The document discusses the declining returns on R&D investments in large-cap biopharma companies, with costs rising and peak sales forecasts decreasing. It highlights the inefficiencies of mergers and acquisitions as a strategy for increasing R&D productivity and emphasizes the need for firms to optimize resources and adopt robust decision-making processes. Additionally, mid-tier biopharma companies are shown to outperform larger peers in terms of average costs and peak sales over recent years.

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Measuring the return from pharmaceutical
innovation 2016: Balancing the R&D equation
R&D returns continue to decline for the original large-cap
biopharma cohort
2010 2011 2012 2013 2014 2015 2016
10.1% 7.6% 7.3% 4.8% 5.5% 4.2% 3.7%
Blockbuster costs without balancing blockbuster revenues
2010
$1.188bn
2015
$1.576bn
up 33%
2016
$1.539bn
down 2%
2010
$816m
2015
$416m
down 50%
2016
$394m
down 5%
R&D costs
Forecast sales
A large number of externally sourced assets have been commercialised;
with late–stage pipelines close to empty the temptation may exist to
refuel through M&A
2013
61%
2016
43%
External % of
late-stage pipeline
External % of
late-stage pipeline
Total pipeline value Total pipeline value
$913bn $833bn
Bigger isn’t necessarily better for R&D productivity
As a negative relationship exists between company size and returns,
getting bigger through M&A may not be a good strategy
Lift the burden
of data complexity
Think small, win big to
optimise and streamline
decision making Forecast salesR&D costs
Strike the right balance:
internal/external
resources
Key lessons to reduce R&D costs
Key strategies to improve commercial success
Forecast sales
R&D costs
Aim for therapy area focus
Adhere to robust
Target Product
Profile
Generate evidence to
support all
stakeholder needs
Align end-to-end
decision-making across
the organisation
Target populations
where value can be
maximised
R&D costs per asset have stabilised for the original
large-cap biopharma cohort but forecast peak sales
per asset continue to decline
Extension cohort of mid-tier biopharma companies also sees returns
decrease in 2016
2013
17.4%
2014
17.7%
2015
16.1%
2016
9.9%
R&D costs Forecast sales
Extension cohort of mid-tier biopharma companies are still
outperforming their larger peers
9% lower average
cost to develop an
asset, 2014-16
132% higher
average peak
sales, 2014-16
Extension cohort
Average returns,
2014-16
14.1%