Emerging risks in the life sciences industry and how to defend against them
Life sciences companies are confronting new challenges brought on by rapid economic and employment growth.
The life sciences industry is a significant contributor to U.S. and Canadian economic growth and job creation. Primarily comprised of pharmaceutical, medical device, biotech, and dietary supplements companies, the middle-market life sciences industry has a revenue growth rate and employment growth rate well above the national average.
According to a new report from Chubb, in the 12 months between February 2019 and February 2020, middle-market life sciences companies collectively posted a healthy revenue growth rate of 6.9% and created new jobs at a rate of 6.6%. The U.S. middle-market employment growth rate was 5%.
Before COVID-19, life science companies anticipated playing an even greater role in strengthening the middle market. Collectively, their projected revenue and employment growth rates for March 2020–April 2021 are far more aggressive than those of other middle-market segments.
With new growth comes new risks. To help life sciences companies better mitigate emerging threats, a new report from Chubb and the National Center for the Middle Market (NCMM) identifies the unique challenges in the middle-market life sciences industry. It also offers guidance for executives to find success.
Conducted in March 2020, the survey polled 400 life sciences companies to learn more about the industry’s economic impact, the challenges companies face, and what the fastest-growing middle-market life sciences organizations do differently to overcome hurdles and sustain growth.
The report entitled, “Life Sciences in the Middle Market — From management to mastery: balancing innovation with risk and regulation to drive sustained performance,” seeks to help companies better compete by providing life sciences executives with insights to help balance risk and navigate regulations.
Based on its research findings, the report highlights five key themes:
- Managing innovation and knowledge which is critical for success
- Protecting complex supply chains which are prone to disruption
- Creating and managing commercialization and distribution partnerships
- Identifying complicated risks and exposures, including cyber threats, and
- Navigating a rigorous and complex regulatory landscape.
Emerging risks began before COVID-19
Just prior to the pandemic, life sciences companies projected significantly higher rates of both revenue and employment growth for the year ahead than the broader middle-market. Even before the outbreak, companies anticipated confronting new challenges and risks that growth would create.
One of those risks is the adoption of advanced technologies, such as mobile applications and internet-connected sensors, and the need to transfer sensitive data securely.
In addition, the long product development cycle and the uncertainty of success for new products mean that life sciences companies ask a lot of their investors. As a result, life sciences executives are about four times more likely than other middle-market leaders to say that accessing and managing capital is a challenge for their businesses, according to the Chubb report.
Supply chain vulnerabilities were another issue that the COVID-19 pandemic only worsened for all industries, but for life sciences companies, in particular, researchers say.
“In many ways, COVID-19 has exacerbated every one of the critical challenges faced by middle-market life sciences companies,” Ben Rockwell, division president of Chubb’s Middle-Market division, said in a statement.
Rockwell explains the pandemic brought a new focus to weak links in supply chains, as well as a range of other potential risks and liabilities. One example Rockwell offered is that connecting companies, devices and end users into technology ecosystems multiplies the targets for cyber intrusions.
To help navigate the changing landscape, Rockwell said it is important that life sciences companies work with knowledgeable brokers and agents to help connect them with risk management solution providers. Notably, researchers advise that companies confer with insurance professionals who specialize in assessing these unique exposures and can provide advanced products and services to ensure companies’ risk management strategies align with their growth plans.
The full report can be found online.
Related: