While the cost to launch a new pharmaceutical product to market stands at approximately $1.54 billion in 2016, a number 30% above that of the 2010 figure, returns on investment continue to fall, according to a study produced by Deloitte using data provided by GlobalData.
This study*, the seventh annual report published by the Deloitte Centre for Health Solutions, states that despite the exceptional amount of money now needed to launch a product, the correlation between investment and returns is growing weaker, and blockbuster costs are not yielding blockbuster revenues. Indeed, there are now just 21 pipeline drugs forecast to attain blockbuster status, meaning a drug would achieve peak annual sales of at least $1 billion, compared to 55 products in 2010**. Such disparity has led to an equation which does not add up for long-term stakeholder value.
The study emphasises the fact that drug discovery and development is an arduous and risky task as the need to produce increasingly differentiated drugs escalates. Indeed, the complex underlying molecular biology of a number of indications is so unclear that finding ways to treat them often results in failure, and the money pumped into such projects does not yield the desired returns.
Sean X. Hu, Ph.D., MBA, GlobalData’s Senior Vice President & Head of Consulting in the US for Pharmaceutical and Diagnostics Industries, and the senior leader of the GlobalData team responsible for providing data to Deloitte, explains: “This report requires an industry-level analysis across a sizeable number of companies, based on a high volume of pharmaceutical industry, company and product data, and the associated benchmarking and forecasting analysis, supplied by the GlobalData database and consulting teams.
“The report provides evidence and actual data to help biopharmaceutical companies understand certain key drivers of a company’s overall financial performance. It also brings strategic value to them by sharing insights on what directions to consider for enhancing a company’s return on R&D investment.”
About the report
*‘Measuring the return from pharmaceutical innovation 2016: Balancing the R&D equation’ has been produced by Deloitte, using data from publicly-available audited annual reports and forecasts provided by research and consulting firm GlobalData. The report features the latest unique analysis from Deloitte of the life science industry’s performance in generating a return from its significant annual investment in new product innovation.
**Forecast sales are calculated based on a time period of approximately 21 years.