Deloitte and Thomson Reuters have handed out a mixed set of grades in their third annual report card on Big Pharma's drug development efforts. The industry leaders are doing better at getting approvals and moving therapies into late-stage development, analysts conclude, but took a big year-over-year hit on their drugs' projected earnings value as payers continue to squeeze hard on prices.
Looking at just the Big 12 pharma companies globally, ranked by R&D expenses, Deloitte and Thomson Reuters found that the number of product approvals has increased by a third. But conversely, adds Deloitte, "the 32 approvals in 2010-11 accounted for forecast revenues of $309 billion, the 41 in 2011-12 just $211 billion." R&D returns, meanwhile, slid to a weak 7.2% from 7.7%. And the cost of developing a new drug for the Big 12 stayed flat at about $1.1 billion.
That downward trend on drug values could turn around in quick fashion, though, as the same companies pushed 78 programs into late-stage development in the past year with a potential value of $378 billion, compared to the $193 billion potential of the 35 new late-stage drugs for the year before.
"While the number of compound approvals has increased by approximately 30% in the last 12 months, the expected revenue has also declined by 30%," said Julian Remnant, head of Deloitte's European R&D advisory practice. "This has resulted in the net value realized through product commercialization declining in over half of the 12 companies analyzed. Time will tell whether the encouraging wave of new late stage compounds is able to reverse this trend and achieve an increase in returns in future years."
Risk hasn't gone away. If anything, it's grown worse. The Deloitte report notes that 19 late-stage drugs bit the dust a year ago, compared to 22 in the last 12 months. Those terminations wiped out $73 billion and $77 billion of potential value.
The analysts found some major league pressure bearing down on drug prices, which has put a continuing squeeze on potential earnings. "However, companies can successfully navigate the payor/reimbursement challenges through well-designed clinical trials in appropriate targeted patient populations and/or comparative studies," says John Cole, solutions director, business practice at Thomson Reuters. "We are seeing an increase in the acceptance of this 'niche-buster' strategy which is driving revenues in smaller, well-defined patient populations."
The analysts studied the results at Pfizer ($PFE), Roche ($RHHBY), Novartis ($NVS), Sanofi ($SNY), GlaxoSmithKline ($GSK), Johnson & Johnson ($JNJ), AstraZeneca ($AZN), Merck & Co ($MRK), Eli Lilly ($LLY), Bristol-Myers Squibb ($BMY), Takeda and Amgen ($AMGN).
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