Deloitte's 12th Annual Pharmaceutical Innovation Report: Pharma R&D Return on Investment Rises to Highest Level Since 2014

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Jan 12, 2022, 10:47 ET

NEW YORK, Jan. 12, 2022 /PRNewswire/ --

Key Takeaways:

Projected returns on investment in pharma R&D in 2021 have risen to 7 % from 2.7 %, the largest annual increase since the study began in 2010.
Forecast peak sales per asset have increased to $521 million, up from $422 million in 2020.
The average cost of developing a new drug in 2021 fell to $2 billion compared to $2.4 billion in 2020.
Average cycle times decreased year-on-year for the first time since 2016, declining to 6.9 years compared to 7.14 years in 2020. Additionally, COVID-19 phase III trials were, on average, 3.7 times faster than non-COVID-19 infectious disease trials.

Why this matters

The findings from Deloitte's Center for Health Solutions 2021 analysis suggest confidence in the life sciences industry and the first signs of a reversal in a decade-long decline in projected R&D productivity. The 4.3 percentage point increase in projected returns on investment in 2021 compared to 2020 is the largest annual increase since the study began.

The report shows a rise in peak sales, reduced cost of development, and reduced length of cycle times, which collectively, indicate that pharma companies are starting to see the benefits of optimized processes from previous years and innovative changes to the R&D process. The COVID-19 vaccine development process may serve as a blueprint for the industry to plan, design and execute studies more efficiently across R&D portfolios.

Deloitte's analysis also found that the combined cohort of pharmaceutical companies continue to rely on external sources to fuel innovation for more than half of their late-stage R&D pipeline, increasing to 71% in 2021 from 51% in 2018. The cohort also revealed a significant increase in the number of co-developed assets, rising from 32% in 2020 to 46% in 2021. This suggests that almost half of forecast revenues from the late-stage pipeline are being generated through collaborations and scientific partnerships.

Key quotes

"While the uptick in investment performance is encouraging, sustaining it will likely require companies to continue investing in approaches that fuel pharma innovation. These include expanding investments in digital technologies and data science approaches, as well as increasing the use of transformative development models. The industry's response to the COVID-19 pandemic proved that biopharma innovation can be accelerated through creative approaches to drug development — only time will tell if this progress becomes a permanent legacy."

— Neil Lesser, principal, Deloitte Consulting LLP, and U.S. Life Sciences R&D leader

"The pandemic certainly has accelerated innovation in R&D models, and it has illuminated the benefits of leading practices including industry collaboration, data-sharing and digitization. We also should recognize that development cycle times continue to challenge the industry and that new ways of working together allowed the industry to deliver life-saving treatments and make a significant difference in the world."

— Sonal Shah, senior manager, Deloitte Services LP, Center for Health Solutions Life Sciences Research leader

Methodology
Since 2010, Deloitte's "Measuring the Return from Pharmaceutical Innovation" report has focused on the projected returns from the late-stage pipelines of a cohort of the 12 largest biopharma companies by 2009 R&D spend. The five most recent reports also include an extension cohort of four mid-to-large cap companies with analysis back dated to 2013.

Throughout the analysis, Deloitte has used these two cohorts as a proxy to measure the industry's ability to balance initial capital outlay with the cash inflows biopharma companies are projected to receive as a result of this investment. Over the past few years, however, Deloitte has seen a convergence in the performance of the original and extension cohorts, and this year, Deloitte combined the two cohorts to form a "combined cohort."

About Deloitte
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SOURCE Deloitte