by Colin Terry, Partner, Deloitte Consulting


Following the launch of our eighth annual report ‘A new future for R&D? Measuring the return from pharmaceutical innovation 2017’, we hosted a peer-to-peer discussion on how R&D leaders can address R&D performance trends. The roundtable stimulated many insightful discussions among the senior R&D executives in attendance, and below are some of the key takeaways that resonated most with me.

Therapy area focus
The conversation started with the topic of therapeutic area focus, and what it is specifically that makes pipeline composition correlate to higher R&D returns. While views varied, participants agreed that building a strong presence in one therapeutic area is a strategic advantage. However, they also discussed alternative strategies including maintaining ’critical mass’ within one therapeutic area while focussing on more ’opportunistic’ assets in two distinct business units. We contributed to this discussion by reminding participants of the analysis we did for our 2016 report, Balancing the R&D equation, which demonstrated a negative correlation between therapeutic area volatility and forecast asset peak sales, and that companies with more focused portfolios appeared to have greater commercial potential from their pipeline assets.1

We also discussed the shift in therapy area focus towards the development of oncology drugs, particularly immuno-oncology therapies, a trend we highlighted in our 2017 report A new future for R&D?. Our analysis showed that, in a bid to maximise their return on investment in R&D, our original cohort of biopharma companies have shifted their focus to specific therapeutic areas such as oncology.2 Indeed, the forecast percentage of late-stage revenue from oncology assets has more than doubled in eight years (from 18 per cent of the pipeline in 2010 to 37 per cent in 2017).

Participants however intimated that targeting such heavily saturated markets may not be the most sensible strategy. The debate centred on whether it is favourable to target saturated markets with high commercial potential, or to focus on targets with lower probabilities of success where there are fewer competitors. Indeed, participants suggested that there may be too many companies ‘chasing the market’, with over 2,000 immuno-oncology agents in development currently, but insufficient eligible, accessible patients to complete these studies in the required timeframe.3 However, participants also pointed out that many companies are continuing to pursue conditions with incredibly high failure rates such as Alzheimer’s disease in a bid to find value.

Asset sales forecasts
The discussion moved towards asset sales forecasts and their potential impact on R&D cost allocation. A number of participants speculated that assets with the highest projected revenue are the ones that receive the lion’s share of funding – something which could be resulting in value destruction in cases where these compounds do not make it through clinical development. Another suggestion was that product teams could be over-hyping the potential of their assets due to the internal competition for funding within larger pharmaceutical organisations, and, subsequently, becoming trapped after a downgrade in projected sales.

Company size
In line with findings from our Balancing the R&D equation report, participants discussed the issue of larger companies being slow to ‘kill’ assets that were previously seen as being viable – either by deciding to invest in another study or, even after the decision to halt the research has been made, spend not being terminated quickly. Large companies tend to have complex and often quite fragmented, governance processes that can be time-consuming and inefficient. As company size and portfolio diversity grows, many competing priorities often cut across numerous functions making resolution particularly challenging. However, smaller organisations tend to be more nimble when it comes to decision-making and the need to allocate resources more quickly, with a handful of key-decision makers engaged early to drive the direction of the programme.4

The discussions brought out a number of interesting theories on how to tackle pharma’s R&D productivity challenge and gave us many ideas to take away as we embark on this year’s analysis. The bitter truth is there is no easy fix, and we believe that the biopharma industry continues to face an incredibly challenging R&D environment. However, there remains room for optimism within the industry and as highlighted throughout our report series, there are certain strategies that companies can follow in order to boost their R&D productivity. 


Colin Terry - Partner, Deloitte Consulting

Colin is a Partner in our Life Sciences practice. He has been with Deloitte since 2011 working in the US firm, until 2014 when he moved to the UK practice. Colin’s client advisory work in the Life Sciences sector ranges across strategy and operations focused on the R&D function including operating model development and implementation as well as post-merger integration (PMI). These engagements have been serving client Boards and their senior leadership teams in R&D, Commercial and Supply Chain.

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