Biotech
Tuesday, September 5th, 2023 2:00 am EDT
Marketing and sales are beachhead commercial functions. An economic downturn puts pressure on these critical teams. Beating organic market growth and winning share in the period(s) post downturn are challenging if management cuts too deep, starves these functions, or lets muscles atrophy. Signals for a return to growth are emerging, albeit slower than expected. As revenue leaders gear up for planning season, now is the time to fight for resources and enable commercial functions for the upcoming share battle.
Recent quarters are highlighted by industry players slashing marketing budgets and reducing headcount. Sales investments have been put on hold with back-fills and expansion of teams delayed. The latest quarterly earnings reports suggest the industry remains in an environment of constrained investments:
- Economic activity in China has slowed with a pronounced impact on spending.
- Labs are working through inventory built during supply chain constrained times.
- Large Pharma and Biopharma companies are operating under strict budget policies.
- Small Pharma and Biopharma companies are conserving and stretching budgets.
- Some companies have folded because their cash reserves were constrained.
While players like Thermo Fisher, Danaher, and Revvity lowered second half of the year (2H) guidance, there are bright spots that signal a pending return to growth:
- Bruker raising 2H guidance on the back of strong new product introductions (NPI) performance.
- Industry leaders are signaling long-term commitment to core Academic, Pharma, and Biopharma end markets including Perkin Elmer’s spinoff and rebranding to Revvity and Danaher’s planned spinoff of Veralto.
- Thermo Fisher reported 10% organic growth in Q2 for their Analytical Instruments Group.
- Continued acquisition of pharma services (e.g., CRO, CDMO, Commercialization, etc.) by private equity (~80% of deals were pharma-related) and established industry players.
- New and novel therapy pipelines are at an all-time high, which will continue to attract funding.
- A recent Linus Group scientist sentiment study showed a decline in macroeconomic weakness (e.g., access to funding and willingness to spend) as a barrier to achieving life sciences objectives.
The signals of a return to growth are emerging. As commercial leaders gear up for 2024 planning, they must prepare to fight for resources in a budget constrained environment. This reality necessitates two 2024 commercial operating plans.
The first plan version should anticipate management’s ask for further efficiency gains and flat or incrementally down budgets. Demonstrate the marginal shifts you will make to align resources against the product, geographic, and customer segments with the greatest traction and tailwind. Show how you are rallying behind NPIs and other strategic initiatives. Pause or abandon areas where your right to win is questionable. Detail the risks associated with a flat or down budget including impact on core customers (awareness and experience) as well as employees (current sentiment and ability to hire and ramp in the event the business seeks to invest for growth). Outline plays you will implement to mitigate risk in this environment.
Create a second plan that you will enact when budgets are available. Be specific and discrete about the investments you would like to make. Prioritize and sequence each and detail the conditions and signals you will monitor to trigger each tranche of investment. Like the first, demonstrate alignment with strategic initiatives, but also detail the sources of growth (e.g., product, geographic, and customer markets) you will bet on and why. Detail the enablement investments (e.g., revenue operations, process improvements, technology, others) needed. Describe timing dynamics and impact of factors such as new hire ramp.
In both cases, spend time on the financial business case. Speak to leadership in terms that resonate. Sell management on how you will deliver return. Outline the long-term risk with removing defensive positions.
Sidebar: Where are companies focusing for 2024 commercial planning?
- New Product Introductions (NPIs): Keep in mind a long-held industry truth. Science sells. The company that helps deliver the better scientific outcome almost always wins. While it is critical to maintain brand presence among the scientific communities regardless of the economic condition, it’s even more important in the quarter preceding NPIs. Companies with late stage product pipeline are funneling budgets to launch activities.
- Sustaining Scientific Communities: Scientists are fickle when it comes to their vendors. They are committed to science and will give mindshare to those that promise better outcomes. As headcount and program budget was slashed in recent quarters, marketing and sales leaders relied on digital tactics and technology to sustain mindshare. Leaders are continuing to optimize their digital marketing mix and find new creative use cases for their marketing and sales tech stack.
- In-Market Presence: Post-pandemic, field marketing and sales capabilities atrophied. Leaders have pushed their teams to get back in market and reestablish face-time with customers. They have emphasized small scale regional events and in-person sales calls featuring technical discussions aimed at advancing customers’ scientific outcomes. Leaders are continuing this push in 2H 2023 and are building in-person (and the associated workload impact) into their 2024 headcount plans.
Summary
2023 has been an unforgiving market. Companies that degrade their defensive commercial positions going into 2024 will find themselves unable to launch strong offensive plays for share gain as the industry returns to growth. Thoughtful commercial leaders will develop two 2024 operating plans. They will be prepared to operate in a resource constrained environment and communicate to management the risks and plans to mitigate. They will maintain a second plan with a set of discrete and prioritized investments each tied to a quantified and well understood growth opportunity.
Don’t miss the return to growth. Visit www.alexandergroup.com to learn more about how Alexander Group can help with your 2024 commercial planning activities.
This post has been syndicated from a third-party source. View the original article here.
