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R&D Return On Pharma Investment Picks Up

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 The vast majority of these had delayed starts or completions; and eight per cent were terminated or withdrawn.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.”

Deloitte Announces New Additions to National Leadership Team

Deloitte is today announcing new additions to its leadership team with Lisa Stott joining as the new managing partner for tax and legal and Jackie Henry taking over as managing partner for people and purpose. In addition, Kirsty Newman has been appointed as United Kingdom market chair.

Effective this month, Jackie will provide leadership of Deloitte’s United Kingdom people strategy and purpose agenda, focusing on inclusion and wellbeing. She started her career with Deloitte in Belfast 31 years ago and for the past seven years has been lead partner in Northern Ireland.

Jackie’s commitment to diversity, inclusion and social mobility has been a focus throughout her career, and in particular her efforts in building skills and providing access to education for people across Northern Ireland.

This includes setting up the Belfast Delivery Centre, which includes the creation of Deloitte’s BrightStart Degree and Graduate academy programmes. She has also served as people and purpose lead for Deloitte’s United Kingdom consulting business for the last two years.

In her role as market chair, effective from 1 June, Kirsty Newman will build relationships with United Kingdom Boards and policymakers and lead Deloitte’s Vice Chairs group.

Newman also serves as Deloitte North & South Europe leader of Deloitte Private and is the co-chair of Deloitte’s Global Family Office Advisory Board. She started her career with Deloitte as a tax consultant and has been a partner for over 20 years.

Deloitte Overview

Deloitte Touche Tohmatsu Limited, commonly referred to as Deloitte, is a multinational professional services network with offices in over 150 countries and territories around the world.

UK City Development Remains Broadly Resilient

UK city development has defied market challenges after delivering nearly 2.5 million square foot of office space in 2020, a rise of over 547000 square foot more than 2019.

The Crane Survey, which monitors construction activity across a range of sectors including offices, residential, hotels, retail, education and student housing, shows that a further 3.61 million sq ft of office space is currently under construction across the quartet of cities.

Construction activities means any and all activity incidental to the erection, demolition, assembling, altering, installing or equipping of buildings, structures, roads or appurtenances thereto, including land clearing, grading, excavating and filling.

Residential delivery increased nearly 67%, rising by 3,290 to 8,197 new homes completed in 2020. A further 18,912 residential properties are currently under development in the four cities.

The cities have delivered 5,405 student bed spaces in city centres, with a further 3,485 in development as universities and private student accommodation providers continue to invest in both teaching accommodation and student housing.

Deloitte’s research indicates the shift to home-working could change how businesses use office space in the future, which, in turn, could influence how local residential areas are used.

This could potentially shape the role of neighbourhood set-ups to create more diversity within local centres.

Chief Financial Officers Anticipate Growth & Lasting Change

Finance leaders expect a return to growth in 2021 with optimism rising to a record high, according to Deloitte’s latest chief financial officer survey. Despite the surge in business optimism, half of CFOs do not expect demand for their own businesses to recover to pre-pandemic levels until the last quarter of 2021 or later.

The Deloitte CFO survey for Q4 2020, which gauges sentiment amongst the United Kingdom’s largest businesses, took place between 2nd December and 14th December 2020, so before new COVID restrictions announced on 19th December and the Brexit deal on 24th December.

A total of 90 CFOs participated in the latest survey, including CFOs of 12 FTSE 100 and 44 FTSE 250 companies.

The combined market value of the United Kingdom-listed companies that participated is £308 billion, approximately 13% of the United Kingdom quoted equity market.

Revenues, risk appetite & economic landscape

There has been a sharp improvement in CFO expectations for United Kingdom corporates’ revenues this quarter with 71% expecting a rise over the next 12 months, up from 29% in Q3 2020, while over half of CFOs expect operating costs to rise. For the first time since 2015, a net balance of CFOs are expecting corporate operating margins to increase in the next year.

Risk appetite remains weak with only 19% believing it is a good time to take greater risk onto the balance sheet, however this is up from just 3% in Q1 2020.

Consistent with the idea of a return to growth CFOs’ expectations for inflation have risen markedly since Q3 2020. Over half of CFOs expect consumer price inflation to be at or above 1.6% in two years’ time, up from 36% three months ago.

While still showing a net negative balance, CFOs’ expectations for hiring, capital spending and discretionary spending have increased from the record lows seen in Q1 2020, with a strong uptick in each category in the last quarter. Expectations for hiring and spending are running higher than the levels seen between 2016 and mid-2019.

COVID & beyond

More than three quarters of finance leaders expect COVID-19 restrictions on movement and activity to continue through the first half of 2021, while 57% expect these measures to be removed permanently in Q3 2021.

CFOs believe that the pandemic is set to trigger a fundamental change in the business environment. An overwhelming net balance of CFOs expect flexible and home working to increase – with a five-fold increase in home working expected by 2025.

