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Deloitte's 14th Annual Pharmaceutical Innovation Report: Pharma R&D Return on Investment Rebounds After Record Low


NEW YORK, April 25, 2024 /PRNewswire/ --

Key takeaways

Why this matters
Deloitte in a series of annual reports on "Measuring the return from pharmaceutical innovation," in collaboration with other member firms, has provided insights into the state of biopharma R&D since 2010.  The 14th annual report analysed the current state of R&D for 20 leading biopharma companies in 2023.

The analysis shows the average returns for the cohort have risen to 4.1% in 2023, up from the 2022 record low of 1.2%. This follows the 6.8% peak in 2021, which was driven by COVID-19 assets passing through the pipeline.

R&D executives who were interviewed as part of the analysis confirmed that R&D operating models continue to experience significant pressures due to:

Key quotes

"With 14 years of analysis to draw on, it's clear that transformational change in R&D is needed to consistently drive increased returns across the biopharma industry. Our related research suggests that these organizations have an opportunity to unlock $5 to 7 billion in value with R&D representing the top value opportunity at 30 to 40%. There is real potential to drive down development costs, increase speed to market, and unlock a new era of R&D productivity."

?     Pete Lyons, U.S. life sciences sector leader, and principal, Deloitte Consulting LLP

"The increase seen in the Pharmaceutical Innovation Report 2023 analysis is certainly encouraging, but sustaining the flow of high-quality assets into the late-stage pipeline tends to be a challenge. Companies should continue to sufficiently invest in early R&D, through both traditional and AI-enabled approaches, to drive innovation, and remain ruthlessly focused on execution to help accelerate development timelines. By analyzing trends over time, we offer a breadth of industry experience to life sciences clients who are leading life-changing R&D."

?     Kevin Dondarski, life sciences R&D strategy leader, and principal, Deloitte Consulting LLP

Pharma fears regulation may stifle innovation
In total, the 20 companies analysed spent $145.5 billion on R&D in 2023, an increase of 4.5% compared to 2022 ($139.2 billion). This rise in R&D costs can be attributed to several factors, including more complex trial requirements, regulatory changes, the impact of inflation, and continuing to operate in functional silos.

R&D executives were more concerned with changing regulations than rising R&D costs and increasing cycle times. For example, executives indicated that the U.S. Inflation Reduction Act (IRA) may stifle innovation because the incentives will be lower and profitability will be reduced, suggesting that biopharma companies may take fewer and smaller risks when progressing assets. Interpreting the new and evolving regulatory expectations and implementing any necessary changes in a coordinated, cost-efficient and timely manner, across a number of business functions, appears to be a significant challenge for the industry.

AI strategies and adoption are in early innings 
While Deloitte's related research indicates transformative value can be gained with AI, R&D executives interviewed as part of the Pharmaceutical Innovation Report indicate that efforts to improve R&D efficiency through digitalization and automation are still in their infancy. In 2023, half of the clinical development programs involved biologics and advanced therapies, including cell and gene therapies, monoclonal and recombinant antibodies, protein and peptide therapies, and plasma-derived therapies. Advanced therapies have created challenges for regulators and pharma companies in agreeing surrogate endpoints, and also in design, manufacturing and supply complications in the conduct of the trials themselves. The R&D executives interviewed believe AI can accelerate the creation of these treatments.

Methodology
"Measuring the return from pharmaceutical innovation 2023," is the 14th annual report led by the Deloitte UK Centre for Health Solutions, the research arm of Deloitte UK's Life Sciences and Health Care practices, in collaboration with the Deloitte US Center for Health Solutions. The report explores the performance of the biopharmaceutical industry (biopharma) and its ability to generate returns from its investment in innovative new products.

Since 2010, the "Measuring" the return from innovation series has tracked the projected return on investment from the late-stage pipelines from an original cohort of 12 leading global biopharma companies. During that time the cohort has expanded and today the leading 20 global pharmaceutical companies are tracked using the same comprehensive and consistent methodology.

About Deloitte's Industry Advantage
With Industry Advantage, we give our clients access to the full breadth of thinking, experience, and technology from across Deloitte, our people, and our ecosystems. Because of our deep sector knowledge, we can apply these capabilities in a targeted way to help our clients differentiate their businesses from the rest of the industry. Deloitte's targeted approach to core business transformation is guided by our understanding of the future of industries. Our industry capabilities are informed by the collective insights of our strategy, engineering and innovation talent, our external ecosystems and alliances; and our broad experience delivering business-critical work for our clients. We demonstrate areas of disruption for your industry and then implement what can help your business create sustainable advantage.

For additional information and case studies on how Deloitte works with clients to create Industry Advantage, visit our website.

About Deloitte
Deloitte provides industry-leading audit and assurance, tax and legal, consulting, financial advisory, and risk advisory services to nearly 90% of the Fortune Global 500® and thousands of private companies. Our people deliver measurable and lasting results that help reinforce public trust in capital markets, enable clients to transform and thrive, and lead the way toward a stronger economy, a more equitable society, and a sustainable world. Building on its 175-plus year history, Deloitte spans more than 150 countries and territories. Learn how Deloitte's approximately 457,000 people worldwide make an impact that matters at www.deloitte.com.

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ("DTTL"), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as "Deloitte Global") does not provide services to clients. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the "Deloitte" name in the United States and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting. Please see www.deloitte.com/about?to learn more about our global network of member firms. 

SOURCE Deloitte


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