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MAPS2018 Keynote address on EY report: Life Sciences 4.0 – Securing value through data-driven platforms

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Summary: This keynote address presented by Pamela Spence, EY Global Life Sciences Leader (pspence2@uk.ey.com) at MAPS 2018 – the annual meeting for Medical Affairs Professional Society – discusses our latest life sciences report and the industry demands for a customer-focused, data driven approach to health care. We describe the accelerating pace of change as technological advances and the escalating expectations of payers, physicians and patient consumers are combining to disrupt the life sciences business model. Data and algorithms that maximize health outcomes based on individual needs and preferences are becoming the ultimate health care consumable. To create value now and in a future that we call Life Sciences 4.0, life sciences companies must build – or participate in – interoperable information systems that collect, combine and share data. For more on our report, Progressions 2018 – Life Sciences 4.0, please go to www.ey.com/progressions

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MAPS2018 Keynote address on EY report: Life Sciences 4.0 – Securing value through data-driven platforms

  1. 1. When the human body is the biggest data platform, who will capture the value? Medical Affairs Professional Society 26 February 2018
  2. 2. Page 2 As a patient/consumer As a policymaker As a physician/care provider As a biopharma or medtech As a payer How can I get the right, affordable treatment and support to be healthy? How can I have a transparent market with a balance of health improvement versus cost? How can I deliver the most cost-effective treatment to achieve health improvement? How can I get appropriately paid for providing the right treatment solution? How can I provide the most cost-effective health solutions to get impact, and transition to them? What do industry stakeholders really want? Progressions 2018: Life Sciences 4.0
  3. 3. Page 3 We are entering a fourth industrial revolution … a fusion across the physical, digital and biological worlds Source: EY, World Economic Forum. Artificial intelligence • Drug discovery • Diagnosis • Patient monitoring Device miniaturization • Smart tattoos and bandages • Digital pills • Medical-grade wearables Health care technology Internet of everything • Smart appliances • At-home diagnostics • Connected clothing Robotics and automation • Robotic surgery • Robotic caretakers/caregivers • Exoskeletons Blockchain • Patient medical records • Drug supply chain integrity • Clinical trials 3-D printing • Bioprinting — organs, bones, teeth • Surgical instruments • Devices, e.g., pacemakers Cheaper computing power and storage • Private data cloud • Big data analytics Automated delivery • Drones • Self-driving cars Genetic technologies • Low-cost genetic sequencing • Gene editing Augmented reality • Connected eyewear • Operating room of the future Progressions 2018: Life Sciences 4.0
  4. 4. Page 4 Uninformed patients, payers and providers Disconnected health care Blockbuster drugs Sick care Enhanced stakeholder demands and super consumers are redefining health Connected health care Integrating health care data; “man and machine” delivering better interventions Super consumers Patients, payers and providers empowered by data Health care Focusing on prevention and addressing affordability Precision medicine Mining data to deliver tailored medicine Progressions 2018: Life Sciences 4.0
  5. 5. Page 5 Technology advancement and disruption are creating opportunities for power to shift among stakeholder groups * “Other sectors” includes retail, technology, manufacturing and industrial products, and consumer products. Biopharma and medtech Patients/consumers Physician/care provider Payers Policymakers Other sectors* Traditional power Future power Power shift Progressions 2018: Life Sciences 4.0
  6. 6. Page 6 Customers Payer Physician/care provider Policymaker Patient/consumer Payer Physician/care provider Policymaker Patient/consumer Payer Physician/care provider Policymaker Patient/consumer Payer Physician/care provider Policymaker Patient/consumer Forces • R&D productivity • Patent cliff • Regulatory hurdles 4.0 Life Sciences 3.0Health outcomes Life Sciences 2.0Diversified portfolios Life Sciences 1.0Blockbuster products Life Sciences Data-driven platforms • Provider/payer consolidation • Empowered patients • Reimbursement pressures • Speed of technology advancement • Super consumers • Aging populations and chronic disease Personalized experiences, products or services will be increasingly demanded – Life Sciences 4.0 Progressions 2018: Life Sciences 4.0
