As Investors Retreat, Healthcare/Life Sciences Sector Stays Resilient

April 17, 2023 – Healthcare and life science organizations are facing an increasingly complex landscape, with rapid technological advancements, changing regulatory environments, and heightened public scrutiny. As a result, these companies have been turning to executive search firms more than ever to acquire world-class leadership. The most pressing challenge has been finding high-impact, innovative leaders who can navigate this complex terrain and drive meaningful change.

One of the most notable trends in healthcare/life sciences recruiting has been the growing demand for leaders with a diverse set of skills and experiences. According to a recent report by Korn Ferry, healthcare organizations are looking for leaders who can balance clinical expertise with business acumen, and who have a deep understanding of the regulatory landscape. Additionally, these organizations want leaders who are adept at navigating the com- plexities of a global marketplace, and who can leverage emerging technologies to drive innovation.

Another key trend in healthcare/life sciences recruiting is the growing importance of diversity and inclusion. Research has shown that diverse teams are more innovative, perform better, and are better equipped to meet the needs of a diverse patient population. As a result, healthcare organizations are placing a greater emphasis on diversity and inclusion in their leadership recruitment efforts. This includes actively seeking out candidates from underrepresented groups and ensuring that the interview process is free from bias.

One of the biggest challenges in healthcare/life sciences recruiting is the shortage of qualified candidates. As the demand for world-class leaders continues to rise, there simply aren’t enough candidates with the necessary skills and experiences to go around. To address this challenge, some organizations are turning to non-traditional sources of talent, such as adjacent industries or geographies. Others are investing in leadership development programs to build the next generation of leaders from within.

Shortage of Qualified Candidates
Healthcare/life sciences recruiting is also being impacted by the repercussions of the pandemic, which has disrupted recruitment efforts and made it more difficult to attract and retain top talent. Remote/hybrid work has become the norm, making it more difficult to build the personal connections that are often necessary in recruiting. Additionally, many healthcare organizations had to divert resources away from recruitment efforts to focus on responding to the pandemic.

Despite these challenges, healthcare and life science organizations remain committed to recruiting world-class leadership. The stakes are simply too high to settle for anything less. The future of healthcare and life sciences depends on having leaders who can drive innovation, navigate regulatory environments, and deliver high-quality care to patients. As a result, organizations will continue to turn to executive search firms and other talent acquisition partners to identify, attract, and retain the best and brightest leaders.

Resilient to Economic Downturns
“Whilst our sector is generally resilient to economic downturns in the broader capital markets, it’s not completely insulated,” said Bianca Coulter, founder of Coulter Partners. “We have seen a certain slowdown in projects from early-stage biotech, mainly due to the difficulty of raising funds; VCs have been investing in their own portfolios and are being conservative. Companies that are already generating revenue and have traction with an established business model are doing better. Therefore, scale-ups and mid-size companies remain very dynamic.”

“A number of large multinationals across our sector have had a huge hit to their share prices and are currently in major restructuring and optimization phases,” Ms. Coulter said. “We are having more career discussions than we were 18 months ago with senior people for whom the current climate is raising challenges.”

Despite the financing and investment climate and layoffs occurring throughout the industry, there remains high demand for top quality candidates, particularly as the employer expectation bar has been raised, according to Ms. Coulter. “In the U.S. in particular, it is still very difficult to hire R&D talent,” she said. “Many C-level executives benefited from the bull market and were elevated into their positions too quickly. As such, and with clients being more selective, there remains a shortage of suitable talent to fill roles. As a result of this shortage, clients are becoming open to new perspectives, targeting candidates from parallel verticals such as animal health, agtech, or food production.”

Ms. Coulter says that she is seeing particular demand in the fields of nutrition and well-being, oncology, neurology, and rare diseases, with continued growth in healthcare services and digital health. “Given financial headwinds and technical challenges, cell and gene therapy, whilst still active, has tapered off,” she said. “Innovation areas such as mRNA, oligonucleotides, protein degradation, and genome editing are currently popular with investors. Companies engaged in these fields require diverse technical leadership, so there is a high demand for CSOs, CTOs, and other senior technical leaders to set strategic vision. Demand for R&D leadership remains exceptionally strong, as well as requests for us to handle clinical development, RA/QA, medical affairs, and CMO roles.”

