By Emily May, Assistant Manager, UK Centre for Health Solutions

Since 2010, we have examined biopharmaceutical (biopharma) R&D by tracking the returns that leading global biopharma companies might expect to achieve from their late-stage pipelines. Yesterday we launched Nurturing growth: Measuring the return from pharmaceutical innovation 2021, the 12^th report in our series which shows that in 2021 our cohort of 15 high spending R&D companies have seen a large uptick in the average internal rate of return (IRR). This is driven largely by reduced average costs to develop an asset, reduced cycle times and increased average sales forecasts. This week’s blog explores these 2021 report findings and discusses how companies can learn the lessons from the past 12 months to realise a productive future for drug development.

Development of our analytical model and the evolution of the study cohorts

Underpinning our annual report series is a bespoke Deloitte analytical model that calculates the IRR that selected biopharma companies might expect to achieve from assets in their late-stage pipelines. These are assets that are expected to launch within the next one to four years (filed, in Phase III or Phase II with breakthrough therapy designation as of 30th April each year). This analysis of IRR is used as a proxy measure of the industry’s ability to balance initial capital outlay on R&D with the cash inflows that the companies are projected to receive as from investment in innovation. Data used to populate the model are from publicly available, audited annual reports and sales forecasts provided by GlobalData.  A more detailed explanation of our methodology is on our website. 

In 2010, our analysis analysed the IRR that the 12 largest biopharma companies by R&D spend in 2009-10 might expect to achieve from their late-stage pipeline (our original cohort). In 2015, we added an extension cohort of four smaller, more specialised companies and retrospectively analysed their R&D investments back to 2013. In recent years the performance of these cohorts has converged, and a merger reduced our extension cohort to three companies, so last year we created a ‘combined’ cohort of 15 companies with trend data back to 2013.

Nurturing the seeds of change

In 2021, the projected IRR for the combined cohort is 7.0 per cent, a 5.3 percentage point increase from 2020 (Figure 1) with ten of the 15 companies seeing an improvement in their IRR. This builds on the ‘seeds of change’ we witnessed in our 2020 report, with this larger uptick suggesting a potential reversal in the decade-long decline in projected R&D productivity that we had seen over the first ten years of analysis. Importantly, if emergency-approved COVID-19 related assets are excluded from our analysis, the projected IRR is 3.2 per cent which is still higher than the 2.7 per cent seen in 2020.

Figure 1. Return on late-stage pipeline, 2013-21 – combined cohort

In measuring IRR as a proxy of R&D productivity we factor in the average cost to develop the assets in each company’s pipeline and the expected sales from these assets once launched:

• in 2021, the average cost to develop an asset, including the cost of failure, decreased to $2,006 million from $2,376 million in 2020, which is still a large increase from our 2013 starting point at $1,296 million. This recent fall in average cost per asset was principally caused by the significant increase in the number of assets in the combined cohort’s late-stage pipeline, 242 in total which is 32 more than in 2020 (Figure 2)
• in 2021, the average forecast peak sales per pipeline asset for the combined cohort increased to $521 million in 2021, the highest level in four years and significantly greater than $422 million seen in 2020. While this was driven partly by the sales forecasts for emergency-approved COVID-19 vaccinations and treatments, six of the 15 companies improved their projected peak sales per asset compared to 2020 (Figure 3).

Figure 2. Average R&D cost to develop a compound from discovery to launch, 2013-21 – combined cohort

Figure 3. Average forecast peak sales per pipeline asset, 2013-21 – combined cohort

Sources of innovation are increasingly external

Since 2018, biopharma companies have relied increasingly on external sources of innovation, as they seek to augment their innovation pipeline through collaborations and scientific partnerships with other, often smaller, players. In 2021, self-originated assets in our combined cohort’s late-stage pipeline reduced to just 29 per cent and we saw another large increase in co-developed assets, from 32 per cent in 2020 to 46 per cent in 2021 (Figure 4).

