Life Sciences Study Findings - Part 1
Sean Higgins and Raj Sharan of the Alexander Group share an overview of Alexander Group’s latest life sciences study. This episode includes overall industry trends, marketing and role specialization, or where organizations are placing bets within their commercial models.
Raj: Growth at 22% year over year. So that’s a dramatic change. Productivity has increased significantly as well. Revenue per seller is up 17%. One challenge that companies across the board are facing is in terms of efficiency, where the expense per revenue has declined 10%. So efficiency is declined, the expense has gone up. So what is driving this decrease in efficiency?
Announcer: It’s time for another episode of the Alexander Group Revenue Growth Model Podcast. Welcome and enjoy.
Sean: Hi, everyone. Sean Higgins here from Alexander Group, along with my colleague Raj Sharan. We’re both leaders in our life sciences and analytical instruments practice. Alexander Group is a revenue growth consulting firm who partners with companies to help solve go-to-market and commercial issues. And today, we’re here to share an overview of our latest life sciences study. This will be a series of podcasts that includes overall industry trends, marketing and role specialization, or where organizations are placing bets within their commercial models. For an overview of the study, Alexander Group conducts ongoing research on the latest contemporary go-to-market models, including investments in data points related to productivity, cost, span of controls and sales compensation. This year’s study includes over 50 companies across the space, including instrument and consumable-oriented organizations. And our primary focus areas include how do we modernize marketing upstream and downstream? What roles are companies deploying to gain market share while remaining customer-centric? What does the hybrid rep of the future look like? And lastly, recruiting and retaining top talent. And with that, I’ll pass it to Raj, who will go over some of the key findings from this year’s study.
Raj: Thank you, Sean. Let me dive into a couple of the external factors impacting the life sciences industry, before we go into some of the findings of the study itself. So a few things are impacting what’s happening in the environment right now. There’s a lot of influx of NIH funding, right. It’s a dramatic increase in funding driven by COVID, but that has continued to persist. Private equity activity continues to remain very high. We’ve seen that over the past couple of years. And even in this market, it has continued to remain very high, almost 40 buyouts, 12 billion of capital has been raised and invested. Despite the market softness, private equity activity continues. Another factor that’s really impacting the environment right now for life sciences companies, pharma R&D is very, very high. $200 billion globally invested in 2021. 15 largest pharma companies have invested $133 billion. And where is all of this investment going? It’s subsectors of the market. COVID definitely was something that was a big factor over the past couple of years, but that has given way to cell and gene therapy, biopharma. A lot of different subsectors in the market that are seeing a lot of investment that is driving the industry. Now, if you look at what some of the key metrics that we are seeing in the life sciences industry, growth of 22% year over year. So that’s a dramatic change compared to in the past where there was maybe single digit growth or low double digit growth, 22% is very high growth.
Raj: Productivity has increased significantly as well. Revenue per seller up 17%. One challenge that companies across the board are facing is in terms of efficiency, where the expense per revenue has declined 10%. So efficiency has declined, so the expense has gone up. So what is driving this decrease in efficiency? A big part of that is the investment in sales resources and specifically investment in the specialization resources. We’ll talk about that in the next episode. But some of the key reasons companies are making this investment is to gain market share. They want to make sure their organization is set up for success in this environment where it is no longer sufficient to grow organically with their market, but to make sure they’re able to capture market share. And they want to make sure that in this era where there may be some softness, that they come out of this being very strong and able to be nimble and able to drive a lot of growth. One thing that a lot of companies, a lot of the leaders expressed to us, is that if they’re complacent, they will lose share and they will have consequences to pay if they don’t make the right investments today. So with that, I’m going to ask Sean to share a couple of examples. Sean, what have you heard in terms of the feedback from some of the leaders you’ve talked to?
Sean: You know, I know in the next podcast we’ll talk about specialization, but through some of the research, we’ve certainly heard that lab buyers and influencers who want to be engaged differently. So we’re seeing information really around this hybrid rep of the future, or being customer centric based on when a lab director is in the lab. Maybe three days a week versus at home two days a week. So when they’re in the lab, they want to interact with vendors at the benchtop when introducing new products or receiving technical expertise. Certainly helping them solve or troubleshoot workflow or application needs. Otherwise, buyers want to be engaged with vendors virtually while at home to review quotes and check on orders and do the typical account management activities. So it’s being able to provide not only the technological capabilities when they’re out there in the field, but also while at home. So this is really requiring sales teams to take a hybrid approach. The second component here outside of really the sales team is over half of life sciences companies are are actually investing in revenue operations next year. One of the significant drivers of cost is increasing headcount, but the roles they’re looking specifically is not the typical classic functions around territory design, training enablement and sales comp, but more around strategy and execution of the model. Whether that’s really top line reviews and funnel management, but also even thinking of implementation roles, creating that conduit between strategy and field execution.
Raj: Thank you, Sean. Yeah, and as you said, we’ll talk in more detail in our future episodes about how companies are investing in modernizing the marketing function. We’ll also talk in terms of specialization layer, which has a big implication in terms of the cost and also in terms of driving growth. I think one of the biggest things we’ve heard from customers as well is they want to make sure they’re hearing from the right set of resources to help them make the decisions. Specialization plays a very key role as part of that, and we’ll cover that in the next topic. If you’d like to learn more, please visit alexandergroup.com.
Visit our Life Sciences and Analytical Instruments practice
Life Sciences Podcast Episode: Case Study – Redesigning a Marketing Organization
Life Sciences Podcast Episode: Marketing in Life Sciences Industry
Life Sciences Podcast Episode: Life Sciences Study Findings – Part 2
Life Sciences Podcast Episode: Talent
Life Sciences Podcast Episode: Customer Centricity
Life Sciences Podcast Episode: The Digital Journey
Life Sciences Podcast Episode: Industry Trends – 2022 Industry Trends
Life Sciences Podcast Episode: Industry Trends – Catalysts for Commercial Change
Life Sciences and Analytical Instruments: Top Priorities For Revenue Growth Success