Industry is less inclined to expand investment this year

Will to expand company investment falls from 53% to 25% in 1 year due to concerns about recession

[New Year's Feature] Pharmaceutical & Bio Industry CEO Survey ③2024 Management Strategy

Survey of 53 Pharma CEOs...53% of which responded that they will "expand investment” last year, as compared to the 25% this year

Management priorities the managers align in order of new product launch>R&D investment>Sales power reinforcement>Production capacity expansion

One in four CEOs of pharma and biotech companies announced that they will expand their investment in 2024.

 

This is down by half compared to the response received in the survey last year when one in two CEOs said they would expand investment.

 

This is likely a reflection of the growing economic uncertainty in Korea and abroad.

 

1 in 4 CEOs "will expand investment"...half of last year's level According to the 2024 Business Management Strategy Survey Dailpharm conducted for 2024 on 53 CEOs of pharma and biotech companies, 25% (13 respondents) responded that they plan to expand investments this year compared to the previous year.

 

68% (36 out of 53) said they plan to keep the scale of investment at a similar level to last year, while 8% (4) said they plan to reduce it.

 

Compared to the results of the 2023 survey, the number of respondents who responded that they will increase investment has decreased significantly.

 

Last year, when Dailypharm asked the same question to 61 pharma and bio industry CEOs, 53% (32) said they would increase, 33% (20) said they would maintain, and 15% (9) said they would decrease their investment this year.

 

So in just one year, CEOs who plan to increase investment have decreased from 53% to 25%.

 

The number of respondents who plan to reduce their investment is similar to last year, while the number of respondents who plan to maintain their investment at the same level more than doubled from 33% to 68%.

 

Overall, this suggests that companies are taking a conservative approach to new investments this year despite the strong performance that they had made last year.

 

In the pharmaceutical industry, it is believed that the increased uncertainty due to the prolonged economic downturn has led to a reduced capacity for new investments.

 

When asked about their business performance in 2023, 49% of respondents (26) chose ‘very good’ or ‘good.’ 40% of the respondents (21) said ‘moderate,’ and only 11% (6) said ‘poor’ or ’very poor.’

In particular, small and medium-sized pharmaceutical companies were more cautious about making new investments.

 

Of the 17 CEOs of small and medium-sized pharma companies with less than 300 employees, 18% (3) said they would increase investment.

 

In contrast, 28% (10 out of 36) of CEOs of pharma companies with 300+ employees said they have plans to increase investment.

 

7 in 10 CEOs "expects operating profit to improve this year" In contrast to the investment expansion plans, CEOs were optimistic about their performance results in 2024.

 

8 of 10 CEOs (81%) expected revenue to increase and 7 in 10 (68%) expect profitability to improve in 2024.

 

81% (43 of 53) responded that they expect revenue to increase.

 

Of these, 11% (6) expected an increase of 20% or more, 36% (19) expected an increase of 10-20%, and 34% (18) expected an increase of 0-10%.

 

Only 6% (3) expected sales to decrease this year compared to the previous year.

 

The remaining 13% (7) expected their revenue to remain similar to last year.

 

In terms of operating profit, 68% of respondents (36 out of 53) expected an increase over the previous year.

 

17% (9) expected an increase of 20% or more, 23% (12) expect an increase between 10-20%, and 28% (15) expected an increase between 0-10%.

 

Only 8% (4) expected a decrease in operating profit, while 25% (13) expected their operating profit to remain at the same level as last year.

 

Managerial priority focuses on 'Launching new products' the most...followed by R&D investment, then strengthening sales power ‘New product launches’ was selected as the most common managerial priority (26 responses) by the CEOs.

 

This was followed by ▲ R&D investment (25), ▲ strengthening sales power (22), ▲ improving manufacturing facilities and expanding production capacity (18), ▲ improving cost structure (17), ▲ securing excellent human resources (14), ▲ entering new businesses (9), and ▲ external investment such as mergers and acquisitions (M&A) (5).

 

3 other priorities - Expanding exports, expanding markets, and improving access to patients – were also selected once each.

 

There were some differences in management priorities by company size.

 

CEOs of large pharmaceutical companies (300+ employees) often chose "R&D investment" (18) as their top managerial priority for the year.

 

This was followed by improving manufacturing facilities, expanding production capacity, and launching new products (15 each).

 

Small and medium-sized pharmaceutical companies focused more on ’new product launches (11).’ This was followed by strengthening sales power (10) and then securing talent and R&D investments (7).

 

In general, large pharmaceutical companies are focusing on long-term investments such as investing in R&D improving manufacturing facilities, and expanding production capacity, while small and medium-sized pharmaceutical companies are focusing on short-term results such as launching new products and strengthening sales power.

 

There were also differences between domestic pharmaceutical companies and the Korean subsidiaries of multinational pharmaceutical companies.

 

CEOs of domestic pharmaceutical companies most often cited "strengthening R&D" as their management priority (22), followed by improving manufacturing facilities and expanding production capacity (17) and improving cost structure, and launching new products (16 each).

 

On the other hand, Korean subsidiaries of multinational pharmaceutical companies selected ‘new product launches’ as their top managerial priority (10).

 

All but one of the 11 CEOs of Korean subsidiaries of multinational pharmaceutical companies responded that they would focus on launching new products this year.

 

This was followed by strengthening sales power and talent acquisition (7 each).