* Early signs pipelines improving -Deloitte, Thomson Reuters
* Drug approvals increasing but sales value lower
* R&D returns at top-12 firms 7.2 pct vs 7.7 pct year ago
* Average cost of developing a new drug steady at $1.1 bln
By Ben Hirschler
LONDON, Dec 4 Drug companies are becoming more
efficient in hunting for new treatments, though this has yet to
be reflected in improved investment returns, according to a
report on Tuesday.
Low productivity in research labs is the biggest single
challenge facing the global pharmaceutical industry, which is
struggling to replenish its medicine chest after a wave of
patient expiries that peaked this year.
While companies are getting more compounds into late-stage
development - reflecting a smarter and more targeted approach to
research and development (R&D) - turning those new products into
big commercial winners is an uphill struggle.
That reflects growing caution among governments about buying
costly new drugs, as well as the arrival of more specialist
products that address relatively small patient populations.
The latest annual study of R&D productivity by Deloitte and
Thomson Reuters found that the number of new drug approvals
increased by around 30 percent, yet the expected revenue from
these medicines actually fell by a similar amount.
In total, the world's 12 top pharmaceutical companies had 41
new drugs approved, with combined forecast revenues of $211
billion, while the year-earlier tally was 32 products with
expected revenues of $309 billion.
In effect, the industry is treading water in the fight to
deliver better returns on the billions of dollars ploughed into
the hunt for new drugs each year.
With an average internal rate of return (IRR) from R&D in
2012 of 7.2 percent - against 7.7 percent and 10.5 percent in
the two preceding years - Big Pharma is barely covering its
average cost of capital, estimated at around 7 percent.
Nonetheless, there are some encouraging signs. In
particular, 10 of the 12 companies tracked in the report showed
an improvement in replenishing their stock of late-stage
"We've seen returns stabilising and there are signs on the
horizon that the situation might turn around, depending on how
successful the industry is at commercialising new assets as they
come through," said Julian Remnant, head of Deloitte's European
R&D advisory practice.
At $1.1 billion, the average cost of developing a new
medicine has remained fairly constant, although it varies hugely
between companies, since this figure includes money spent on
drugs that ultimately fail.
For the most successful company in the group, the average
cost of developing a drug was just $315 million, while at the
other extreme one firm spent $2.8 billion.
The companies analysed in the study were Pfizer,
Roche, Novartis, Sanofi,
GlaxoSmithKline, Johnson & Johnson, AstraZeneca
, Merck & Co, Eli Lilly, Bristol-Myers
Squibb, Takeda and Amgen.
The study calculated IRRs for these companies by estimating
the future value of sales from products in final-stage Phase III
clinical trials, or those submitted for regulatory approval,
using standard industry benchmarks for success rates.
(Editing by Louise Heavens)