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Untangling Capital Allocation
How to simplify the challenge
The Future of R&D Finance in Life Sciences
Adopting Modern Solutions to Drive Strategic Enterprise Value
In the high-stakes world of life sciences R&D, competition is stiffening while return on investment is declining. R&D Finance is in a unique position to help. Finance can empower decision-makers to weigh investment trade-offs and performance with powerful insights based on real-time data and forecasting.
R&D Finance can enhance decision-making in life sciences
Return on investment in research and development (R&D) is declining. Industry trends signal that it is becoming far more expensive and less fruitful to develop a commercially viable drug—studies indicate this cost is more than $2.3 billion.1 Peak sales have declined by nearly 50% over the past 10 years,2 and organizations continue to seek opportunities to address regulatory developments, commercial market access constraints, inflationary headwinds, and associated downstream pricing pressures. These macro trends indicate that advancements within R&D operations could present meaningful opportunities to bend the cost curve and improve total cost to commercialization.
R&D Finance is uniquely positioned to modernize its role in delivering strategic value by providing the right information at the right time to help executives make smarter, better-informed decisions across the enterprise. Intelligent performance and resource management, advanced portfolio analytics, and connected planning practices represent meaningful capabilities within reach. With R&D spend as a percentage of revenue exceeding 20%3 in the life sciences industry, even a marginal improvement to reducing R&D expenditures and improving insights can deliver tens to hundreds of millions in unlocked value. Leading companies are actively taking measures to implement the underlying finance infrastructure required to deliver solutions that improve profitability and ultimately allow organizations to better serve customers and patients.
Unlocking strategic value through the modernization of R&D Finance in life sciences
R&D Finance opportunity mapping for life sciences
This report focuses on four core opportunities within the R&D Finance domain and provides an overview of how organizations may adopt leading-class capabilities to help achieve them. Each opportunity can be mapped across a conceptual R&D portfolio framework:
Driving accuracy and efficiency in measuring ongoing study performance
Investing in solutions to provide deeper, more timely insights to ongoing financial health throughout the entirety of the new drug development life cycle
Driving smarter R&D budget allocation through deeper portfolio insights
Deploying advanced capabilities and technologies to more effectively allocate within R&D portfolios, deploy resources, and support organizational strategies
Improving long-range planning and identifying and closing strategic portfolio gaps
Leveraging technology to equip Finance with capabilities to proactively evaluate organic and inorganic growth opportunities across the R&D pipeline
The future of R&D Finance
Many life sciences R&D organizations face the challenges of limited real-time investment performance analysis, static portfolio-level insights, and insufficient data to properly weigh investment trade-offs. R&D Finance functions can unlock strategic value for the enterprise by applying leading-edge intelligent performance management capabilities, modern resource management solutions, advanced data-driven forecasting, and predictive scenario modeling practices, while connecting efforts downstream to help generate broader enterprise insights. In the high-stakes world of life sciences R&D, the competitive landscape is evolving. Legacy capabilities can be expensive and time-consuming and could soon present material risks in achieving organizational objectives. Finance can empower strategic decision-makers to make more informed investment decisions powered by forward-looking, data-driven insights.
The inherent nature of R&D is to fearlessly innovate in search of a greater future—and the future of R&D Finance is here today.
Where should you concentrate your efforts? Download the full report for a detailed breakdown of the four opportunities. Explore the capability evaluation scale for each, see how they map against the Finance calendar, and learn what you need to begin your R&D Finance transformation.
Endnotes
- 1. Emily May et al., Seize the digital momentum: Measuring the return from pharmaceutical innovation 2022, Deloitte, January 2023.
- 2. Ibid; Karen Taylor, Mark Stockbridge, and Sonal Shah, Balancing the R&D equation: Measuring the return from pharmaceutical innovation 2016, Deloitte, 2016.
- 3. Brian Buntz, “Pharma’s top 20 R&D spenders in 2021,” Drug Discovery & Development, March 30, 2022.
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