In case you missed it, Deloitte recently published its annual report measuring the return from pharmaceutical innovation. Unfortunately, Deloitte’s 2016 conclusions do not bode particularly well for the biopharma industry. The full report, which can be viewed here, contains sections on the ROI of R&D, increasing pipeline value, reducing cost to launch, and the external challenges the biopharma industry faces.
Deloitte compared performance data of 12 leading biopharma companies against four mid- to large-cap companies. These are some of the some of the key findings from Deloitte:
- Annual projected pharma R&D returns continue to decline to 3.7 percent
- Peak sales per asset fall 4 percent year-on-year since 2010
- Costs to bring a product to market stabilize, from $1,576 Million in 2015 to $1,539 Million in 2016
- Smaller pharma companies have seen a decline in overall performance, but on average they continue to outperform their larger counterparts, generating returns up to three times higher
The return on investment of R&D remains an important indicator within the biopharma industry. Even if R&D costs are high, a strong sales forecast can attract investors. A company’s ROI also guides internal decisions about the allocation of funds to, or away from, the research and development department. A healthy R&D department allows organizations to continue researching new treatment options for various patient needs.
The report includes four main factors currently influencing R&D returns. Maintaining a consistent focus on a specific therapy area, the end of the blockbuster, smaller companies remain more effective, and the increase of M&A are each listed as either positively or negatively influencing returns. Deloitte offers some key lessons for companies to apply that may increase commercial success while reducing the cost to launch:
Increasing commercial success
- Aim for therapy area focus
- Target populations where value can be maximized
- Adhere to robust target product profile
- Generate evidence to support all stakeholder needs
- Align end-to-end decision making across the organization
Increasing R&D productivity
- Think small, win big decision making
- Strike the right balance of staff and resource
- Lift the burden of data complexity
The lessons outlined by Deloitte are issues that we discuss with our clients on a daily basis. Pearl Pathways’ team of experienced advisors remain up to date on industry trends to help life science companies both small and large meet their goals. Please contact us today to begin a conversation.