  7. 7. Page 7 Future value will be captured by those who can fuel innovation by unlocking the power of data through platforms Future value Innovation Outcomes x Personalization For people For physicians For payers For policymakers Participatory Precise Predictive Proactive Data streams Traditional and nontraditional partners Platforms of care (Connect + Combine + Share) = FV=ID Data Building Life Sciences 4.0 Progressions 2018: Life Sciences 4.0
  8. 8. Page 8 Technology giants are already significantly investing in health, blurring the lines between health and technology Source: EY, United States Patent and Trademark Office. Analysis as of 31 January 2018. Analysis is based on year of patent filing filtered by company for select search terms in the patent abstract or claim: health, medical, patient, disease, wellness and physical activity. 9 14 19 128 21 28 7 9 48 23 42 40 33 0 20 40 60 80 100 2013 2014 2015 2016 2017 Alphabet Microsoft Apple Progressions 2018: Life Sciences 4.0
  9. 9. Page 9 The challenge: health data is siloed across stakeholder groups and within organizations Biopharma and medtech companies Physicians and hospitals PayersPharmacies Laboratories Consumers and caregivers Governments and NGOs • Preclinical research • Clinical trial data • Biomarker analyses • Post-market analyses • Health record data • Hospital admissions • Longitudinal patient outcomes • Product sales • Script volumes • Medication adherence • Diagnostic results • Biomarker and genetic assessment • Claims data • Actuarial analyses • Cost data • Cost data • Demographic data • Biomedical data • Environmental data • Social media commentary • Sensor data • Quantified self/fitness tracking Progressions 2018: Life Sciences 4.0
  10. 10. Page 10 As health data is aggregated, more advanced platform opportunities will emerge, placing the consumer at the center Therapeutic-specific platforms of care E M E R G I N G Supra-platform aggregation F U T U R E S T A T E . Point solutions E V O L V I N G R A P I D L Y Company 1 Genetic testing Multiple sclerosis Healthy aging Depression Diabetes Asthma D A T A Asthma Heart disease Company 2 Rheumatoid arthritis Oncology Kidney disease Diabetes DepressionHealthy aging Diabetes Health and fitness AsthmaHeart disease Company 3 P A T H 1 Companies contribute solutions to create a platform in a specific therapy area Diabetes Company 2 Company 1 Company 5 Company 4 Company 6 Company 3 P A T H 2 The individual is surrounded by multiple platform solutions in the same therapy area Asthma 5 P A T H 3 The individual is surrounded by multiple platform solutions in different therapy areas DepressionHealthy aging Diabetes Health and fitness Asthma Heart disease Asthma 6 Asthma 1 Asthma 2 Asthma 3 Asthma 4 Rare disease Heart disease Genetic testing Depression Rheumatoid arthritis Multiple sclerosis Oncology Kidney disease Hospital of future Healthy aging Health and fitness Progressions 2018: Life Sciences 4.0 D A T A
  11. 11. Page 11 The health care business of today has arranged itself in a combination of four basic business models Breakthrough innovator Developer of best-in-class products that command high prices and are primarily paid for by health insurance Disease manager Developer of products and solutions to manage chronic conditions end-to-end Efficient producer Developer of “good enough” products that are cheaper than the competition Lifestyle manager Developer of products aimed at prevention and overall health maintenance sold directly to the consumer Progressions 2018: Life Sciences 4.0
  12. 12. Page 12 How is value created? High dollar value capture Low dollar value capture Who demands value? Wealthy individuals Highly innovative products and services Institutional health care systems Efficient operations and supply chain Mass market consumers Customer understanding and relationships Breakthrough innovator Efficient producer Disease manager Lifestyle manager Optimal value will come when companies create products and services to match demands from different customer segments ... Source: EY. Concept developed from an initial idea first profiled by Prof. Brian D. Smith in his book, The Future of Pharma, published by Gower Publishing in 2011. Progressions 2018: Life Sciences 4.0
