Pharmaceuticals companies have long relied on services and firms to support them with innovative products and offerings. In today’s market, the winners will be the providers which can help to optimise recruitment, streamline operations and overlay digital enhancements.

There are exciting opportunities for pharma services and technology companies today as their clients of all sizes try to navigate increasingly complex trials and technology change, on top of the perennial challenge of recruiting patients. Developing solutions which are flexible enough to cater to different niches and sizes by employing the right technology can help to differentiate in today’s market.

Change is the only constant in the field. For example, the pandemic catalysed tremendous change for clinical trials – particularly Phases I through III – as COVID-19 drove decentralised trials to hit a peak in 2021. Since then, however, non-COVID trial initiations have fallen back approximately 15% in 2022 and 2023, signalling a return to pre-pandemic levels.

Therapeutic areas are also shifting, with oncology now comprising around 40% of market volume driven by ongoing demand for new and innovative cancer treatments. Neurology follows at 11% – which has historically been an under-researched area despite the strong potential.

Healthcare tech and services companies have a real opportunity to develop specialised capabilities in both areas to optimise the design of trials to improve efficiency and patient outcomes.

“In recent years, the pharmaceutical outsourcing industry has seen significant shifts in both challenges and opportunities, influenced by changing study dynamics, evolving R&D investment, and adjustments post-pandemic,” says Matt McCarty of McCarty Consulting, a specialist in advising Life Science Technology businesses.

Despite the ebbing and flowing of study starts, large pharma companies have continued to increase R&D spending each year for over a decade, with double-digit growth seen between 2022 and 2023.  As impressive as this is, it’s the mid-market pharmas that account for around two-thirds of the R&D pipeline, with Emerging BioPharma (EBP) organisations (those generating less than $500 million in annual revenue or spending under $200 million in R&D) playing a crucial role in driving innovative treatments and therapies.

The trick for any life science technology / service provider is balancing support for large-scale pharma clients with the unique needs of these smaller, agile innovators, who may have limited budgets but represent a growing piece of the pie. To succeed, companies need to build service models and products which are adaptable, scalable, and capable of serving players large and small.

Complexity as an opportunity

Another pain point for pharma companies which services and technology can help address is the increasing complexity of trials. Trial protocols now feature more extensive eligibility criteria, which has knock-on effects for the administrative side of things and affects patient recruitment and retention. And while the duration of trials may have decreased marginally, particularly in oncology, the time required to move between subsequent trial phases has actually grown. There has been a 45% increase in the average time between protocol approval and the first patient visit from 2015 to 2021.

Time is money: these delays can hinder timely trial progress. “This creates real opportunity for pharma to use innovative digital solutions to help spend go farther,” Matt enthuses.

One way to increase efficiency is optimising recruitment, and the pandemic’s normalising of decentralised trials is a boon. Having spiked in 2021, the ‘remote’ trials today comprise around 30% of total trial volume and are a valuable strategy because they can help overcome the challenges of recruitment and patient accessibility, particularly when trying to access diverse or hard-to-reach groups. Pharma services providers can support by refining decentralised trial models and integrating robust digital tools to offer a flexible trial design that appeals to both EBPs and larger pharma companies looking to boost uptake by enhancing patient convenience.

Succeeding with private equity

“In a landscape where blockbuster drugs are rare, targeting the right niche treatments becomes essential, making it imperative for pharma services to focus on cost and time efficiencies. This offers significant opportunities for both service and technology providers to bring valuable solutions,” Matt explains.

This is easier said than done for many businesses, whether because they’re hamstrung by limited resource or because their scale comes at the cost of agility. Private equity can play a crucial role in this. For example, mid-sized companies aiming to scale a proof of concept into a reliable, global offering can use the capital and resources of a private equity firm to help build on their initial successes and create technology platforms and support infrastructure suitable for growing globally.

Sales and commercial growth are another area where private equity can help. Bringing experience in sales optimisation, effective go-to-market strategies, KPI setting and monitoring, private equity expertise can be valuable in accelerating commercial success.

For larger, more established companies, private equity can help address older infrastructure (‘technical debt”) which may hinder flexibility and cost efficiency. “Private equity’s strength lies in streamlining these systems, not by inventing new products but by refining existing processes for improved performance and reduced costs,” Matt says, speaking from first-hand experience.

Additionally, private equity firms can support ESG initiatives, an area many smaller companies may be unable to adequately address owing to insufficient internal resource. This is an area of increasing importance not just to keep up with regulation, but to gain a competitive advantage.

“Tomorrow’s pharma services and life science technology successes will help address trial complexity, improve patient access, and harness tech to support the needs of both large pharma and EBPs, and I’ve seen how private equity can help to drive efficiencies and scale in the space,” Matt advises.

It’s about much more than capital, what drives superior outcomes in pharma and pharma services is the pattern recognition that comes with having seen in many times before, and then having the resources to help execute.

Christian Fellowes, Investment Director, Inflexion 

Healthcare is one of Inflexion’s six core sector focuses, with over a dozen investments in the space to date. Current investments include Tierartz Plus Partner (“TPP”), Village Vets, Proteros Biostructures, Steripack Group, Upperton Pharma Solutions, CNX Therapeutics, Rosemont Pharmaceuticals and European LifeCare Group. All Inflexion portfolio companies, regardless of size or ownership stake, have full access to our dedicated value acceleration resources covering digital enhancement (including data, AI, technology, cybersecurity and digital marketing), international expansion, M&A, ESG, commercial strategy and talent management.