Research and development (R&D) include activities that companies undertake to innovate and introduce new products and services. It is often the first stage in the development process. The goal is typically to take new products and services to market and add to the company’s bottom line.
In 2020, projected returns on investment in R&D for a combined cohort of 15 global pharmaceutical companies was 2.5 per cent, 0.9 percentage points higher than in 2019.
This is the first sign of a reversal in the declining trend seen over the past seven years, according to research by Deloitte’s Centre for Health Solutions.
The range in performance between the top performing and bottom performing companies has narrowed, however, with all but one company having an internal rate of return below the industry weighted average cost of capital.
In 2020, the cohort saw an increase in average forecast peak sales per pipeline asset to $421 million, from $357 million in 2019. However, the average cost to develop an asset increased once more to $2,442 million, up $51 million compared to 2019 and a $1,115 million increase since 2013.
The increase in costs per asset is due mainly to a fall in the overall number of assets in late stage pipelines which decreased from 213 in 2019 to 207 in 2020. Between 1 May 2019 and 30 April 2020, the cohort had a total of 53 assets approved, an increase from 39 in 2019.
Deloitte also commissioned analysis measuring the impact of the COVID-19 pandemic on clinical trials to investigate the likely impact on future year returns.
The analysis revealed that between March and November 2020, the pandemic affected an estimated 1,210 trials across the industry. The vast majority of these had delayed starts or completions; and eight per cent were terminated or withdrawn.
Colin Terry, Consulting Partner for European R&D at Deloitte, commented: “We are finally seeing seeds of change in the projected R&D productivity given recent progress of some novel trial designs and improvements in efficiency through the digitalisation of drug discovery and development.
However, adoption continues to be experimental and not at scale across the industry, although accelerated by the COVID-19 pandemic across all stakeholders and regulators.
The ‘need for speed’ has become all-encompassing alongside the realisation that development cycle times need to be reduced and new ways of working embraced to finally see the industry break the trends of the last decade.”