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What is the actual market-size (TAM) for the software as a service industry, for Biotechnology & Pharma industries? Specifically - for SaaS used by researchers in laboratories and paid for out of research budgets ?
Hello! Thanks for your request to provide you with to total-addressable-market for the SaaS for biotechnology and pharma industries. The short version is that, I have provided you an estimate of the total-addressable-market for SaaS for biotechnology and pharma industries, complete with supporting hard data and a comprehensive overview of my calculations.
Below you will find a deep dive of my findings.
GLOBAL R&D PHARMACEUTICAL SPENDING
The International Federation of Pharmaceutical and Manufacturers Associations (IFPMA) facilitates collaboration, dialogue and understanding with key global players within the biopharmaceutical industry. In their report about facts and figures of the industry in 2017, they stated that as of 2015, The research-based pharmaceutical industry is estimated to have spent approximately $149.8 billion globally on pharmaceutical R&D.
GROWTH OF R&D INVESTMENTS
The Pharmaceutical Research and Manufacturers of America, represents the US' leading innovative biopharmaceutical research companies. According to their 2016 report about the research segment of the biopharmaceutical industry, relative to other manufacturing industries, the biopharmaceutical industry invests 12 times more in R&D per employee. Data also shows that it had the highest growth rate in R&D investment at 25% across all manufacturing industries between 2000 and 2012.
This is due to the increase in complexity of clinical trials during the last decade. In addition, clinical trial designs and procedures have also become much more complex, demanding more staff time and effort, and discouraging patient enrollment and retention.
The report also stated that as of 2016, there were over 7,000 medicines targeting a broad array of disease areas and conditions that are in clinical development around the world.
ALLOCATION OF R&D BUDGET
The Industrial Research Institute (IRI) is an association of companies and federal laboratories that unites innovation leaders from diverse industries and across all research and development functions to create and exchange knowledge on improving their organization’s technology management capabilities. According to their 2016 Global R&D Funding Forecast, as of 2016, the National Institutes of Health (NIH) has a total of 21 institutes and 6 centers, with 11 institutes having individual R&D budgets of more than $1 billion. The National Cancer Institute (NCI) was stated to be their institute with the largest budget amounting to a total of $5 billion.
The National Institutes of Health has the second largest federal government R&D budget with a 2016 R&D appropriation request of $31.3 billion—$1.0 billion or 2.6% more than was appropriated in 2015.
It was mentioned in their forecast that the global life science industry, which consists of pharmaceuticals, biotechnology, medical instruments and devices, animal and agricultural bioscience and commercial research and testing, is one of the top two large global high-tech industries—the other being ICT. Most of the industry’s activities are driven by R&D in the biopharmaceutical sector, which accounts for about 85% of the industry’s total R&D spending. The biggest portion of their R&D spending in the sector is allocated to staff salaries at 33%, which they emphasized has remained consistent throughout their previous annual reports. The second biggest portion is allocated to capital spending at 18%, covering new research laboratory designs, construction and renovations; new large instrumentation and equipment purchases; and the creation of specialized testing structures and systems. This is followed by 15% of R&D spending allocated towards materials, 11% for supplies and consumables, 12% for overhead expenses which include utilities, maintenance and support; 6% for outsourcing; and 5% for licensing, legal fees, transportation, training, recruitment and emergency activities and systems.
GLOBAL LIFE SCIENCE INFORMATION TECHNOLOGY EXPENDITURE
Deloitte is a research firm that provides audit, consulting, financial advisory, risk management, tax, and related services to select clients. In their 2016 global life sciences outlook, they stated that information technology spending in the life sciences sector will reach $54 billion by 2019, growing at a year-on-year rate of 5% from 2015-2019.
CALCULATIONS
A typical Wonder request usually takes 2-3 hours to fully accomplish, however, due to the scarcity of up-to-date and publicly available information from credible sources directly stating the total-addressable-market for SaaS for biotechnology and pharma industries, and in addition the fact that there is also no publicly disclosed information specifying how pharma companies segment their R&D budget towards just software, 6 hours of extensive research has only allowed me to produce a rough triangulation based on all viable resources available.
Considering that the total expenditure of the global biopharmaceutical industry dedicated to R&D in 2015 is $149.8 billion (A), and it was stated that it comprised of 85% of the total global life science expenditure on R&D (B), we can divide A by B and multiply the value by 100 to arrive at the total expenditure of the global life science industry (C) which is $176.24 billion.
Considering that the budget of the global life science industry dedicated to information technology is forecast to reach a value of $54 billion by 2019 (D) at a CAGR of 5%, I consulted a compound annual growth rate calculator to compute for its original value back in 2015 (E). Results show that E = $44,425,900,000.
Now that we have both C and E, I am able to determine that E is equal to 25.21% (F) of C.
In order to calculate for a rough estimate for the total-addressable-market for the SaaS for biotechnology and pharma industries, I multiplied A by F and arrived at the value of $37.76 billion.
CONCLUSION
To wrap it up, I have provided you an estimate of the total-addressable-market for SaaS for biotechnology and pharma industries, complete with supporting hard data and a comprehensive overview of my calculations.
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