Foreword

Welcome to the sixth annual Deloitte report exploring the pharmaceutical industry's performance in generating a return from its significant annual investment in new product innovation.

This report estimates the return on investment that 12 of the leading life sciences companies might expect to achieve from their late stage pipelines, which comprise assets that should launch within the next one to four years, based on publicly available information.

For the first time since Deloitte started to assess R&D returns in 2010, we have introduced a new group of companies to the analysis: four, mid-to large-cap companies in recognition of the increasing amount of value produced by such companies and their importance to the life sciences industry. Adding companies of this size and scale has allowed us to deepen our insights into the company and portfolio characteristics that lead to higher R&D returns.

As in previous years, we continue to report our key R&D returns metrics, however, we have shifted the emphasis of the report to focus on deepening our understanding of the factors that positively influence returns for companies and patients. We have explored five themes that impact fundamentally a company's ability to generate returns in R&D successfully; portfolio focus and volatility, competition for external innovation, company size, cash investment trends and the impact of peak sales trends.

Since our last report, we have seen macroeconomic pressure continuing to reduce returns in the life sciences sector and specific questions being raised over the pricing of innovative medicines across the world, including those markets which have different price setting mechanisms such as the US. There has also been renewed debate over the 'correct' level of R&D spending for companies and the industry as a whole, as well as the level of returns the industry should expect. These external factors, combined with internal productivity challenges, have generated the lowest projected returns since our report started in 2010. However, the extension cohort might provide some lessons on how to produce drugs that create value with less cost and infrastructure.

We hope you find the report insightful and welcome your feedback on the findings as well as the implications for the life sciences industry.

To read this Report in full, please click here.

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