Speciality Chemicals Magazine MAY / JUN 2022 | Page 20

PHARMACEUTICALS

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!" 0 ) - $ G &% ) G '% got online and researched their conditions . They also connected with other people with similar situations . That has led to increased patient self-advocacy .” That is likely to combine with the aforementioned challenges to healthcare budgets as payers shift their priority to efficiencies and delivery . “ Costs will be redirected to consumers ,” said Lewis . That will mean increased payer management , including increased selection and pricing pressure . In generics and biosimilars that could mean a race to the bottom .”

Lewis also noted a dichotomy in healthcare expenses in that “ about 85 % of healthcare spending is not for medicine , but payers ’ control over most of that is very limited ,” so they focus on the segment they can control . He identified five changes to be expected in the next few years . “ There will be a re-thinking of hospitals , and how healthcare is delivered . There will be even more focus on data-driven efficiency and on home and social care , as well as more use of tele-medicine . And , as noted , there will be more costs to consumers .” The near-term outlook is uncertain , Lewis admitted . “ It is still a very disruptive environment . Some countries are clearly emerging from pandemic . For example , the UK has decided to treat COVID as endemic , much like influenza .

“ At the other end of the spectrum , there have been major outbreaks in other countries , notably China . So you never know what is going to happen , but you still have to plan . Global pharma did remarkably well in the past two years .” To underscore that , he related that “ I worked on HIV treatments and at the time we thought it remarkable that we developed some effective treatments in just a few years . But that pales in comparison to what was accomplished to create COVID vaccines and treatments .”

Capital shift coming

An important shift from public to private capital is accelerating among CDMOs of all sizes , said Jim Miller , content advisor for DCAT , in his outlook for the contract segment . “ Cash-burning biopharma is out of favour , but corporate capital and private equity ( PE ) are becoming more available . That PE ownership is transformative to CDMOs .” Specifically , Miller noted that private capital shields CDMOs from the restrictions of quarterly reporting , while at the same time imposing financial discipline on them . There are often incentives to management . “ All that means that now CDMOs can be true partners to Big Pharma .” A driving factor in this trend , Miller said , is the need for CDMOs to “ mitigate the COVID drop-off and backfill to maintain their growth .” He also noted that there are some limiting factors to private capital , including market volatility , and stressed that the funding is mostly limited to capital . “ Debt is not generally available .” Even as private investment increases overall , Miller explained that private capital is , by its very nature , rarely a buy-and-hold investment long term ; there is always an exit strategy in place at the time of investment , and usually a time frame of five to seven years . “ Overall there is likely to be less M & A activity this year because of lower valuations , but there are several PE-backed CDMOs that are maturing ,” Miller noted . “ These include Curia , Cambrex , Alcami and Cordenpharma .” Those lower valuations are a result of the initial trend Miller identified , the reluctance of public markets to continue to invest in CDMOs . “ It has been a difficult year ,” Miller added , “ with tremendous inflation especially in energy and chemicals , geopolitical disruption . The strengths of 2021 will make 2022 even more difficult , even though the momentum of substances in the development pipeline will continue .” •

Lauryn Kuna

DIRECTOR , MEMBERSHIP SERVICES

DCAT k + 1 856 388 2968 J lkuna @ dcat . org j www . dcat . org

20 SPECIALITY CHEMICALS MAGAZINE ESTABLISHED 1981