In a groundbreaking development, research by Deloitte’s Centre for Health Solutions reveals that 15 global pharmaceutical companies, including the 12 largest by market capitalization, are experiencing a surge in projected returns on investment (ROI) in research and development (R&D). The projected ROI has skyrocketed to 7.0 per cent in 2021, marking the highest level since 2014 (7.2 per cent). This notable increase of 4.3 percentage points from 2020 represents the most substantial annual rise since the inception of the study.
Moreover, the forecasted average peak sales per asset have reached an impressive $521 million, the highest level in four years. This surge is significantly greater than the $422 million reported in 2020. The driving force behind this upswing is attributed, in part, to the optimistic sales forecasts for COVID-19 vaccinations and treatments that have received emergency approvals, making a considerable impact on the mass market. Notably, six out of the 15 companies in the cohort have improved their projected peak sales per asset compared to the previous year.
Cost of Drug Development Decreases with Accelerated Cycle Times
Deloitte’s research also brings forth encouraging news regarding the cost of drug development. The estimated average cost, including the cost of failure, has decreased to $2,006 million in 2021, a notable decline from $2,376 million in 2020. This reduction is primarily attributed to a significant increase in the number of assets in the cohort’s late-stage pipeline, totaling 242 assets – 32 more than in 2020.
Additionally, the average cycle times, representing the duration from the initiation of clinical trials to market release, have decreased for the first time since 2016. The cycle times have fallen to 6.9 years in 2021 from 7.14 years in 2020. Furthermore, COVID-19 phase III trials, on average, demonstrated a remarkable 3.7 times faster progression compared to non-COVID-19 infectious disease trials.
Colin Terry, European Life Sciences R&D leader at Deloitte, emphasized, “The combination of rising peak sales, reduced development costs, and shortened cycle times indicates the pharmaceutical industry’s success in optimizing R&D processes. This efficiency is crucial for delivering innovation to patients worldwide, addressing health equity on a global scale.”
External Capital Drives Pharma Innovation Growth
Deloitte’s analysis highlights the evolving landscape of pharmaceutical innovation, with an increasing reliance on external sources of capital investment. The proportion of late-stage pipeline revenues dependent on external funding has surged from 51 per cent in 2018 to 71 per cent in 2021. Additionally, there has been a substantial rise in the number of co-developed assets, jumping from 32 per cent in 2020 to 46 per cent in 2021.
Neil Lesser, Life Sciences R&D leader for Deloitte US, notes, “Pharma companies are strategically partnering with smaller players, seeking to augment their innovation pipeline through collaborations. This trend is expected to persist, with substantial capital investment from venture and early-stage financing continuing to drive innovation as assets approach commercial launch.”
