Accessability Links
Cookies on our website
By continuing to use this website we will assume you are happy to receive cookies as outlined in our cookie policy
Accept Policy

Deloitte signals 'substantive change' in pharma R&D

Jan 09
Tags: Deloitte
Share this story:
Deloitte signals 'substantive change' in pharma...

A trend of diminishing returns on investment in research and development (R&D) is one of the major challenges currently facing pharmaceutical businesses, according to Deloitte.

Research published by the professional services firm's Centre for Health Solutions noted that the pharma industry is going through a period of "substantive change", and companies must be prepared to overcome challenges.

Falling R&D returns

Deloitte's findings have suggested that returns on R&D investment have been steadily declining since 2010.

The latest projected returns for the top 12 companies in the industry are 1.9 per cent, marking a significant fall from 3.7 per cent in 2017.

Average peak sales for 2018 are expected to be around $408 million (£320 million), the lowest since the study began nine years ago.

Typical returns on R&D investment stood at 10.1 per cent in 2010 and have since dropped by 8.2 percentage points.

According to Deloitte, the key factor in this trend is the increase in the cost of developing and winning marketing approval for new drugs, which has risen in six of the last eight years.

The average cost of this process is now $2.18 billion, almost double the figure of $1.19 billion recorded in 2010.

According to the report, costs could be reduced and R&D returns increased through new ways of working, a renewed focus on acquiring the right talent and innovative deployment of technologies such as artificial intelligence and robotic process automation.

Colin Terry, consulting partner for European life sciences R&D at Deloitte, noted that the combination of escalating development costs and regulatory constraints has made it "more difficult than ever" for companies to redeem their investments.

"Cutting R&D cycle time and costs is vital in a world where projected sales continue to be stagnant," he added.

"In order to succeed and maximise their return on investment, the industry must act now to embrace new technologies and seek out the talent with the right skill set to challenge the status quo, then implement and sustain the new model."

Smaller firms showing the way forward?

Since 2015, four smaller and more specialised biopharma companies have been included in Deloitte's R&D report, in addition to the 12 original businesses analysed since 2010.

These smaller firms have consistently outperformed their peers, partly thanks to a strategy of identifying high-value products that respond to unmet medical needs.

While they also fell victim to the trend of declining R&D returns - which dropped from 12.5 per cent in 2017 to 9.3 per cent in 2018 - this was driven by the cost of commercialising five high-value drugs.

Products specifically designed to address unmet medical needs have added $70 billion of projected lifetime sales to the portfolios of the four smaller companies in the study.

Neil Lesser, life sciences R&D leader for Deloitte US, said these businesses have the advantage of being able to produce valuable pipelines with less legacy infrastructure and "organisational complexity".

He added: "The challenge for these companies will be to continue the growth trajectory while at the same time investing in talent, and allocating funds to mature smartly."

Search for the latest management consultancy jobs and consulting recruitment opportunities, or contact us on +44(0)207 089 9017.

Image: iStock/nicolas_

Share this story:
Add new comment
Jobs Related to this Post
5 result(s) found 
Page 1 of 1 

£50k plus £25k bonus
London or Manchester if preffered
Client Director (Account / Relationship Management) PE and VC Portfolio   You will join this growing consultancy team based out of a new London office in Clerkenwell or our Manchester office
£70k-£100k plus package
Manchester or London
Consultant Technical Architect Our client is one of the top 50 fastest growing technology businesses. They make technology make a difference. They design, build and optimise high performance
£80k-£110k plus pacakge
Central London
Our client is one of the top 50 fastest growing technology businesses. They make technology make a difference. They design, build and optimise high performance cloud-based systems for mission critical
£50k-£70k plus bonus, benefi...
Central London, no travel required
Our client is a specialist global insights and research firm. They help professional services organsiations to improve how they go to market and develop relationships with their clients
£55,000-£95,000 + bonus, ben...
We are working with an independent consulting firm focused exclusively on improving public services. They have a unique approach to solving complex problems, combining insight