Investing in pharmaceuticals for the long term

Pharma companies face growing debt costs, expiring patents, protracted development cycles and industry disruption. Fresh investment could reignite growth.

November 6, 2024

3 mins

Corporate, commercial & institutional bankingHealthcare

As 2025 approaches, pharmaceutical giants have some tough challenges. The first is their capacity to invest: high interest rates have made debt expensive. In addition, commercialising new medicines is an ever lengthier process. “It can now take up to 15 years to bring a new medicine to market,” says Alix Mackay, Director of Pharma Business Development at the innovation consultancy CPI.

At the same time, regulations are expected to become more complex, while both large and small competitors are investing heavily in research. Against this backdrop, decision-makers at established pharmaceutical firms must ready their strategic investment capacities so that they can capture the best opportunities ahead.

This begins with improving balance sheets – often through securing access to debt from non-traditional sources and using different types of debt. “While big pharma are well accustomed to the deep US finance markets and, to some extent, Europe, it can be beneficial to explore other willing investors in Asia and the Middle East, too,” says Shoaib Yaqub, Head of Capital Structure & Rating Advisory at Standard Chartered Bank.

Other companies will seek to improve their own cash holdings. Approaches may include selling non-core operations, or development or production facilities, to inject additional funds and reduce running costs. And, as these companies evolve, many will seek to free daily working capital, including through supply-chain financing, which can increase shorter-term efficiencies.

Identifying new opportunities

Armed with a more flexible investment capacity, decision-makers need to spot and capture high growth potential. New opportunities may include biologic drugs that originate from cell cultures and may treat some illnesses more effectively, with a market of more than USD400 billion; AI is also critical, speeding much of the complex research, development and production that are needed.

Across all medicinal areas, commercialisation relies on production efficiencies. And industry collaboration is growing: CPI’s Medicines Manufacturing Innovation Centre, founded by AstraZeneca and GSK, brings together 29 companies of all sizes, helping to develop a range of ideas from biologics to improved manufacturing.

Reliable investments for the long term

For pharmaceutical firms looking to drive sustained growth, success depends on the identification and harnessing of long-term opportunities. This must be backed with skills in smart capital structuring, for which many companies work with trusted financial partners such as Standard Chartered. The Bank’s global on-the-ground presence, and its capital structure advisory expertise, can help pharmaceutical businesses as they make these critical decisions.

“The companies that get ahead over the next decades will be defined by the investment choices they make, and those investments need shrewd capital management,” says Yaqub.