Pharmaceutical R&D efficiency - a fleeting imperative

Pharmaceutical R&D efficiency - a fleeting imperative

by Pininvest Analysis

Pharmaceuticals Majors on pininvest.com

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R&D efficiency – though remaining quite difficult to measure in ‘productive’ terms – is fast becoming a key differentiating factor between pharmaceutical companies

Efficiency can in one sense be understood as a factor of new molecule discoveries over R&D expenses but this measure introduces two additional levels or complexity

  • Commercialization of new molecules do not necessarily meet the targeted return on R&D investment
  • R&D expenses are characterized by a dynamic of their own, because, over the extended time frame of research (10 years and more), all cost layers increase, and often do so exponentially

Big Pharma has more in common with film studios (or publishers) than one would suspect … New molecule entities may well (and usually do…) turn out no better than a second rate movie – and just as publishers are flooding the literary market every year, drug manufacturers need to run 100 projects to hit – maybe – a multi-billion blockbuster and – maybe – 4 or 5 financially valuable molecules

Year over year increasing R&D costs per project compound the risks because of new technologies (DNA sequencing, computational drug design and the like...) and of larger clinical test requirements and trial extensions with further expenses tacked on at a later stage (non-US regulatory approvals, product life-cycle management)

We imply that very few Pharmaceutical companies today can sustain the effort – and, even more expensively, invest in basic breakthrough research