Similarly, 98% of CFOs expect levels of corporate and individual taxation to rise, two thirds anticipate higher regulation of the corporate sector and 59% see the size and role of government in the economy increasing.

The impact of Brexit

CFOs think a no-deal Brexit would have been a far greater risk to the economy and to business than the actual outcome of a trade deal. Moreover, they saw either Brexit outcome as having a greater negative impact on the economy than on their own businesses.

The large companies on our panel are more confident about their own ability to deal with Brexit than the wider economy’s.

Two thirds of CFOs saw a no-deal outcome as having a severe or significant negative effect on the economy and 18% expected a similarly negative impact on their own business. Just 20% of CFOs saw a trade deal as a major negative for the economy and this dropped to 7% in relation to their own business.

A majority of CFOs expect the post-Brexit points-based immigration system to act as somewhat of a drag on long-term economic growth. Around a quarter expect little or no effect, while 6% expect the new immigration system to support growth.

A net balance of 66% of CFOs expect both goods and services trade with the EU to decrease, while 77% expect a decrease in high-skilled immigration from the EU, with only 24% expecting an increase in skilled immigration from outside the EU.

Strategy & spending

CFOs remain in defensive mode with 49% and 46% respectively rating increasing cash flow and reducing costs as strong priorities. Meanwhile expansionary strategies have risen in popularity slightly since Q3, for example, around a quarter cite introducing new products, services or expanding into new markets as a priority for the year ahead.

What Will The Life Sciences and Healthcare Sectors Look Like in 2025?

As 2020 draws to a close, Deloitte in the United Kingdom has unveiled some predictions on how patients, healthcare and life science companies and their staff might behave and operate in five years’ time, based on today’s evidence.

Below is a list of sector predictions for the year 2025:

  • Advances in AI-enabled robotics, cognitive automation, digitalisation and life-long learning will help task shifting and role-enrichment, changing the who, what, and where of work.
  • Advanced AI-enabled technologies will also have accelerated drug discovery and clinical trials improving efficiency and efficacy and reducing costs, enabling companies to reverse the decline in the returns from pharma R&D.
  • Predictive prevention models will have led to more precise public health digital interventions – dramatically lowering smoking rates, improving nutrition and reducing loneliness.

Karen Taylor, director, United Kingdom Centre for Health Solutions, said: “This year, inevitably, our predictions have been informed by the unparalleled impact of COVID-19 and how people perceive health risks.

“In response to the pandemic, the pharma industry, academia, biotech and governments initiated scientific ventures funded by governments, multilateral agencies, not-for-profit institutions and the private sector.

The sharing of data has expedited the search for new treatments and vaccines, with regulators quickly entering into discussion aimed at supporting the most promising innovations.”

Deloitte United Kingdom Overview

Deloitte United Kingdom is a leading professional services firm – one of the largest in the United Kingdom and part of a global network spanning 150 countries and territories.

We’re made up of 20,000 professionals, with a wide range of specialist skills, who our clients rely on to help them with programmes and projects that are critical to their success.

Whether it’s digital transformation expertise, sustainability know how, cyber skills or financial advice, we help clients in the public, private and third sectors meet challenges big and small.

Female Automotive Workers Deserve Promotion Opportunities

The automotive industry comprises a wide range of companies and organizations involved in the design, development, manufacturing, marketing, and selling of motor vehicles. It is one of the world’s largest industries by revenue.

Deloitte’s Women in Automotive Industry research was conducted between June and September 2020 and is based on the responses of 110 women working in the automotive industry.

Respondents came from organisations across the value chain in the United Kingdom, including original equipment manufacturers, suppliers, dealers, and finance companies, and their roles ranged from apprentices through to senior leaders.

The United Kingdom, made up of England, Scotland, Wales and Northern Ireland, is an island nation in north-western Europe. England – birthplace of Shakespeare and The Beatles – is home to the capital, London, a globally influential centre of finance and culture.

Key findings in the report:

  • 68% of women have seen a positive change in the automotive industry’s attitude towards women employees in the last five years; but
  • Half of women feel unprepared to navigate the future of the industry, and this is particularly prevalent in traditional back office functions;
  • 40% would choose a different industry if they could go back; and 50% of women would leave the automotive industry altogether due to lack of promotion opportunities, organisational cultural norms, poor work-life balance and an uncertain industry future;
  • 90% of women feel they are under-represented in leadership positions, with 42% believing an industry bias towards men still exists for leadership positions, driven by organisational cultural norms; and
  • 57% of women do not see a career path to get to the level they want in the auto industry.

Deloitte is a leading global provider of audit and assurance, consulting, financial advisory, risk advisory, tax, and related services.

Deloitte currently has approximately 330,000 people in more than 150 countries and territories.