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Digital Transformation in Biotech: The Competitive Advantage

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Article by 
Tefi Alonso
  —  Published 
October 24, 2022
June 7, 2023

The biotechnology industry has experienced incredible growth over the last few years. While other industries faltered during the COVID-19 pandemic, governments and markets across the globe turned to the biotech industry to help with the research and development of vital vaccines and innovative treatments.

Stock prices across US and European biotech firms surged at double the rate of the S&P 500 index. Chinese biotech companies saw growth that was six times better than their non-life science counterparts. This whitepaper explores the current application of digital technologies within the biotech space and recommends the implementation of specific digital transformation strategies. 

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Table of Contents

  • Transforming BioTech with Cutting-Edge Technology Solutions
  • What is Digital Transformation in Biotech?
  • Challenges Facing the BioTech Industry
  • Types of Technology Available to BioTech Companies
  • Key Strategies of a Successful Digital Transformation
  • Risks of Not Implementing Digital Transformation
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Transforming BioTech with Cutting-Edge Technology Solutions

Traditionally, biotech companies have been relatively slow at innovating with certain digital technologies such as AI, the Internet of Things (IoT), and quantum computing. However, the impacts of the COVID-19 pandemic have shifted the digital mindset of biotechnology companies.

Investment in digital transformation has accelerated rapidly to adapt to a remote working environment and faster demand for cutting-edge medicines and treatments. 

A vast majority (76 percent) of BioTech leaders view digital innovation as a competitive differentiator. Companies that want to remain competitive should move quickly to keep pace with other biotech companies. This is especially critical for small to mid-sized biotech firms that have fewer resources at their disposal. 

What is Digital Transformation in Biotech?

Digital transformation in Biotech is the integration of digital technology into all areas of a biotech company, optimizing operations and value delivery. A required component of a biotech digital transformation is also a cultural change, biotechs specifically need to challenge the current market and innovate in order to differentiate.

Challenges Facing the BioTech Industry

The biotech industry has a unique set of challenges that other industries don’t typically face. Fortunately, technology solutions if implemented properly can help mitigate or strengthen the response to these challenges. 

  • Strict and Complex Regulatory Requirements - Governments across the globe have established strict regulations that biotech companies must follow to ensure the health and safety of the general public. In addition, many governments have their own policies and regulatory bodies that must approve new products and treatments. Countries like the United States, China, Turkey, Brazil, and South Korea all have their own national and local regulatory groups. 

  • High Cost of R&D - Biotechnology companies spend a lot of money to develop, test, and get approval for their products and treatments. The R&D cost for a single drug can easily exceed $1 billion. In addition to the high cost, the R&D cycle (from conception to market release) takes about 15 years on average. This leaves biotech companies unable to generate any return on their investment for over a decade. 

  • Consumer Price Pressures - Drug pricing is a hot issue both economically and politically. This is especially true in places like the United States that lack national healthcare schemes. Many governments have proposed additional restrictions on pricing models for biotech firms. This of course would reduce profits. However, supply and demand could influence industry profits as the life sciences industry saw a 35% to 45% decrease in revenue following strong performance from 2015 to 2018.

  • Talent Shortages - The global pandemic increased the demand for the biotech industry’s medical solutions. Biotech firms across the globe struggled to source and keep top talent. According to a survey of 350 life science HR professionals and hiring managers, over half of all firms spent an average of more than 9 weeks recruiting candidates. In addition to technical staff such as researchers and scientists, more companies are embracing advanced technology such as artificial intelligence (AI) which has required companies to hire thousands of data analytics professionals, network specialists, and engineers. 

  • Negative Public Perceptions - While biotech companies quickly worked to provide the vaccines and medical treatments needed during the COVID-19 pandemic, the public has become increasingly apprehensive of new technologies from the industry. Much of this is a result of changing or misleading information that was released to the public during the pandemic. 

  • Increased Competition - Venture capitalists have identified the biotech industry as having huge potential. The general consensus is that the biotech industry has matured and is less risky than in the past. For this reason, VC activity has increased by 45 percent in 2021. In the same year, there were over 100 biotech IPOs in the US stock market alone. While the US continues to lead in biotech investment, Europe and China are quickly gaining ground. Recent funding for biotech companies in Europe and China has doubled and quadrupled, respectively. 

Types of Technology Available to BioTech Companies

Each biotech organization will have different needs when it comes to digital transformation. It’s important for leaders to identify what tools are available and understand their potential benefits and impacts. Deloitte conducted a survey with 150 biotech leaders to find out where they would focus their technology efforts. Half of the respondents indicated that cloud computing was a priority. Other key technologies included AI (38%), data lakes (33%), and wearable technology (33%). 

