'Stunning' 4% yearly rise in R&D share has emerging biopharma dominating pipeline

Emerging biopharmas have gradually taken over the R&D pipeline, producing two-thirds of all new drugs in 2022, a finding one financial biotech player called "stunning." 

"Emerging biopharma has been rising at roughly 4% a year for each of the last five years," Tim Opler, Ph.D., managing director for life sciences investment bank Torreya, said during a March 29 presentation of IQVIA’s report on global R&D trends. Opler, citing the IQVIA data, dubbed the stat an "absolutely stunning finding." 

"Go back to, say, the year 2005," Opler said. "If someone told you that two-thirds of our industry would be driven on the R&D side by emerging biopharma—it would be unthinkable. If one were to project that trend forward, what it would suggest is that we could have a day when we do this talk, say in 2027 or 2028, where 80% of the industry's pipeline is coming from emerging companies." 

So-called emerging biopharmas (EBPs)—a term for companies with less than $200 million in R&D spending and annual sales lower than $500 million—were responsible for 67% of 2022’s R&D pipeline, according to IQVIA's report. This is a jump from about 63% pipeline ownership the year prior, 51% five years ago and 33% back in 2002 ago, according to the report. 

However, the rise of EBPs underscores the slowly receding presence of Big Pharma in R&D.  

“If two-thirds of the pipeline is from emerging biopharma, what's going on with Big Pharma?” Opler asked during the presentation. “I do worry a bit about Big Pharma R&D productivity and I think that's a topic to be addressed in the five years ahead.”

Big Pharmas represented just 23% of pipeline activity in 2022, a steep drop from 48% back in 2002. The decline has somewhat softened in the last five years, according to IQVIA's chart, though the number of EBPs has shot up 26% in the same period.  

The number of R&D deals between pharmas also dipped 25% from 2021, while an increasing share of deals involved EBPs with larger companies. 

This isn’t to say Big Pharma isn’t still greatly involved in biotech. In 2022, the 15 largest pharmas put down a record-setting $138 billion for R&D, a 43% jump from five years prior and a number that represents 18.8% of their recorded sales.