Growth is on the horizon for the life sciences industry, according to Cleveland Research Company, an independent research firm based out of Cleveland, Ohio.
It based its optimistic outlook on its Q4 2020 survey of members of the Independent Laboratory Distribution Association (ILDA). The ILDA is made up of 29% distribution organizations and 71% manufacturing organizations. Of these firms, 57% reported annual revenue less than $10 million, 33% reported revenue between $10 million and $100 million, and a final 10% had revenues greater than $100 million. They work in verticals such as biotech, pharmaceuticals, clinical sciences, academics, government and applied sciences.
Revenue Growth Trending Up
Cleveland Research found that revenue growth is on the rise. ILDA members saw negative revenue growth in Q2 2020 and less than 1% growth in Q3 2020, but that number shot up to 6.6% for life science companies in the year’s final three months.
Perhaps even more promising than the actual revenue growth numbers in Q4 were ILDA members’ perceptions of that growth. Among manufacturers, 14% reported that growth was better than they expected. An astonishing 40% of distributors said the same thing. Both metrics indicate that the economic rebound from the pandemic occurred quicker than many expected.
Product Performance Gains Strength
Both ILDA manufacturers and distributors posted strong product demand. In Q4 2020, ILDA distributors saw a boost in demand for lab equipment, lab furniture and temperature control products when compared to Q3 2020. All three of these product categories are major components of the life sciences product portfolio.
Despite demand softness in many of the end markets they supply, manufacturers still reported strong quarterly demand for lab equipment, lab furniture, temperature control products, and lab consumables. Taken altogether, it seems clear that despite uncertainty in end markets, life sciences companies have carved out a niche of products that still serve a strong need.
A Bright Outlook for 2021
While the revenue growth in Q4 2020 signaled a bounce-back from the worst financial months of the pandemic, Cleveland Research suggest that the outlook for 2021 should be even stronger.
ILDA members finished 2020 with meager 3.3% revenue growth, much of which was boosted by gains that occurred before the pandemic derailed markets in March of last year. Cleveland Research set its 2021 growth outlook at 9.2%, which is up from members’ expectations of 6%. Drilling down further, manufacturers anticipate growth levels in 2021 that are higher than what distributors anticipate. When looking at the 9.2% revenue forecast figure for 2021, volume contribution drives 7.5% of that growth while price contributes 1.7%.
We’ll continue to keep our eye on these growth numbers. Meanwhile, life sciences companies like P3 Medical, Monobind Inc., and Precision Medical Products have used NetSuite’s cloud ERP to scale up their operations and adjust to fluctuating demand. Interested in learning more about how NetSuite can help your business? Visit the life sciences section of the website.