Digital transformation – where does biopharma stand?


Financier Worldwide Magazine

July 2017 Issue

Digital transformation is a major driver for innovation across industries. Modern cars are equipped with a multitude of sensors and digital assistants, which make our travels easier and safer. The ultimate innovation – self-driving vehicles – are already touring on the streets of California and it will most likely be only a matter of years until they will be a familiar sight during early morning rush hour. Evidently, the transformation does not stop at the established industries, but also affects many adjacent businesses. Car-sharing services only became popular with the possibility of using a smartphone app to locate available cars whenever you need one. Google’s real-time traffic service, which is based on the data of millions of android users in their cars, has rendered the traditional traffic message channel obsolete.

In the light of these exciting technological advancements it would be reasonable to assume that the pharmaceutical industry is at the forefront of this digital revolution as an industry, which depends on acquisition and interpretation of thousands of data points from patients in clinical trials to approve a drug; an industry where biological research data from universities around the globe is integrated into a company’s own results and matched to patient data to discover innovative medicine. However, compared to other areas the pharmaceutical industry is embracing the digital transformation more reluctantly. One possible explanation could be that after the era of big M&As in this sector, many pharma firms have reached the size of a large tanker, which cannot change directions as quickly as smaller companies (a similar trend can be observed with e-mobility, where the big traditional players like Mercedes or BMW are only slowly catching up with fast moving newcomers like Tesla).

A more industry-specific reason is that biological systems are still too complex to be decoded in sufficient detail by computers. Reports on successful modelling of virtual cells or even organs are counterbalanced by as many failures (see, for example, the rocky development of the hyped €1bn Human Brain Project by the European Union). The burst of the genomics bubble in the 2000s, where millions of dollars spent on M&A deals failed to deliver on the promise of new drugs, is an example of overhyped technologies in the pharma sector.

This does not mean that the pharmaceutical industry has given up on digital transformation; it might just be a little more cautious than other industries.

How does biopharma tackle the digital transformation?

Two main approaches can be observed along the value chain: (i) optimisation of processes; and (ii) digital transformation that could create true innovation and enable new business models.

The first one is more evident and can be illustrated with a few examples. Pharma companies have to send clinical research associates for regular visits to hospitals and medical practices to check if patients’ results have been properly captured. These expensive and time consuming journeys are being partially replaced by electronic case report forms and remote monitoring. Digital and automated data capture is less error prone and the information can be transferred directly to the study sponsor.

Real-life evidence is another topic where optimisation through digital technology has a major impact: regulators put more and more pressure on pharma firms to provide evidence that a drug not only works for the thoroughly selected study group under predefined conditions, but also in the real world, with real patients. To provide this data, an increasing number of companies rely on digital devices and apps for patients. Instead of regular doctor’s visits to measure, for example, a patient’s blood pressure, a small device worn around the wrist could continuously monitor health parameters and transfer the data to a doctor. If data privacy can be guaranteed, this will have tremendous advantages for all parties involved, including patients, doctors, payers and the pharmaceutical industry.

Besides these examples that show how processes could be optimised to save costs, information technology is also being used for truly transformational processes. The extremely complex and challenging approach to identifying and verifying new biological targets for drugs is the seed for innovation in the pharmaceutical industry. Here lies the starting point for finding novel treatments that could eventually help patients and address unmet medical needs. A competitive advantage that can be realised at this early point in the value chain can potentially be maintained until – about a decade later – a new drug comes to market, finally generating revenue.

Intelligent machines like IBM Watson can already scan millions of research publications in a fraction of the time that would be needed by scientists. With their machine learning capabilities, these computers start to identify patterns and connections in biological pathways which might have been missed by humans, just because the amount of data is so overwhelming.

The old traditional drug discovery approach, in contrast, would start by forming a hypothesis about a target, then screen for compounds that can hit it and further optimise these molecules.

But not only in drug discovery, also at the other end of the pharma value chain, digital transformation puts the patient at the centre of attention. In marketing & sales, the aforementioned use of electronic devices and apps increases safety and adherence of patients and helps strengthen their loyalty toward pharma companies. Alzheimer patients are rewarded when they take a ‘selfie’ every morning when taking their medication; Novartis and Google’s life-science arm Verily are developing a contact lens that measures glucose levels in diabetes patients non-invasively.

How does biopharma get access to IT talents and capabilities?

The last example is a good case study on how biopharma is tackling the challenge of transforming their traditional business model to embrace new digital technologies. Companies still seem to be scared by the burst of the genomics hype bubble in the 2000s, where they bet mostly on mega deals to access technologies in a land-grab mode. Instead, many of the newly formed ‘digital partnerships’ are based on a risk/benefit-sharing agreement or even joint ventures. Earlier this year Germany-based Merck KGaA formed a strategic partnership with Silicon Valley hotshot Palantir along Merck’s entire value chain. Instead of charging a fee, Palantir will receive royalties on sales if the collaboration is successful. Also, Google is a strong believer in the digital transformation of biopharma, and Verily is a formidable centre of gravity when it comes to talent and capabilities. Together with GlaxoSmithKline they formed the joint venture Galvani, which develops miniature electronic implants. French pharma company Sanofi and Verily both invested $250m each into their joint venture Onduo. The goal is to develop devices, software, medicine and professional care to improve disease management for type 2 diabetes. Interestingly, Verily has also initiated its own efforts to compete with the established pharma companies. The ‘Baseline’ study collects, organises and analyses health data from approximately 10,000 participants over the course of four years to define ‘what is health?’. Time will tell where Google will take it from there.

This is not the only example of a business with an IT focus competing with traditional pharma companies in the area of digital transformation. Another example is BenevolentAI, Europe’s biggest private artificial intelligence (AI) firm, which analysed data from thousands of scientific publications to identify the most promising assets for hard-to-treat diseases. Last year it in-licensed several early-stage compounds from Johnson & Johnson and might soon have the first drug in clinic that was identified by AI.


So, does this mean that biopharma is finally embarking on a path toward digital transformation? In contrast to industries like the automobile sector, next generation IT has yet to deliver in the pharmaceutical industry. Due to long development timelines and extremely high attrition rates for medical treatments, there is yet no drug on the market that was found by an intelligent machine. So there is still no proof that AI can ‘beat’ the complexity of biology. The Silicon Valley way of thinking is to go for ‘moon shot’ projects. Marc Zuckerberg’s promise to “cure all diseases within the next 50 years” is the perfect example. It might just not be the most convincing pitch for an industry, where only 10 percent of drugs that start development make it to the market.

For now, most pharma companies are placing smaller bets, constantly scouting for novel technologies and deal opportunities. Digital optimisation will continue to improve patient experience as well as reduce costs in drug development. Time will tell whether this will also evolve into a true digital transformation with innovative novel treatments that make a big difference in addressing patient’s unmet medical needs.


Dr Johannes Zimmermann is an analyst and Dr Markus Thunecke is a senior partner at Catenion. Dr Zimmermann can be contacted on +49 163 850 9161 or by email: Dr Thunecke can be contacted on +49 163 850 9154 or by email:

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Dr Johannes Zimmermann and Dr Markus Thunecke


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