of new investment allocations will rise and become more accelerated in their onset, so be prepared for sharper and more frequent drawdowns. But social and economic rewards from the new momentum will be huge as well.
Second aspect of pharmaceutical sector experience with Covid19 vaccines development is relating to the scale of investments. Covid19-related research spend in pharmaceutical sector totaled a massive $180 billion globally. Previous large scale public health emergency – the Zika virus – involved only $1.1 billion in global research-related spending. The scale of future investments in pioneering and effective treatments of more complex diseases will have to be closer to that of Covid19-related budgets. And this can only be feasible if there is a major change in the way we do business in pharma and bio-tech sectors alongside a significant uplift in public spending on healthcare-related R&D. Healthcare sector, as a whole, is likely to consolidate downstream to increase efficiencies of scale, but it will also become more open to research collaborations between smaller startups and larger established players. Pfizer-Biontech model is a good template, generating returns on investment for earlier stage aggressive innovators and reducing risks associated with bringing new products all the way from the lab to the markets. These changes will benefit pharma, biotech and medical devices sectors in decades to come, just as advanced economies’ demographics of aging start shifting toward today’s middle income and emerging markets. Put simply, supply-side growth enabled by a new investment cycle in healthcare will be supported by a big boost in longer-term demand.