Did COVID drive ROI growth in biopharma?

By Sonal Shah, senior manager, Deloitte Center for Health Solutions, Deloitte Services LP

After a decade of consistent declines, the pharmaceutical sector appears to have rebounded with record-high returns on investment (ROI) in 2021, according to the Deloitte's Center for Health Solutions 2021 analysis of projected R&D productivity among the top 15 largest biopharma companies. While much of the growth was driven by the development of vaccines and therapies to prevent and treat COVID-19, it wasn’t the only factor.

The projected ROI jumped from 2.7% in 2020 to 7.0% in 2021, according to our research. This was the largest year-over-year increase in internal rate of return (IRR) we’ve seen since we began analyzing the data 12 years ago. While this increase follows a slight uptick that we reported last year, it is too soon to know if the sector is in the early stages of a long-term trend.

COVID-19 vaccines and therapies were a big contributor to the IRR increase in 2021. However, even when we exclude those assets, we still see an increase, a trend that started in our last report in 2020. Improvements—likely driven by investments in streamlined processes, technology, advanced evidence-generation techniques and collaborative interaction models—were seen in all of the key metrics that we track, including:

• Cost to develop a new product: The average cost to bring a new product to market fell to slightly more than $2 billion in 2021—down from nearly $2.4 billion a year earlier. This decrease was due to an overall increase in assets in the late-stage pipeline. In 2013, by contrast, the average cost to bring a new asset to market was just under $1.3 billion.
• Cycle times: According to our research, phase III clinical trials for COVID-19-related products ran an average of 8.4 months—significantly shorter than the 30-month average for non-COVID infectious-disease trials. Overall average cycle times fell to 6.9 years in 2021, down from 7.14 years in 2020. It was the first cycle-time decrease in four years.
• Peak sales: Average peak sales forecasts jumped from $422 million in 2020 to $521 million in 2021—an increase of 23.4%. Three of the companies we track achieved a forecast peak sales-per-asset greater than $500 million in 2021.
• Collaboration: Nearly half (46%) of late-stage assets were co-developed in 2021—up from 32% in 2020. This suggests that almost half of forecast revenues from the late-stage pipeline are being generated through collaborations and scientific partnerships.

Lessons learned from COVID

In 2020, the biopharma sector was under pressure to keep clinical trials going and many companies also invested heavily into the accelerated development of COVID-19 vaccines and therapies. The push to improve efficiencies prompted many companies to move to non-traditional trial models. For example, when clinical trial locations were shut down, some biopharma companies leveraged technologies and alternate recruitment and execution models to keep studies on track. Data science, real-world evidence, and real-world data were used to identify COVID hotspots so that clinical-trial sites could be set up or paused.

Many biopharmaceutical companies pursued newer approaches to develop COVID-19 vaccines and therapies. These approaches include enabling at risk-development, streamlining protocol design, using adaptive clinical-trial designs, and remote data collection. To continue the upward trajectory of increasing returns, companies might need to incorporate these approaches into the broader portfolio. The development process for COVID-19 vaccines and therapies could serve as a blueprint for the industry to plan, design, and execute studies more efficiently across R&D portfolios.

Will regulators continue to collaborate with industry?

Over the past two years—as COVID-19 vaccines and therapies were developed and tested—we saw more of an open dialogue between biopharma companies and regulators. During the early part of the pandemic, there was a need for greater global regulatory collaboration to address the humanitarian crisis. Regulators and global public health leaders learned how to share information in real-time through various forums.

It’s difficult to know if this level of collaboration will persist in the post-pandemic era. For life-threatening and debilitating conditions, companies might try to work closely with regulators to accelerate protocol review, use rolling data submissions and even design minimalistic dossiers for approvals. This could lead to a new era where biopharma companies work more collaboratively with regulators.

Expect to see more emphasis on health equity

The ability to engage and enroll the right patients in clinical trials appears to be one strategy for improving R&D productivity. Racially and ethnically diverse clinical-trial participants (representative of the intended patient population likely to use a medicine once approved) can help inform the safety and effectiveness evaluation of new products and the use of new medicines for patients. However, achieving this has often been challenging in the pharmaceutical industry. The disproportionate impact of COVID-19 on different populations reignited discussions on the importance of enrolling diverse patient populations in clinical trials. But, nearly 80% of patients who participate in clinical trials are white, according to a multi-year study conducted by the US Food & Drug Administration.¹ We expect biopharma companies will continue to improve diversity in their clinical trials and focus on enrolling populations that historically have been under-represented in clinical research.

Our findings suggest a renewed confidence in the biopharma industry and the first signs of a reversal in a decade-long decline in projected R&D productivity. While the uptick in investment performance is encouraging, sustaining it will likely require companies to continue investing in novel approaches to drug development. These may include expanding investments in digital technologies and data science approaches, as well as increasing the use of new clinical-trial paradigms. The industry's response to the COVID-19 pandemic proved that biopharma innovation can be accelerated through creative approaches to drug development—only time will tell if this progress becomes a permanent legacy.

Endnotes:

^{1. 2020 Drug Trials Snapshots, US Food and Drug Administration, February 2021}

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