As we kick off the new year, we asked our practice group leaders to reflect on the trends they have seen in their industry in 2023 and what may lie ahead in 2024. John Baker, Managing Partner, Global Life Science,discusses the different life sciences sectors, diagnostics, medical devices, biopharmaceuticals, and healthcare IT and AI, and what business leaders should be thinking about to stay ahead in 2024.
Trends in 2023
Diagnostic Companies Slowed Hiring: Diagnostic companies played a significant role during the pandemic, including creating COVID testing and products supporting testing. The multinationals invested heavily in people and hired at a significant pace to keep up with demand. Many mid-cap diagnostic companies shifted their focus to COVID products and testing. PE-backed firms did the same. All was great until it wasn’t. The rate of layoffs rose 57% in 2023, compared to 2022, with 187 workforce reductions in 2023. All that hiring after the pandemic required normalization in the market; hence, layoffs and slow hiring occurred in 2023.
Medical Device Companies Struggling to Regulate: During the pandemic, medical device companies struggled. Those providing technology for elective surgeries slowed dramatically. Those involved in respiratory products and services flourished and shifted their focus to developing ventilator products and services.
Again, there was a heavy dose of hiring in the growth areas and less in the other areas. Coming out of the pandemic, elective surgery companies needed to rebound, but costs and growth were limited, so layoffs occurred. Those in the respiratory markets who over-hired needed to normalize their workforces.
Biopharmaceuticals: During the pandemic, biopharmaceutical companies shifted their focus to vaccines and technologies that supported research and development in a big way, and many did very well. CDMOs grew and became a go-to business to support manufacturing vaccines and other products. Many firms have shifted investments to immune-oncology, oncology, gene therapy, companion diagnostics, precision medicine, and more. As the population ages, more focus is on diabetes and neurodegenerative diseases.
Healthcare IT and AI: Like all markets, including life sciences, Healthcare IT and AI has grown dramatically. In life sciences, utilizing AI to accelerate drug discovery, wearable technology to track and monitor vitals, development of new technologies in device and diagnostics and drug design, supply chain, personalized medicine, precision medicine, clinical trials to identify best populations for effective trials and much more. Wearable tech gained traction in 2023, with 52% of healthcare leaders becoming more involved in the development of these devices, and the future of these products will be critical in the future of care for patients and caregivers. Utilizing new AI methods in healthcare will evolve and continue to help reduce costs and improve outcomes.
Predictions for 2024
- Increase in Hiring: In 2024, we see a need to increase hiring after a slightly down year. We expect the first quarter to show growth in multinationals in all sectors. The PE markets have been affected by the cost of money and the slowing of exits. We are uncertain as to how that market will evolve. Venture capital will grow within all sectors, especially telemedicine, home healthcare, and technologies that support those markets. Some companies will utilize AI to help determine their go-forward strategies. How to best use the information will require leadership that embraces AI.
- Huge Growth Potential: In short, life science companies in all sectors have huge opportunities for growth. For example, the medical technology/medical device sector, adversely affected by COVID-19, is now a catalyst for growth. Post-pandemic, new technologies have brought solutions for supply chain disruptions, staffing shortages, and the quality of patient care.
- Demand for Consumer-Focused Healthcare: Consumers are demanding more focus on their health; hence the need for at-home, wearable, and other technologies that improve outcomes and reduce costs. Med tech companies are expanding beyond their core business and trimming down lower-margin businesses. For example, you will find that partnering with CMO/CDMOs in all Life Science sectors has increased. These companies are outsourcing components manufacturing, including design and engineering. The climate for M&A activity globally has diminished a bit due to market conditions unable to sustain a healthy dealmaking environment, thus causing health systems to seek non-traditional partnerships with retailers, telecom companies and technology giants.
- Growth of GenAI & Telemedicine: One common denominator for all Life Science Sectors is Generative artificial intelligence (GenAI). Given the outsourcing mentioned above, AI can aid with automated development tools that can support the design and accelerate time to market for devices, from therapeutics to diagnostics. All of this will have a positive impact on outcomes and reduced costs.
Another outcome of the pandemic was growth in telemedicine and digital therapeutics, or software-based medical devices, which help the consumer manage their care more effectively. With the healthcare labor shortage, the use of telemedicine has increased significantly and is projected to increase from $94 billion to $286 billion by 2023. This is an area of significant growth in 2024 and beyond.
- Continuing Global Innovation: Innovation will be the key to success globally. Large and small companies must focus on research in these areas and develop new technologies that disrupt and support lower costs and better outcomes. Research shows that a majority of MedTech and BioPharma executives are making R&D a top priority for innovative products in 2024, due in part to a slow in innovation resulting from the pandemic.
The life science industry is ever-evolving and challenging, and these factors will affect how life sciences organizations build their workforces and leadership teams. By staying current on the latest trends and developments, health system leaders will be prepared to address these challenges and opportunities for continued success in 2024 and beyond.