In what could be a radical shake-up of the healthcare sector, regenerative medical procedures such as stem-cell or gene therapy hold the promise of completely curing diseases rather than simply treating them. With the pharmaceutical industry's business model currently based on treating incurable diseases with drugs, regenerative therapies are mostly being developed in specialist clinics and trial situations. Despite the rapid expansion of the market for new therapies – anticipated to grow 33 percent per year from 2020 through 2025 – Big Pharma show a striking lack of involvement and therefore risk missing out on a slice of this significant market.

Munich, October 2, 2017

Regenerative medicine could produce new therapeutic interventions for cancers, genetic disorders or autoimmune diseases. Stem-cell therapy, for example, can restore damaged tissue or even regenerate entire organs. In a revolution for patients, many of whom have had to rely on medication for years, the focus is shifting from treatment to cure. And the market for regenerative medicine is set to grow rapidly, from a value of EUR 20 billion today to somewhere in the region of EUR 130 billion by 2025. These are among the findings of the latest study by Roland Berger, "Regenerative medicine – The next generation of therapeutic products is set to shake up the pharmaceutical world".

"Regenerative medicine has the potential to turn the healthcare sector upside down for all involved: health insurers, hospitals and pharmaceutical players alike," says Roland Berger Partner Thilo Kaltenbach. "As regenerative medicine becomes established over the coming years, it is going to transform the drug market in particular."

Big Pharma's role is secondary so far

International drug companies have not been very active in regenerative medicine to date: More than 80 percent of stem-cell and gene therapies currently in the clinical testing phase are in the hands of biotech firms. "Big Pharma risk not only having these new therapies eat into their top line but also having to stand on the sidelines of the emerging business," says Kaltenbach, who therefore advises pharmaceutical players to rethink and reorganize: "Big Pharma's current business model with its industrial-scale production and value chains is not compatible with the new therapies coming through the pipeline."

That is because regenerative medicine involves tailoring the therapy to the patient, which means that it needs to be administered locally in a hospital setting. As such, a large part of the value creation will never leave the hospital, where the treating physicians, the clinical laboratory and other involved parties are all located. This reality will force those in the drug industry to take a good, hard look at their entire organization. They need to redouble their focus on innovation and accelerate clinical development to bring many of their solutions to market faster.

"Pharmaceutical companies should partner with biotech firms and clinical research groups," says Roland Berger Partner Kaltenbach. And he advises them to reconsider their infrastructure: "In regenerative medicine it's important for production to be located close to where the therapy is going to be applied – geographical proximity is therefore crucial."

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