In a new “Measuring the Return from Pharmaceutical Innovation” report by Deloitte’s Center for Health Solutions, returns from R&D innovation are up by 7% across the industry.
For biopharmaceutical companies, innovation is a crucial concept. According to a new analysis assessing the return on innovation from R&D investments made within the top 5 pharmaceutical companies within the industry, innovation is paying off.
In a new “Measuring the Return from Pharmaceutical Innovation” report conducted by Deloitte’s Center for Health Solutions, returns from R&D innovation are up by 7% across the industry. The increase is largely driven by assets granted Emergency Use Authorization against the COVID-19 pandemic. However, if products in use without full regulatory approval are excluded, Deloitte said the projected internal rate of return is 3.2%, which shows the industry has improved its core productivity.
Deloitte used two key measuring sticks to develop the report. First, Deloitte assessed total R&D expenditures incurred by a company to bring a product to commercial launch based on publicly-available data. Secondly, the report estimates the forecasted projection of potential revenue that these products might generate.
Some key highlights from the report show that the average cost to develop a pharmaceutical asset in 2021 was $2.006 billion, down $370 million from the previous year. That cost is an average across the 15 companies examined in the report, taking into account different forms of therapeutic approaches made. Deloitte said the decrease from 2020 is primarily due to the “overall increase in the number of assets in the late-stage pipeline.”
As could be expected given the pandemic, infectious disease targets have increased for companies over the past year by an average of 4%. Infectious disease assets now make up 14% of the combined pipelines of the 15 companies. With Emergency Use Authorization on the table, assets aimed at COVID-19 went through clinical trials 3.7 times faster than other infectious disease studies.
Oncology remains a primary driver of innovation. Since 2013, the first year Deloitte conducted its Measuring the Return report, the oncology pipeline has doubled across these 15 companies. From 2020 to 2021, the pipeline has mainly remained the same.
While average R&D costs for 2021 declined, Deloitte noted that the average forecast peak sales per pipeline asset increased from $422 million in 2020 to $521 million in 2021. The range of forecast peak sales across companies has also increased, driven by the sales forecasts for COVID-19 vaccines.
The Deloitte report notes that the primary sources of innovation for companies are being developed by external sources, which continues a trend for the past several years. According to the report, the external development increased from 32% in 2020 to 46% in 2021, meaning almost half of the assets in the late-stage pipeline are now being developed through collaborations and scientific partnerships.
