Is life science R&D earning its investment?
Deloitte – Measuring the return from pharmaceutical innovation 2013
Deloitte, the professional services firm, has conducted its annual survey evaluating pharmaceutical R&D investments together with Reuters. The largest pharmaceutical companies have performed well in terms of bringing new products to market but are struggling with diminishing returns on investment.
Deloitte and Thomson Reuters analysed the 12 largest life sciences companies by research and development spend for their ‘Measuring the return from pharmaceutical innovation 2013’ report.
Some of the results in short
Now in its fourth year, the report found that:
- The top 12 companies have launched 105 products since 2010, with a projected value of $770 billion;
- Since 2010, 167 compounds have been pulled into late stage development with a total risk-adjusted value of $819 billion;
- The cost of bringing an asset from discovery to launch increased by 18%, rising from $1.1 billion in 2010 to $1.3 billion in 2013;
- Late stage terminations continue to take too much value out of company pipelines, amounting to a loss of $243 billion over the four years.
- The average forecast for the peak sales of an asset declined by 43%, dropping from $816 million in 2010 to $466 million in 2013.
While the number of compounds flowing through late stage development has remained stable since 2010, the total projected value of late stage pipelines has declined. Overall, R&D organisations are commercialising effectively, this has been particularly apparent over the last year. But they are failing to match this level of performance in other drivers of R&D economics, for example reducing the cost of success and boosting the rate of innovation. Companies need to maintain their current trajectory in terms of movement of compounds through the late stage pipeline and on to commercialisation. However, the pace of change in factors underlying the economics of R&D needs to accelerate for the sector to achieve sustainable returns.
Although the projected average return has declined over the four year period, the cohort average hides wide variation at the company level. Five of the 12 companies recorded a projected R&D return of over 7% this year, indicating that the leaders in the cohort are weathering the storm.
About Deloitte in Switzerland
Deloitte is a leading accounting and consulting company in Switzerland and provides industry-specific services in the areas of audit, tax, consulting and corporate finance. With approximately 1,100 employees at six locations in Basel, Berne, Geneva, Lausanne, Lugano and Zurich (headquarters), Deloitte serves companies and institutions of all legal forms and sizes in all industry sectors. Deloitte AG is a subsidiary of Deloitte LLP, the UK member firm of Deloitte Touche Tohmatsu Limited (DTTL). DTTL member firms comprise of approximately 200,000 employees in more than 150 countries around the world.
Zurich, 16 December 2013
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