Figure 4. Proportion of late-stage pipeline sourced from internal and external sources, 2013-21 – combined cohort

Cycle times have dipped slightly

Between 2016 and 2020 there has been a trend towards longer cycle times, but this year has shown a slight dip, to an average of 6.9 years which is a notable dip from the seven-year high of 7.14 years seen in 2020 (Figure 5). This decrease is driven by the expedited completion of trials for COVID-19 therapies and vaccines. Indeed, COVID-19 Phase III trials were 3.7 times faster than other infectious disease Phase III trials. However, the average cycle time remains above pre-pandemic levels of 6.64 years in 2019, reinforcing the need to optimise processes as the ‘need for speed’ continues to be a vital factor for improving R&D productivity.

Figure 5. Average clinical trial cycle time (in years)

Lessons from the COVID-19 experience

Biopharma companies should expand the use of some of the COVID-19 development measures to plan, design and execute studies more efficiently across their development portfolios (Figure 6).

Figure 6. Incorporate the lessons from the R&D approaches adopted for COVID-19 into routine clinical development

• enable at-risk development for high priority programmes by identifying programmes with a high probability of success and allowing bypassing of certain stage-gates to enable the seamless transition from one phase of development to the next
• expand collaborative dialogue with regulators to accelerate the development of urgently needed therapies through data-sharing infrastructure and harmonising requirements across geographies
• focus on streamlined trial protocol design with a limited number of relevant endpoints to reduce the burden on site staff, avoid protocol deviations and save development time
• selectively pursue transformative development approaches with master protocols and adaptive trial design to enable the rapid assessment of therapies
• expand the use of digital technologies, and AI-based solutions, to conduct hybrid studies and capture data from and manage diverse study populations remotely
• strive for greater diversity in clinical trials to ensure study populations match the prevalence of disease across racial and ethnic groups.

Sustaining the momentum of change

To drive a more productive future for R&D, with more equitable and quicker access to new therapies, companies should nurture the growth identified in 2021 through:

• unlocking the power of collaborative data sharing to build on prior and emerging knowledge, reduce duplication of research efforts and curate research-grade real-world data (RWD) with cloud-based capabilities across ecosystems
• building a digital talent pool to expand the use of data science-driven and hybrid study approaches by rethinking talent strategies, creating alliances to access digital talent at source, and investment in reskilling existing talent
• increasing health equity, patient centricity and building trust through a focus on wider application of access and affordability programmes and demonstrating humanity, transparency, capability and reliability
• integrating environmental, social, governance (ESG) initiatives into R&D by considering clinical trial footprints and supply chains whilst meeting society’s expectations about equity of access to experimental and approved therapies.

Conclusion

Much of the gains we have seen in 2021 were driven by collaborative data sharing, investing in digital and technology talent, and recognising the growing influence of connected healthcare. These changes have benefited the entire industry as well as the cohort companies under review in our research. The ultimate benefactor, of course, is the patient. This unparalleled stakeholder collaboration, along with significant public and private funding, and regulatory flexibility also enabled the world’s biopharma companies to bring COVID-19 vaccines and therapies to market in record time. While these medicines were developed in response to an unprecedented healthcare imperative and are targeted at a mass, global market rather than specific groups within a population, the industry can capitalise on using the COVID-19 vaccine development process as a blueprint to plan, design and execute studies more efficiently across all R&D portfolios.

Emily May, Assistant Manager, UK Centre for Health Solutions

Emily is an assistant manager in the Centre for Health Solutions where she applies her background in both scientific research and pharmaceutical analytics to produce supported insights for the Life Sciences and Healthcare practice. Emily leads the research and publication of the life sciences insights, performing thorough analysis to find solutions for the challenges impacting the industry and generating predictions for the future. Prior to joining the centre, Emily worked as an Analytical Scientist conducting physical chemistry analysis on early stage drug compounds and previously lived in Antwerp, Belgium where she researched and developed water-based adhesive films.

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