  • Cloud Computing - As workforces shifted to remote work, many biotech companies started to rapidly transition their networks and data storage technologies to the cloud. In addition to helping workers access important data and research from anywhere, cloud computing is allowing companies to scale effectively. 

  • Artificial Intelligence - More biotech companies are starting to look to AI to help analyze massive amounts of data, run simulations, and predict outcomes in drug trials, research data, and operational efficiency. Companies like Novartis have even created guidelines for how they intend to use AI ethically. 

  • Wearables - Wearable technology such as body-worn sensors and monitors are helping researchers observe patients during clinical trials remotely. This can help streamline the process but also expand clinical trials beyond a geographic region where researchers are physically located. 

  • Virtual or Augmented Reality - AR and VR technologies can help biotech companies remotely view and configure equipment or tour manufacturing facilities. 

  • Internet of Things (IoT) - IoT solutions can help improve supply chain tracking and can automatically communicate potential issues such as temperature control malfunctions that could affect products and sensitive materials in transit. 

  • Blockchain Technology - Some pharmaceutical companies are looking to leverage blockchain to improve the speed at which vials of medication can be traced back to the source in the event of contamination or recall. About 70% of life science leaders indicated they would add blockchain technology to their toolkits over the next decade. Some experts believe that this technology could add up to $3 billion in value to the industry. 

Case Study - Digital Twin Technologies

Until recently, clinical trials relied solely on humans (or other living participants) to see how various medications and treatments influence biological elements). There is a high level of risk with this approach as miscalculations can have serious side effects. It’s necessary for biotech companies to proceed slowly to ensure everything is planned carefully. This can add significant time to the R&D process. 

New technology is emerging that will help accelerate this process by introducing digital twin technologies into the process. A digital twin is a virtual model that is designed to accurately mimic a real-life physical object. This technology has already been in use in engineering design and manufacturing fields where engineers can conduct tests on designs (windmills, automobiles, etc.) without the cost and time required to build a physical prototype. 

Biotech companies are finding this application can be used in the biological realm. In 2020, pharmaceutical giant GlaxoSmithKline began a pilot program to test the use of digital twin technology in the vaccine development process. So far the pilot has been successful and GSK has indicated they will plan to roll this approach out as a standard practice across their organization. 

Key Strategies of a Successful Digital Transformation

1. Consolidate Data Storage and Access

Successful implementation of a digital transformation strategy relies heavily on how well data is stored, organized, and accessed within organizations. Surveys have shown that this continues to be a challenge for many biotech companies. While the use of data is central to all biotech research and operation, some companies still have fragmented data storage systems.

Some scientists reported spending 8 to 10 hours each week on low-value data management tasks because data resided in multiple places. These time savings can be applied to more valuable tasks such as drug development. One study found that improving data workflow improved antibody discovery by 9 business days. 

Key Takeaway

To effectively execute a digital strategy, biotechnology companies need to first work toward streamlining their data collection and analytic output. This can help provide additional insights that can improve R&D effectiveness and reduce costs by making their research teams more efficient. 

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2. Streamline R&D Processes

Biotech companies spend a lot of money each year researching and developing the latest medical treatments. Globally, biotech firms spend over $55 billion on R&D efforts. Controlling these costs is vital to ensure that the company can remain competitive, especially in an environment where startup biotech firms are emerging with low overhead. 

According to one study of pharmaceutical executives, 72 percent believe that digital transformation was critical for improving and streamlining their R&D process. Even simple improvements can have major impacts on the efficiency of development and reduction of overall costs. 

Key Takeaway

Streamlining R&D with technology can significantly improve the speed at which biotech companies can develop new treatments and drugs and reduce trial costs. Biotech firms should focus on technologies that make them more effective such as leveraging AI and conducting clinical trials remotely. 

Case Study: Predicting Drug Side Effects 

Adverse reactions to drugs and other medical treatments are a major concern with regulatory agencies around the world. In the United States alone, there are over 2 million hospitalizations each year as a result of adverse drug reactions. For this reason, the R&D process can be slow to ensure that all major side effects have been identified or mitigated. Accelerating the ability for biotech companies to identify what side effects to expect can reduce R&D times and cut costs. 

In 2018, researchers from Harvard Medical School and Novartis Institute for BioMedical Research came up with a solution. Using a massive dataset containing 600,000 physician reports, they were able to use an open-source machine learning program to identify and predict which patients were most likely to have a negative reaction to their treatments and what type of side effects could be expected. 

The algorithm found that over 220 individual proteins could be associated with specific drug reactions. While this is a great breakthrough, there is still much work that needs to be done to further develop this technology. The current model still only assesses less than 1 percent of the genes in the human genome. However, improvements to this technology could create significant improvements in medical treatment R&D time. 

