Deloitte: 2014 Sees Improvement In Pharma R&D Returns

In the past year, the rate of return on research and development investment has increased from 5.1 percent to 5.5 percent, says a new survey from Deloitte consulting firm. This is the first increase the industry has seen since 2010 and represents a replenishing pipeline, reports Reuters.

Julian Remnant, head of Deloitte’s European R&D advisory practice told Reuters, “There are signs that returns from pharmaceutical R&D are turning a corner.”

Deloitte points to the 2014 FDA approvals as one sign of this productivity increase. So far in 2014, the FDA has approved thirty five new molecular entities (NMEs) and biological products — eight more treatments than last year’s 27.

Still, the failure rate is high, and many drugs in development never survive to see FDA applications. The Pharmaceutical Research and Manufacturers of America (PhRMA) reports that only 16 percent of drugs that reach clinical trial are approved by the FDA.

Remnant was quick to acknowledge that pharma research was still a high risk business. He said, “We continue to see a relentless rise in the costs to develop a new medicine this year to $1.4 billion — with little change to the billions of dollars of value lost from products failing in the final stage of development.”

In November, Tufts released a study estimating that the approximate cost of developing a drug from discovery to market is $2.6 billion, which includes roughly 10 years of work and 1.4 billion out of pocket expenses.

Tufts credited this rise in expenses with the growing complexity of treatments and the fact that many pharma companies are pursuing research on difficult and largely misunderstood diseases, such as Alzheimer’s.

The Deloitte survey based its numbers on twelve pharma companies, including: Pfizer, Roche, Novartis, Sanofi, GlaxoSmithKline, Johnson & Johnson, AstraZeneca, Merck, Eli Lilly, Bristol-Myers Squibb, Takeda, and Amgen.

Though the average rate of return has increased, Deloitte’s numbers suggest that it was not a successful year for everyone. Depending on the company, the spectrum of R&D return was as high as 11.7 percent for some and as low as negative .7.

According to Reuters, the larger companies made significantly larger investments and, on average, saw the lowest returns.