KPMG Life Sciences CEO Outlook

As pricing pressures mount and the cost of delivering novel medicines increases, life sciences CEOs are dealing with a growing list of complex challenges. Yet there are also significant opportunities on the horizon – AI, precision medicine, digitalization and more. The big question is whether life sciences organizations are prepared to take advantage.

To find out, we surveyed 118 life sciences CEOs globally to ask them about the risks and challenges they face, their expectations for the next three years and the opportunities driving their businesses forward. Here are the key highlights that emerged:
 

• The majority of life sciences CEOs expect anemic growth over the next three years. Fifty-six percent say they expect to achieve growth of less than 2.5 percent per annum. Pricing pressures and patent expirations are likely influencing expectations, along with a recognition that the high cost of promising new gene therapies and other precision medicines may limit adoption in certain markets.

• CEOs are worried they might not outpace the market.  Eighty percent of life sciences CEOs are confident in the industry’s growth prospects. But just 69 percent say they are confident in their own company’s growth prospects.
  
  
• Growth will be anemic. Fifty six percent expect growth of 2.5 percent or less per annum. Our respondents say that pricing pressures, patent expirations and R&D costs and challenges are top reasons for lower growth expectations.
  
  
• CEOs are worried about a range of risks. But supply chain disruption was ranked as the top risk. With significant concerns about supply chain concentration risks, life sciences CEOs are concerned about any disruption to their operations.
  
  
• After regulatory demands, CEOs are most worried about the impact of trade regulation. Geopolitical conflicts, trade regulation and inflationary pressures ranked as three of the top five risks worrying life sciences CEOs. 
  

• Advanced digitalization and connectivity are top growth priorities for life sciences CEOs. More than half (53 percent) say they will be placing more capital investment into buying new technology in 2023.
  
  
• Generative AI emerged as a top investment priority for 62 percent of life sciences CEOs. But 46 percent say it will take between 3 to 5 years to see a return on the investment from generative AI. In particular, they are worried about new ethical challenges and heightened cyber concerns.
  
  
• While appetite for M&A remains high, CEOs would like to see market conditions stabilize. They are more concerned about macroeconomic conditions than they are about finding appropriate targets and integrating them. 
  

• Life sciences CEOs are keen to keep investing in public trust. Ninety-two percent say they plan to invest into social and community programs to fulfil their CSR goals, build their reputation and brand image, engage employees and mitigate risk.
  
  
• Reporting capabilities can improve. Just 70 percent of respondents said they have the capability and capacity to meet new reporting standards. As regulators and stakeholders seek greater transparency and disclosure from companies, this will become increasingly important.
  
  
• ESG must be linked to business value. Two-thirds said they have fully embedded ESG into their business as a means of value creation. Yet they also see big challenges dealing with the complexity of decarbonizing their supply chains.
  
  
• CEOs think ESG will give them an advantage. The top two benefits of meeting stakeholder ESG expectations were cited as improved cost of finance and competitive advantage. Less of a concern is customer and employee engagement.