Biotech and life sciences firms experienced a banner year in 2020. The COVID-19 pandemic highlighted the value of innovative medical solutions, leading to new opportunities for research, product approval, and funding.
The FDA greenlit more medicines than it did in any year other than 1996. Biotech IPOs set records in both deals (74) and total value (over $14 billion). Firms received the highest total of venture capital funding in history, with 2020’s sum of $26 billion blowing away the previous high of $19 billion in 2018.
Following the record-setting year, biotech firms still face obstacles in 2021. Controlling costs and maximizing budget efficiency remains an ongoing challenge. As new competitors enter the field, the importance of hiring and retaining top talent increases, and firms must keep up with ever-changing drug compliance regulations.
Read on to learn more about how these challenges affect biotech companies in 2021—and one turnkey solution that firms utilize to overcome them.
Challenge 1: Maximizing Cost-Effectiveness
Funding research to fight health threats like COVID-19, cancer, and Alzheimer’s is expensive. Firms spend up to one billion dollars on research and development (R&D) for a drug. The process of developing a treatment, earning regulatory approval, and bringing a product to market averages 15 years, meaning firms often spend more than a decade on a product before seeing any return on their investment. As global supply chains continue to be slowed by the pandemic, procurement of essential drug components is delayed, adding length to the entire process.
In the face of steep internal costs and a lengthy process before generating revenue, it’s no surprise that the vast majority of biotech and life science companies see cost control as a major challenge. In a recent survey of 300 life sciences executives, an overwhelming 98% report that they experience revenue loss due to the long process of earning and maintaining approval for a product.
While experts are optimistic that biotech startups will continue to receive a wealth of funding in 2021, risks loom. Drug pricing is a hotbed issue, with increased calls for governments to limit what companies can charge consumers for their products. Government interference in pricing would cut into biotech firm profits. Additionally, some industry insiders wonder whether a correction is imminent. Following strong performance at the beginning of both 2015 and 2018, the life sciences sector saw revenue drops of 45% and 35%, respectively. A similar downturn in 2021 would heighten pressure on biotech companies already grappling with enormous expense sheets.
Challenge 2: Hiring Amidst the Biotech Talent Shortage
While the pandemic increased the demand for biotech’s cutting-edge medical solutions, it also exacerbated a long-existing challenge for firms: sourcing and holding onto top talent.
Simply put, more firms seek highly-skilled life sciences professionals than there are qualified candidates. The sector became increasingly sophisticated in recent years, and biotech firms now seek employees with harder-to-find skills. More companies than ever incorporate artificial intelligence (AI) and process analytical technology (PAT) into their practices. As a result, firms seek professionals with expertise in engineering, data analytics, process development, and related emerging fields. The biotech boom in 2020 only furthered the problem, increasing the need for—but not the supply of—top talent.
The skills shortage forces biotech HR teams to spend substantial time and resources recruiting talent. According to a recent survey of over 350 life sciences HR professionals and hiring managers, 58% of firms spend more than nine weeks recruiting candidates. An additional 22% report hiring times of more than four months.
Because of the long, resource-intensive recruitment process, HR teams face increased pressure to retain every member of their workforce. When employees leave, firms miss out on their productivity, and HR teams must repeat the entire recruitment and onboarding process. The costs of turnover are well-documented, with statistics ranging from 33% of an employee’s salary to a staggering 213% for highly educated executive positions. While the exact cost of losing and replacing key employees varies, one thing is clear: biotech companies already facing tight budgets cannot afford excess turnover.
Challenge 3: Keeping Up With Regulatory Standards
To aid biotech companies conducting COVID-19 vaccine research, regulatory agencies modified compliance standards in 2020. The new standards lessened the heavy burden of compliance facing biotech companies, but companies are not optimistic that the user-friendly changes will carry forward.
In fact, 87% of pharmaceutical companies believe they will have to comply with additional U.S. regulations in 2021 and beyond. At the same time:
- 60% are concerned about new healthcare policies
- 59% say that regulation limits their control over product pricing
- 56% say that keeping up with regulations delays revenue
Biotech and life sciences firms in Europe face their own set of compliance challenges. Louise Fullwood, Legal Director at global law firm Pinsent Masons, says her life sciences clients have their hands full simply trying to meet patient data privacy standards. “Clients from outside the EU, and even those within the trading bloc, are horrified by the regulatory landscape around use of patient data,” Fullwood says. While the European Union passed the General Data Protection Regulation (GDPR) to streamline compliance standards, companies must still juggle competing requirements from various agencies and governments.
In a recent Deloitte survey of senior regulatory leaders in the life sciences industry, respondents said meeting differing global standards was “a nightmare” and the cause of “significant headaches.” An anonymous Global Head of Compliance spoke to the depth of the complexities: “There are all kinds of authorities: FDA, my local regulators, China, and for the first time, Turkey, Brazil, South Korea. They follow different directions and it’s difficult to satisfy them all…It’s really, really complex.”
How International PEO Helps Biotech Rise Above Obstacles
Despite these challenges, industry experts are bullish on biotech growth in 2021. Brad Loncar, CEO of the biotech-focused firm Loncar Investments, believes that more countries will further investments in the sector. “Governments understand biotech has a national security element to it now,” says Loncar. “I think there’s going to be a biotech boom all around the world, especially in Europe and in Asia.”
To take advantage of rising global demand—and alleviate pain points from the challenges outlined above—firms utilize International PEO (Professional Employer Organization). An International PEO partner acts as a company’s international Employer of Record, enabling quick entry into new markets, full compliance with labor regulations, and ongoing support of global employees. International PEO helps biotech firms overcome three key challenges by providing:
- Cost-efficient market entry: For biotech firms already facing budget constraints, establishing an entity to operate in a new market is a significant expenditure. Setup can take months and require $20,000 of initial investment, with annual maintenance fees averaging $200,000. International PEO expedites market entry, enabling companies to legally begin operations in a matter of days. Working with an International PEO provider helps biotech firms avoid the costly and lengthy entity setup process so they can quickly generate revenue and hire employees in new markets.
- Expert global employee support: Considering the time and resources that go into biotech hiring, the scarcity of talent, and the high cost of turnover, firms must maximize employee retention. When HR teams cannot adequately assist global workers spread across markets, attrition rates rise. An International PEO partner helps by providing expert support to every member of a biotech company’s global workforce. By answering every question related to pay, benefits, and more, International PEO enables an optimal employee experience—no matter where teams are located.
- Full labor compliance in international markets: When biotech HR leaders have their hands full recruiting and retaining talent and legal teams are busy maintaining compliance with various regulatory authorities, keeping up with international labor laws is an unneeded headache. International PEO relieves the burden by staying ahead of changing employment regulations in every market. Through international PEO, biotech companies avoid the hefty fines and legal fees that come with non-compliance.
Streamline Overseas Operations With Velocity Global
Velocity Global enables biotech and life sciences companies to simplify hiring and find new clients in over 185 markets worldwide. Our experts assist with every step of the expansion process—from planning and employee onboarding to ensuring ongoing compliance—so companies can continue searching for innovative medical solutions and driving their businesses forward. Reach out today to find out how our expertise enables your firm to power past every global challenge.