The COVID-19 pandemic, a stringent regulatory environment, and an up-and-down economy have arguably posed the biggest challenges to the pharmaceutical industry's collective innovation efforts in recent years.
Sure, there are outliers in the U.S. Take Johnson & Johnson and Moderna. Their breakneck-speed work with COVID-19 vaccine development was undoubtedly one of the most important healthcare innovations of our lifetimes.
There's also been progress made by in bringing new, life-saving and -altering generic drugs to the market:
- Naltrexone to treat those experiencing opioid overdoses
- Donanemab to slow down the progression of Alzheimer's
- Semaglutide to treat diabetes and help with weight loss
But, for the most part, innovation outside of the development of novel therapeutic drugs like these has been stagnant throughout the pharma industry since the start of the decade.
Operational complexities, competing organizational priorities, and intricate drug-development frameworks and processes haven't necessarily brought innovation in the pharmaceutical sector to a screeching halt.
That said, leaders at pharmaceutical firms haven't exactly made key structural changes at their companies to empower teams across the business to explore both core and transformative innovation opportunities.
The state of pharma industry innovation
To predict where the near- and long-term future of innovation in the pharma industry is headed, it's worth looking at the current landscape to see what pharmaceutical companies are doing to move the needle today.
Personalized, precision medicine having its moment
From helping pharmas develop new cancer therapeutics, to aiding with prenatal screening and pharmacogenomics, precision medicine is already having a positive, wide-ranging impact in the healthcare arena.
"With precision medicine, there's a lot that goes into that, providing the right treatment for the right patient at the right time," Arkana Laboratories CEO Dr. Chris Larsen shared in our Alloy 2024 session on AI in healthcare and other regulated industries. "That gets me really excited as well in my particular field in diagnostic medicine."
Generative AI adoption (and creation) on the rise
Recent Bain & Co. research found 40% of pharma executives are "baking expected savings into their 2024 budget," thanks to the use of generative AI, while 60% foresee improvements in terms of cost savings and productivity.
With pharmaceutical firms' AI budgets expected to climb from $1 billion in 2022 all the way to $22 billion by 2027, per S&P Global analysis, it's safe to say AI technology development is (rightfully) a top priority for pharmas.
Specifically, generative AI will remain a focus area.
Boston Consulting Group and Microsoft leaders noted the best way for the pharma industry to determine AI's efficacy for their organizations is to gauge the tech's 'potential' (granular use cases), put the right 'platform' in place (data infrastructure and governance), and build the right 'partnerships' (advisory firms to help with internal adoption and implementation).
Cell and gene therapy development making waves
The American Society of Gene + Cell Therapy reported there were more than 3,500 precision medicines in development in 2022. Work on these types of drugs "will remain a focal point for pharmaceutical innovation" in 2025 and beyond, according to healthcare management consulting firm ZS.
"As the industry evolves and technologies advance, the art of dealmaking will remain at the forefront of bringing these life-changing therapies from the laboratory to the clinic, offering hope to patients who have long awaited a cure," Clarivate Global Head of Life Sciences and Healthcare Thought Leadership Mike Ward wrote for Nature.
Cell and gene therapy is certainly a facet of the pharma space that has the attention of the corporate venture capital arms of big industry players (Bayer, BMS, Eli Lilly, Novartis, and Pfizer) and industry-focused VC firms.
The key for biopharmas to get backing for "CGT" development in 2025 and the coming years?
According to RA Capital Management Senior Managing Director Josh Resnik, they "must demonstrate a strong value proposition that is unable to be replicated by other drug modalities in order to secure sufficient venture financing."
Acceleration of drug discovery and clinical trials
"The impending gen AI–driven life science revolution promises unquantifiable effects on human health and well-being," McKinsey recently wrote. "An accelerated drug discovery process, for example, will help cure more diseases more quickly, opening additional resources that could then be applied to currently underserved areas."
Deloitte Life Sciences R&D Strategy Leader and Principal Kevin Dondarsk echoed these sentiments.
Kevin noted pharma must "sufficiently invest in early R&D, through both traditional and AI-enabled approaches, to drive innovation, and remain ruthlessly focused on execution to help accelerate [drug] development timelines."
AstraZeneca is a prime example of a pharma industry player providing ample resources to solving this latter challenge of transforming clinical-trial design. AstraZeneca recently launched Evinova, a new innovation lab, to help cut clinical-trial timelines considerably and facilitate easier participation for patients and investigators.
Revision of business strategy tied to deregulation
Former International Society for Pharmaceutical Engineering President and CEO Thomas B. Hartman noted "regulatory harmonization will be a critical component to enabling innovation in the pharmaceutical industry," in regard to the organization's 2024 survey on the state of pharma innovation.
However, with a new presidential administration in place that's focused on deregulating industries, it may lead to a significant increase in innovation activities for pharmaceutical manufacturers and life sciences firms.
Pharma industry deregulation "could offer some positive elements in our efforts to bring medicines to patients as long as we maintain strong scientific standards," former Alnylam Pharmaceuticals CEO John Maraganore, a board member of multiple BioTech companies, recently shared with Biopharma Dive.
Adoption of more advanced supply-chain technologies
PwC analysis found "AI-enabled intelligent automation and advanced analytics" can vastly improve supply-chain operations for pharma companies. One projection found this advanced tech is likely to produce 60-70% reduction in process timelines and 30+% decrease in operational costs for pharma companies.
"While the global drug shortage is a complex challenge that won’t be resolved quickly, prioritizing collaboration, transparency, and proactive strategies can help build a more resilient pharmaceutical supply chain," SAP supply-chain expert Öykü Ilgar recently wrote for Forbes.
With traceability, cold-chain losses, and demand forecasting proving to be persistent problems for the pharma industry, it's easy to see why innovation tied to supply-chain modernization and digitization is a focal point.
The next innovation opportunity for the pharma industry: Building startups and venture studios
All these innovations are cause for optimism (and celebration). Yet for all the great work executed by organizations across the pharma industry, even more innovation opportunities await in 2025 and the coming years.
Notably, there's an untapped form of transformative innovation outside the core business that only some pharmas have embraced — one that offers a path to develop new capabilities that solve customer, business, market, and strategy problems and generates valuable insights: venture building.
Consider our work with a top-5 pharma leader.
The firm partnered with us on a venture-build program to build a new startup that addressed a problem facing its subsidiaries: the need to streamline medical, legal, and regulatory (MLR) review processes and accelerate the release of drug-related marketing materials.
Revisto offers an AI-powered platform that aims to eliminate the "tedious and financially burdensome approach to marketing compliance" for pharmaceutical companies.
One-off startup-creation approaches like this solve big issues facing the pharma sector.
But the real value-add opportunity for biotech companies, life sciences firms, and drug manufacturers to unlock transformational growth is to create their own venture studios to build PharmaTech companies at scale.
