Rare Daily Staff

Projected returns on investment in pharma research and investment for the top 12 pharmaceutical companies have fallen to 1.9 percent in 2018, the lowest level since 2010, according to a recent report by Deloitte’s Center for Health Solutions.

Returns are down 1.8 percentage points from 3.7 percent in 2017, and forecast average peak sales are at $408 million, making 2018 the lowest level since Deloitte’s R&D report began nine years ago. Returns are down by 8.2 percentage points since 2010, when they stood at 10.1 percent.

At the same time, the average cost of developing a new drug has almost doubled since 2010 to $2.2 billion, which is behind the declining returns, according to the report.

In order to combat this decline in productivity, Deloitte recommends companies seek new ways of working and emphasizes finding the right talent in order to lessen development costs and increase R&D returns. Technologies such as Artificial Intelligence (AI) and Robotic Process Automation (RPA) will help to build on, and accelerate, the innovative work of R&D organizations.

“The results signal a time for substantive change in the pharmaceutical industry. Despite the launch of many successful products, growing development costs and regulatory constraints are making it more difficult than ever for companies to redeem their R&D investment,” says Colin Terry, consulting partner for European life sciences R&D at Deloitte.

“Cutting R&D cycle time and costs is vital in a world where projected sales continue to be stagnant,” he says. “In order to succeed and maximize their return on investment, the industry must act now to embrace new technologies and seek out the talent with the right skill set to challenge the status quo, then implement and sustain the new model.”

In addition to the 12 original cohort companies, since 2015 four smaller and more specialized biopharma companies have been used as an extension cohort of the R&D study.

Though these companies also saw returns drop this year, from 12.5 percent in 2017 to 9.3 percent in 2018, this drop was driven by the costs of commercialization of five high value drugs from the four companies. These smaller firms continued to outperform their peers, finding success in identifying high value products with significant unmet medical needs. These products added $70 billion of projected lifetime sales to the commercial portfolio across the four companies. The extension cohort also increased their forecast peak sales per asset from $952 million in 2013 to $1,165 million in 2018.

“The smaller companies in our cohort continue to outperform, as they are able to produce valuable pipelines with less legacy infrastructure and organizational complexity,” says Neil Lesser, Life Sciences R&D leader for Deloitte US. “The challenge for these companies will be to continue the growth trajectory while at the same time investing in talent and allocating funds to mature smartly. For the larger companies, a focus on technology and adapting their organizations and talent models to maximize productivity, is the way forward in this evolving landscape.”

 

January 14, 2019
Photo: Neil Lesser, Life Sciences R&D leader for Deloitte US