A Mixed Bag of Results – Assessing R&D in the Pharma Industry for 2012
More and more evidence has come to light that R&D in the pharma industry is becoming increasingly and alarmingly expensive.
This has been illustrated by a report conducted by analysts at Deloitte and Thompson Reuters entitled Measuring the return from pharmaceutical innovation 2012, which analysed 12 companies including Pfizer, Roche, Norvatis, Sanofi, GlaxoSmithKline, Johnson & Johnson, AstraZeneca, Merck & Co, Eli Lilly, Bristol-Myers Squibb, Takeda and Amgen.
FACTS AND FIGURES
The report discovered that pharma’s internal rate of revenue (IRR) dropped from 7.7% in 2010/11 to 7.2% in 2012. However the report predicts that this decline is expected to stabilise.
In contrast however, the report also revealed that the number of compound approvals has increased by an estimated 30% in the last year, leaving the scenario looking like a mixed bag of results.
Julian Remnant, head of Deloitte’s European R&D advisory practice expanded on the situation, “While the number of compound approvals has increased by approximately 30% in the last 12 months, the expected revenue has also declined by 30%. This has resulted in the net value realised through product commercialisation declining in over half of the 12 companies analysed. Time will tell whether the encouraging wave of new late stage compounds is able to reverse this trend and achieve an increase in returns in future years."
Other revelations included the fact that the 12 companies analysed by the report showed signs of struggle regarding the concept of reducing the impact of late-stage terminations. Between the 2010/2011 and 2011/2012 comparisons, the number of terminations increased from 19 to 22, estimating a loss in value four billion dollars higher than the previous year.
Remnant went on to comment that 7 of the 12 companies have seen value eroded due to the increased influence of late-stage terminations relative to successful product launches, “Once a compound proceeds to late stage development, the cost of failure increases significantly.”
CLOSING REMARKS
Solutions director John Cole of Thompson Reuters said however that companies can successfully navigate reimbursement challenges through well-designed clinical trials in appropriate targeted patient populations and comparative studies, “We are seeing an increase in the acceptance of this strategy which is driving revenues in smaller, well-defined populations.”
“Overall, our findings suggest a mixed picture of performance in 2012 relative to 2011,” said Remnant, “It will take a number of years for the full picture on R&D productivity to emerge and definitive conclusions to be drawn. The companies that are successful in the business of R&D will be systematic in their corroboration of unmet need, leaders in marshaling the best science, with developments in biology and advances in diagnostics, as well as deploying a flexible, collaborative research model that focuses early on gathering evidence of medical value.”