Predictably, when public markets soften, leadership teams look to do non-dilutive deals. “As a result, a lot of companies (particularly biotech) have been turning to out-licensing and partnering, so we’re seeing a notable increase in the number of business development roles and commercial functions,” Ms. Coulter said. “Our work in CBO, BD, M&A, and similar functions has been very robust recently. Clients are looking for turnaround commercial leaders who can drive a business in a price pressured environment, in addition bringing scale-up and growth experience. We have been partnering on a large number of C-level (often newly created) positions including CEO, CBO, and board director.”

For the beginning of 2023, Coulter Partners predicted headwinds and does expect these to persist for the next two quarters, with very few IPOs. “Companies with positive clinical data and certain types of business models will continue to be able to raise money but we think investors will be very selective, and there will be more company failures ahead,” said Ms. Coulter. “While we are not expecting to see the energy of the past few years return immediately, as the year progresses, we do expect a gradual ramp-up and return to a steady investing environment with public markets reopening in 2024. New company formation will resume, as there are many exciting clinical stage assets progressing, and we expect to see an increase in demand for certain types of senior executive leadership, including CEOs.”

The landscape has been changing over the past six to nine months, according to Chrystie Chapman, chief operating officer of Slone Partners. “The headlines have been reporting layoffs in biotech and elsewhere in the life sciences and tech industries as the IPO market has started to slow down, so one might assume this means it is becoming much easier to recruit industry executives now,” she said. “However, that’s not the case. Remember that 2020-22 were booming years in the life sciences, powered by the almost insatiable quest to discover diagnostic tools, treatments, and vaccines to mitigate the impacts of the COVID-19 pandemic, and were further fueled by an incredible amount of investor dollars that flowed into the sector. About midway through last year things began normalizing a bit. Yes, many companies have been paring down and investors have become more discerning in 2023, but healthcare and the life sciences remain red hot because of all the amazing breakthroughs in medical science, AI, and clinical research.”

So, companies are still hiring. In fact, Slone Partners placed more C-suite executives in 2022 than any year in its history. “Finding talented candidates went from being ridiculously difficult and nearly impossible to just plain hard,” Ms. Chapman said. “Great executives still have all the opportunities they could possibly want and are
still in the driver’s seat. It remains a candidate’s market and there are still many opportunities for highly talented and accomplished executives, particularly in the VC and private equity-backed space. These companies are still fighting for the same executives with similar experience and profiles as they compete for the investor dollars needed to reach the next stage.”

Ms. Chapman says that the demand is high for almost every role in the C-suite as well as for board members, particularly in those cases in which the company is seeking to diversify its board. “Functional areas that are most in demand right now are regulatory affairs, clinical development, and business development,” she said. “Business development executives are very much in demand at the moment. That includes chief business officers and VPs of business development. There are very practical reasons for this. Biotech and other life sciences companies understand that their runway to get a product to market is a long one. It takes years to get a therapeutic product through the development and clinical trial stages to commercialization, so companies want people with the experience and expertise to guide them on that journey efficiently and successfully.”

Because the road to commercialization is such a laborious and expensive process, many companies are leveraging their highly sophisticated drug discovery platforms as revenue generators, allowing other companies to use them to test their drug discoveries, according to Ms. Chapman. “These platforms are often AI or genetically driven, so they can move the drug discovery process along much faster,” she said. “The company with the platform can still develop its discoveries while generating income to help pay for that development and support the other activities the company is involved in while preserving precious VC dollars. Companies are seeking these types of strategic partnerships and the executives who can make them happen. These types of savvy business development leaders are very much in demand right now.”

Ms. Chapman believes that 2023 will be the year of digital health and AI-driven drug discovery and development. “Researchers on the front lines of drug discovery and development are using computer vision, machine learning, and AI to a greater extent than ever to support drug discovery and clinical decision making,” she said. “This confluence of technologies is allowing clinicians, whether located in an extensive medical center in a large city or in a small practice in a more rural area, to support their patients locally through new and different tech platforms that are add-ons to the current standard of care. Treatment pathways and diagnoses can therefore be more accurate, more effective, and perhaps most importantly be determined in significantly less time.”