  13. 13. Page 13 … creating opportunities for platform technologies Breakthrough innovator ► Scale in digital capabilities ► External collaborations to access emerging science ► Services to provide customer engagement and/or integrated data capture across the value chain Disease manager ► Consumer-facing solutions based on individual preferences ► Behavioral science skills to influence adherence ► Understanding of disease risk to optimize care for those at greatest risk Efficient producer ► Predictive analytics capabilities to improve inventory management, distribution and forecasting Lifestyle manager ► Systems that promote frictionless customer engagement ► Algorithms to anticipate consumer needs Progressions 2018: Life Sciences 4.0
  14. 14. Page 14 Agile networks, often short term, will deliver complementary skills to core offerings Source: Specific extract from EY research. Based on sample data; non-exhaustive. Digital or new entrant Life sciences company Technology incumbent Other Progressions 2018: Life Sciences 4.0
  15. 15. Page 15 0 50 100 150 200 250 300 350 400 450 1 2 3 4 5 Source: EY; Fortune 500. The Fortune 500 is an annual list published by Fortune that ranks companies by total revenues for their respective fiscal years. Companies included in the directory are incorporated in the US, operate in the US, and file financial statements with a government agency. The 2018–2023 estimate is determined by extrapolating linear or exponential trend lines in Microsoft Excel. AveragenumberofnewcompaniesaddedtotheFortune500 If there is any doubt … without intervention, companies in the Fortune 500 will be displaced Linear forecast Exponential forecast Progressions 2018: Life Sciences 4.0
  16. 16. Page 16 Progressions 2018 – Life Sciences 4.0 Securing value through platform based businesses Future value Innovation Outcomes x Personalization For people For physicians For payers For policymakers Participatory Precise Predictive Proactive Data streams Traditional and nontraditional partners Platforms of care (Connect + Combine + Share) = FV=ID Data Building Life Sciences 4.0 Progressions 2018: Life Sciences 4.0
  17. 17. Conclusions ► To create future value, life sciences companies must determine how they can seize the upside of disruption in today’s transformative age. ► The ubiquity of data and analytics creates new opportunities for life sciences companies to rethink innovation and create personalized health outcomes that the wider ecosystem of health stakeholders are now demanding. ► Platforms that connect, combine and share data will be a central enabler of this future value creation. ► These platforms create a mechanism for companies to quickly and safely tap into diverse data streams and link them to scientific and clinical data. ► Companies will also need to consider developing new capabilities linked to customer engagement, personalization and data literacy that are central to emerging platforms of care. ► Life sciences companies can access these capabilities by building them organically or through flexible partnerships or acquisitions. Progressions 2018: Life Sciences 4.0Page 17
  18. 18. EY | Assurance | Tax | Transactions | Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. How EY’s Global Life Sciences Sector can help your business As populations age and chronic diseases become commonplace, health care will take an ever larger share of GDP. Scientific progress, augmented intelligence and a more empowered patient are driving changes in the delivery of health care to a personalized experience that demands health outcomes as the core metric. This is causing a power shift among traditional stakeholder groups, with new entrants (often not driven by profit) disrupting incumbents. Innovation, productivity and access to patients remain the industry’s biggest challenges. These trends challenge the capital strategy of every link in the life sciences value chain, from R&D and product supply to product launch and patient-centric operating models. Our Global Life Sciences Sector brings together a worldwide network of 15,000 sector-focused professionals to anticipate trends, identify their implications and help our clients create competitive advantage. We can help you navigate your way forward and achieve sustainable success in the new health-outcomes-driven ecosystem. © 2018 EYGM Limited. All Rights Reserved. EYG No. 01382-184GBL 1711-2486204 ED None ey.com/lifesciences This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice. The views of third parties set out in this publication are not necessarily the views of the global EY organization or its member firms. Moreover, they should be seen in the context of the time they were made.

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