The world's biggest R&D spenders

Last year the top 10 R&D spenders in the biopharma world shelled out a record $67.41 billion on drug development, with big acquisitions and bold trial plans upping the ante on what it takes to mount a major pipeline effort these days.

Analyzing the annual statements of the world's largest pharma companies, which provide the lion's share of the world's research budgets, FierceBiotech found that despite considerable cuts in a number of R&D operations, the Top 10 players saw a collective jump of more than 10 percent in R&D spending. And despite plans by Pfizer--Number One in R&D spending in 2010--to force through a major restructuring in R&D, this year Big Pharma will still be a big spender when it comes to drug research.

Top R&D budgets
1. Pfizer: $9.4 billion
2. Roche: $9.2 billion
3. Merck: $8.12 billion
4. Novartis: $8.08 billion
5. Johnson & Johnson: $6.84 billion
6. GlaxoSmithKline: $6.09 billion
7. Sanofi-Aventis: $5.94 billion
8. AstraZeneca: $5.3 billion
9. Eli Lilly: $4.88 billion
10. Bristol-Myers Squibb: $3.56 billion
Tied for 10th. Takeda Pharmaceutical: $3.5 billion

Analysts have been driving home the reasons for the R&D spending burst for several years now. Patent cliffs loomed on the drug world's biggest treatments. Pharma responded with some big acquisitions as well as plenty of homegrown programs to locate replacements as generic competition prepared to slice away revenue. And these big companies had the cash on hand to spend.

For some, these expansive strategies have worked fairly well. For many others, though, there's been little to show for the billions invested in the pipeline. As a result, the word from the R&D world these days is that it's time to catch fish--or find a different rod that doesn't cost so much.

"Our industry is taking too long, we're spending too much and we're producing far too little," said Eli Lilly CEO John Lechleiter recently, echoing a criticism that has been directed straight at Indianapolis for the past two years. And it's all happening at a time when the science of drug discovery and development has never been better.

The R&D model is changing dramatically, says Joe Hammang, Pfizer senior director, worldwide science policy. Development is becoming more collaborative, he adds. But it's also becoming decidedly harder to win an approval at the FDA or the EMA.

"As consumers we all want safe products," Hammang tells FierceBiotech, "and the increased regulatory pressure and expectations of drugs without side effects is bringing this significant pressure to the biopharmaceutical industry. It's not meant as a criticism. That regulatory body is very strict in terms of what is expected, which is often not discussed when we talk about productivity."

"If you look at INDs (investigational new drug applications), the number hasn't really dropped off over the years," notes Eric Utt, Pfizer's director of science policy. But these new drugs "are failing the objective of the study. Some are not as efficacious, for others there's the increased stringency that these drugs are being measured by. The bar has been set much higher for us."

Sanofi and others, meanwhile, have been rolling out their own development strategies and pushing for a new mindset that encourages an enlightened attitude toward outsourcing. And while Pfizer will attempt to lead the way in dramatically reducing R&D costs, there's no sign that any of the other big spenders will follow suit--yet.

Roche, Merck, Novartis and others have outlined ambitious development schedules for 2011. But this year, say the R&D chiefs, push will come to shove. New drugs must get past Phase III and developers will have to do better than the nine percent success rate it has for drugs that enter the clinic. There are quite a few late-stage programs that promise to do just that. In 2011, pharma has to keep its promise, or make fresh pledges about how it plans to spend investors' money.

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