Spotlight on the Pharmaceuticals Sector

John MacDonald
The pharmaceuticals industry is poised for transformation as challenges surface in traditional markets and new opportunities arise in emerging markets.

Although the sector has remained resilient during economic downturn, pharmaceutical (pharma) companies are now under pressure from every direction. There are significant challenges to the established blockbuster drug business model. Most companies are experiencing revenue impacts as patent protection expires on their major drug lines, bringing increased competition from alternative brands and generic manufacturers.

The potential loss of market share has caused many major pharma companies to explore leaner ways of working, new markets, strategic alliances and creative partnerships (sometimes with non-traditional players).

The potential loss of market share has caused many major pharma companies to explore leaner ways of working, new markets, strategic alliances and creative partnerships (sometimes with non-traditional players).

This is an increasingly global market. The loss of patent protection in developed economies, and the rise of generics, has prompted pharma companies to seek growth opportunities in new areas. Demand for trusted brand medications is growing rapidly in emerging economies, with China, India and Brazil stepping up their healthcare expectations. Regulatory enforcement is in its infancy in these fast-growing markets and this also brings challenges.

Lower margins and less productive research & development pipelines are forcing pharma companies to seek a leaner approach. Financing, taxation, asset utilisation and capital allocation are all under the spotlight. In the face of changing market conditions, the industry’s real estate professionals are additionally challenged to cut operating costs and consolidate facilities. This is often as a legacy of the sector’s recent appetite for mergers and acquisitions, along with the associated consolidation and divestiture of under-utilised or unwanted assets.

In recent times there has been a move towards adaptability from the outset, designing facilities so that they can be easily reconfigured as needed. This brings cost and efficiency benefits.

Outside of staffing costs, owning, operating and maintaining facilities constitute the largest expense faced by pharma companies. Ensuring that the property portfolio is fit for purpose and aligned with the business strategy is a top priority. Research & development and manufacturing facilities are typically complex buildings with tight regulatory constraints. Traditionally there have been long lead times for reconfiguration of these facilities, and also for laboratories and other scientific environments. In recent times there has been a move towards adaptability from the outset, designing facilities so that they can be easily reconfigured as needed. This brings cost and efficiency benefits.

For many companies, defending and expanding their market reach will be critical to weathering these next few years. Real estate challenges include creating ‘centres of excellence’ in targeted therapeutic areas, locating research and manufacturing facilities in close proximity to the markets they serve, and accessing/collaborating with research and related talent.

Outsourcing of facilities management to a third-party provider brings further benefits, allowing pharma companies to concentrate on core business and reduce operating costs. Many major companies are opting for this approach, benefiting from cost savings of 10 to 20 per cent, improved consistency of service levels, improved service delivery and potential for better procurement opportunities on an asset refresh.

Recent years have seen a tighter regulatory landscape around approval of new drug lines, slowing new drugs coming to market. The US Food & Drug Administration (FDA) responded with an expedited approval process; 2011 saw New Drug Approvals increase to 35, compared with 21 in 2010. Against this background and with the changes initiated by the pharma companies themselves, there is room for optimism that challenges can be overcome and opportunities realised.

Faithful+Gould is responding to these challenges by providing an increased international capability and recruiting additional senior staff with specialist knowledge of the pharmaceutical sector.

Faithful+Gould is responding to these challenges by providing an increased international capability and recruiting additional senior staff with specialist knowledge of the pharmaceutical sector. We provide our proven Rightsizing project management and cost management services, including outsourcing, life cycle asset management, business driven maintenance, masterplanning, agile and flexible working, and the consolidation and sale of redundant assets. Our services address the whole asset lifecycle, encompassing operational as well as capital costs.

We have 25 years’ experience in this sector, offering a managed service resourced by our career professionals. We are based in every primary location in the global pharmaceuticals market, and we continue to work closely with the top 15 players. Our aim is to help clients identify optimal property portfolio strategies to support their changing business needs.

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