3. Supply Chain Transparency

The supply chain is a critical component of the biotech industry. Researchers and scientists depend on being able to process, send, and receive sensitive compounds and materials around the world. Having a technology-backed supply chain is especially important for drugs and treatments that must be handled a certain way (for example, temperature-controlled shipments). Mistakes can weaken the effectiveness of these treatments or render them harmful to patients. 

Key Takeaway

The biotechnology supply chain can benefit greatly from technology used to improve efficiency, transparency, and reliability. Through digital transformation, biotech firms can implement cutting-edge tools like computer vision and IoT devices that can provide feedback and make real-time decisions or recommendations. 

4. Improve Patient Interaction and Care

The COVID-19 pandemic has drastically changed the way biotech companies and medical providers interact with their patients. One study found that 85 percent of people feel confident with managing their health through online tools and resources. This can bring huge opportunities for biotech companies looking to expand their research and trials beyond their geographic area and improve end-user satisfaction.

A huge risk to biotech companies is their increasingly direct competition with non-life science companies. Huge tech giants like Apple and IBM are offering technology platforms that collect, analyze, and provide health-related data directly to consumers. This could create opportunities for biotech firms to create partnerships with these tech companies to leverage access to their devices and data. This would also help reduce the challenges of trying to beat technology firms at their own game. 

Key Takeaway

Technology will transform the way that biotech companies engage their customers and patients. Biotech firms can work with existing technology platforms or develop their own to give patients more control over the monitoring and access to health data through wearable technology, ledger-based patient records, and virtual reality. 

5. Address Staffing Challenges

The biotechnology industry has struggled in recent years to keep key technical and research positions filled. These vacant positions come at a high cost including slowing down the execution of critical work and overloading existing employees. With increasing costs of living, wage inflation, and employee burnout, companies also need to focus on retaining their existing workforce. The cost of turnover is well documented with costs ranging from 33% to over 200% of the annual salary depending on the role. 

As companies develop and implement their digital transformation strategies, they will need more professionals who have a technology background including data engineers, network architects, and software developers. SHRM (Society for Human Resource Management) asked IT leaders in the United States, China, Brazil, and India about the global state of IT staffing.

Of the 1,000 leaders surveyed, 73 percent expressed concerns with being able to recruit and fill technology positions. The 2021-2023 Emerging Technology Roadmap for Enterprises report mirrored this sentiment with 64 percent of IT executives believing talent shortages will hinder companies from adopting new emerging technologies. 

  • Focus on Retooling Existing Resources - Companies could offer development programs to existing employees to help them keep up with the new technologies that are coming available. Development options include in-house workshops, education reimbursement, or altering career development plans. 

  • Look Outside of the Biotech Industry - Much of the talent needed to help support biotech companies in their digital strategies will come from outside of the biotech industry. Since many companies are embracing technology and digital transformation, companies can benefit from professionals from other industries that already have experience with these types of initiatives. 
  • Leverage Remote Work - Some companies are looking globally for new talent. The COVID-19 pandemic has shown that many employees are capable of working from anywhere in the world. Biotech companies that operate regionally may have better success filling technology roles by offering remote working arrangements to a wider global talent pool. 

Key Takeaway

Talent, especially those in the technology fields, will be critical for the growth and development of biotech companies in the future. Biotech companies will need to focus on a combination of approaches including retraining new employees, providing workplace flexibility, and attracting non-life science workers. 

Risks of Not Implementing Digital Transformation

The global biotech industry is expected to continue growing exponentially over the next decade. Some projections anticipate growth that exceeds 15 percent (CAGR) through 2028. Biotech firms that want to maintain their competitive edge will need to also embrace the rapid development of technology in the industry.

This is especially true since governments around the world now realize that biotechnology is a potential national security element. Failure to execute a successful digital transformation can have a significant impact on a company’s ability to retain its market share. 

  • Loss of Compliance - Biotech firms that are unable to effectively address changes in regulation can find themselves at risk of facing fines or being shut down. 

  • New Market Entrants - There are over a hundred new biotech companies going public each year with tens of billions in investments from venture capitalists. These new companies have the advantage of not starting with outdated legacy technology. 

  • Rising Costs - The cost to develop new biotechnologies is expected to increase. Companies that don’t leverage technology to reduce these costs could be priced out of the market. 

While there are many benefits that come to technology solutions, industry leaders need to focus their efforts on the technologies that are the right fit for their strategic vision. The cost of implementing new technology can come at a steep cost, so it’s critical that your digital transformation be carefully planned and executed. 

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