Last year, biopharma won its share of new drug approvals, though not as many as we're used to in the U.S., as research spending came to fruition. But drugmakers also suffered a number of R&D setbacks, cut research staff, rejigged their operations and refocused their pipelines.
Drug R&D also found itself in the spotlight as one of the biggest political issues to arise last year—drug pricing—became inextricably linked to the cost of biomedical research and development. U.S. industry groups PhRMA and BIO, as well as Europe’s EFPIA and the U.K.’s ABPI, have all said, and will continue to say, that the inherent reason drug prices are what they are is because of the huge R&D investment most (though not all) companies funnel into their scientists and labs.
It’s a risky business: The majority of drugs that begin phase 1 won’t be approved, and over the years, failures in phase 3 have cost individual companies hundreds of millions of dollars each time. Sometimes failures stem from problems with the studies themselves, sometimes a company simply refuses to give up on a dead asset, but often, a failure in the lab is simply part and parcel of the trial-and-error approach inherent to pharmaceutical and biotech research.
Based on figures from their 2016 annual reports, the top 10 pharma R&D budgets (all using their GAAP figures) combined totted up to $70.5 billion, with full-year revenue coming in at $404.8 billion.
On average last year, the top 10 Big Pharmas spent just over 17% of their top line on research, with GlaxoSmithKline spending the second least in percentage terms at 12.9%, and the least in absolute numbers at £3.62 billion ($4.49 billion).
AstraZeneca and Bristol-Myers Squibb shelled out the most on R&D in percentage terms, both spending just over 25% of their revenue.
Both of those companies have, however, sales at the lower end of the Big Pharma list: AZ brought in $23 billion last year, while BMS took in just $19.4 billion. Their respective R&D budgets of $5.89 billion and $4.94 billion, while topping the ranking percentage-wise, came in near the bottom in absolute numbers.
There is a bit more to the BMS story as well: In 2015, the company spent $5.9 billion on research, but last year, that dropped by $1 billion, or 16%. In percentage terms in 2015, BMS put 42% of its revenue toward R&D. This was by far the largest drop in an R&D budget for the top 10 last year.
Most of the others upped their spend slightly, a few significantly, although AZ also spent less in 2016, with a decline of 1.7% off its total 2015 budget.
Eli Lilly was a close third to AZ and BMS, with 24.7% of its total $21.2 billion in sales last year going into R&D. That spending represented a 9% increase on its 2015 figures.
The lowest in percentage terms was Johnson & Johnson, which laid out just 12.6% of its sales on research in 2016. J&J's spending was comparatively large at $9 billion (though that figure included research on medical devices and other areas outside pharmaceuticals), but so was its revenue at $71.9 billion, more than any of its top 10 peers. To match BMS and AstraZeneca in percentage terms, it would have had to spend $18 billion.
Swiss oncology major Roche was tops in total terms, spending a massive CHF11.53 billion ($11.42 billion) last year, nearly 23% of its CHF50.57 billion in revenue. It also recorded a 20% jump in R&D spending compared with 2015, the biggest increase among the top 10, with most of this increase going into its pharmaceuticals divisions, the rest into diagnostics.
Generally, research budgets moved up with sales in percentage terms, although some may feel that an average 17% of its total revenue going into R&D seems a little small. And the $70 billion R&D figure for the top 10 together is, in fact, the same as it was back in 2012 and 2011, so total spend has remained stagnant for some time.
Roche 1
Johnson & Johnson 2
Novartis 3
Pfizer 4
Merck 5
AstraZeneca 6
Sanofi 7
Eli Lilly 8
Bristol-Myers Squibb 9
GSK 10