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Kathlyn Stone

Pharmas' ROI Still in Decline Despite More Approvals

By December 16, 2013

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Despite a rise in the number of new drug approvals, big drug-makers' returns on investment (ROI) are continuing to decline, according to Deloitte and Thomson Reuters' annual productivity study.

The average internal rate of return (IRR) from R&D during 2013 was estimated at 4.8 percent, down from 7.2 percent in 2012 and 10.5 percent in 2010. During the same time period, the average cost of developing new drugs rose by 18 percent to reach $1.3 billion, according to the study.

At the same time, the average forecast peak sales of each new drug declined from $816 million in 2010 to $466 million in 2013, a 43 percent drop.

The cost of developing a new drug varied widely among the top 12 pharmas analyzed. One of the best performing companies spent $393 million developing a drug in 2013, while at the other end of the range, $3.08 billion was spent on developing a single drug.

Companies included in the study were Pfizer, Roche, Novartis, Sanofi, GlaxoSmithKline, Johnson & Johnson, AstraZeneca, Merck & Co, Eli Lilly, Bristol-Myers Squibb, Takeda and Amgen. Together they launched 105 new products since 2010, with a projected sales value of $770 billion.

In releasing the results of the study, Deloitte's European R&D advisory practice head Julian Remnant commented that companies could improve the returns on their R&D investments by focusing on "genuine unmet need, cost-effectively with demonstrable value cases; preserving and developing talent in R&D; and harnessing the power of data analytics to enhance R&D decision making."

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