Measuring the return from pharmaceutical innovation 2014

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Measuring the return from pharmaceutical innovation 2014, produced by the Deloitte UK Center for Health Solutions, in collaboration with GlobalData, analyzes the R&D returns of the 12 largest life sciences companies by R&D spend.

Key findings

• 143 products launched globally since 2010 for the benefit of patients, with projected lifetime revenues of $995 billion.
• 236 assets with forecast lifetime revenues of $1,171 billion progressed to late stage development, since 2010.
• Rate of return has increased for the first time since 2010, to 5.5%.
• Cost of bringing an asset to market rises for the fifth year, to $1,401 million.

Strategic factors impacting R&D returns

• Company size – the larger the company, by revenue or R&D spend, the greater the cost to develop each asset and the lower the returns.
• External innovation – for 75% of the companies, less than half of the projected revenue is from compounds discovered in their own laboratories. Across all 12 companies, 58% of forecast revenues from innovation at the latest stage of development is sourced externally.
• Portfolio focus – an emphasis on fewer therapy areas appears to deliver better returns.

The view from Deloitte

Neil Lesser, Principal and Life Sciences R&D Strategy lead at Deloitte US, said: “The life sciences R&D ecosystem is undergoing a transformation and the industry’s biggest players are having to evaluate how they access, foster and commercialise their innovations. We have found that some of the top 12 organizations are further through the journey than others and, as a result, are delivering leading returns.

“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. Companies need to consider if they have invested in capabilities that make them “collaboration ready”, including the talent, processes, infrastructure, and data required to be able to collaborate effectively for the long term without eroding the value acquired.”