“This trend is really gaining momentum in 2023 and is becoming a part of regular conversations in the life sciences and healthcare industries,” she said. “The impacts of this trend can be truly revolutionizing. These fast-moving technologies are impacting research and how drugs are produced and brought to market as well as how patients are treated in clinical settings.”

“We are in a very interesting market environment with respect to healthcare and life sciences executives,” said Ernie Brittingham, leader of global of the healthcare sector at Russell Reynolds Associates. “Equity values are (mostly) down, which largely resets the competitiveness of external opportunity. C-level executives are currently reevaluating the platforms they are on, including the market, equity opportunities and whether they believe in the mission and culture.”

Investing in Internal Talent
On the other hand, companies are increasingly investing in their own talent, according to Mr. Brittingham. “Boards, CEOs, and C-suite executives dedicate significant time and effort to ensure their organizations have the right leadership in place to achieve their strategic goals,” he said. “We find an increasing request for data-driven approaches around the predictability of executive success, as well as internally identifying and developing the next gen of C-level leaders. Assessment of leadership competencies and overall C-suite potential paired with a development plan and coaching opportunities are becoming common place to show executives the organization is invested in their future potential.”

Mr. Brittingham also notes that healthcare organizations are at an interesting inflection point. Companies are assessing the “aftermath” of COVID-19 and are turning back to 2019 as their point of comparison. What will their new growth rate look like? How do they replace revenues that were achieved through diagnostic tests or telemedicine? How do organizations maintain the innovation and agility that was required during the pandemic? “We are seeing organizations become more operationally focused, with more rigor around profitability,” he said. “In line with the emphasis on profitability, mid- and large-cap organizations are increasingly focused on consolidation and portfolio optimization. We anticipate that overall deal activity in private capital will go down, while spin-offs, carve-outs and M&A continue and reset the competitive landscape.”

“In addition, 2022 showed a marked increase in healthcare company boards searching for a CEO profile,” Mr. Brittingham said. “Fifty percent of all newly appointed board directors at healthcare Fortune 500s were current or former CEOs. The uncertainties of the present – from inflation to geopolitical instability – have created a need for directors that have first-hand experience navigating this climate. We are seeing this trend extend to CEO roles as well, where prior CEO experience as well as affinity with supply chain and operations are more prominent.”

Mr. Brittingham also notes that organizations are grappling with what the balance of hybrid work should look like. “We are increasingly partnering on culture assessments to help organizations understand how to achieve optimal performance under the new remote/in-office work expectations,” he said.

Matthew Vossler, managing director in the life sciences and healthcare services practices for Diversified Search Group, said: Not surprisingly, one of the areas that continues to be the most competitive for talent exist in physician- executive recruiting (chief medical officer, chief scientific officer, heads of clinical, regulatory, etc.) Particularly within regulatory affairs, clinical, and safety/ pharmacovigilance,” he said. “Nearly all our clients seek an MD or Ph.D. who is well known or recognized as a key opinion leader. They must possess industry experience that includes pharma with a successful transition to biotech, specific therapeutic area experience, as well as rare and orphan disease.”

“The demand far outpaces the supply for these individuals and when you factor in the desire for diversity, we are seeing early-in-career physician executives and scientists being hired and promoted into more senior roles at a much faster pace,” Mr. Vossler said.

Diversified Search Group is seeing the busiest areas in those roles that impact the speed and success of clinical programs moving into phase 3, and from a therapeutic area perspective, there is a strong emphasis in rare/orphan disease and neuroscience. “And this focus in neuro was a topic of interest with investors during the JPM conference in January,” said Mr. Vossler. “Our teams have already seen in the last few weeks several new projects with focus in big target areas like Alzheimer’s, Parkinson’s, and multiple sclerosis, but also in areas like depression, anxiety, sleep, and pain.”

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