Pharmaceutical firms ‘see higher R&D returns’

Companies are receiving higher rates of return on their pharmaceutical research and development (R&D) investments for the first time since 2010.

That is according to new research from business advisory firm Deloitte, which said that while R&D returns stood at 5.1% last year, they have since risen to 5.5%.

Revenue boost

Among its other findings, the group’s Measuring the Return from Pharmaceutical Innovation 2014 report said a total of 143 products have been introduced by the 12 largest pharmaceutical businesses since 2010.

It is thought these products will boast total lifetime revenues of $955 billion between them.

Deloitte, which produced its research in collaboration with GlobalData, added that the last four years have seen 236 assets reach late-stage development.

It said the forecast lifetime revenues of these products could potentially reach $1,171 billion.

Medicine development costs ‘remain high’

In response to the findings, Julian Remnant, head of Deloitte’s European R&D advisory practice, said that despite the yearly improvement in R&D returns, it remains expensive to develop new medicines.

He said: “While winners are emerging, the economic drivers of product development are complex and the study has identified wide variations at an individual company level.”

Key factors influencing R&D returns

Looking ahead, Deloitte’s report suggests that the size of a company could have an impact on its R&D returns.

It said bigger companies could face weaker returns because of higher development costs.

External innovations could also be a factor, in terms of R&D returns. Three quarters of the firms analysed in the study said less than half of their projected revenue currently stems from compounds which emerged from their own laboratories.

Deloitte indicated that stronger returns could also be generated if firms focus their portfolios on fewer therapy areas.

Focusing on collaboration

Businesses now need to consider whether they are ‘collaboration-ready’, according to Neil Lesser, principal and life sciences R&D strategy lead at Deloitte US.

He said: “The majority of the industry’s value is now coming from external sources of innovation, and these external assets are showing higher future forecasts than those from internal labs.”

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Copyright Press Association 2014