What You Should Know:
– Deloitte Centre for Health Solutions releases its thirteenth annual report, ‘Seize the Digital Momentum: Measuring the return from pharmaceutical innovation 2022’ that explores the performance of the biopharmaceutical industry (bio Pharma) and its ability to generate returns from investment in innovative new medicines.
– Since 2021, much of the world has successfully adjusted to life where COVID-19 is more endemic as vaccines and treatments reduced the risk and severity of illness, however geopolitical turmoil and a global cost-of-living crisis have continued to drive serious instability in the health landscape.
Pharmaceutical Innovation – Trends and Insights At a Glance
This is the 13th in a series of reports on Measuring the return from pharmaceutical innovation, providing insights into the state of bio Pharma R&D since 2010. The inaugural report analyzed the average IRR that a cohort of 12 large-cap biopharma companies might expect to achieve from their late-stage pipelines. However, between 2010 and 2015, the IRR fell from 10.1 percent to 4.2 percent, suggesting that smaller more dynamic and flexible R&D units were better. Equipped to confront the challenges of biopharma R&D. Between 2013 and 2019, the expected returns of the original cohort continue to fall year-on-year while the much higher returns experienced initially by the extension cohort fell more dramatically, resulting in a convergence in the IRR of the two cohorts to an all-time low in 2019. In 2010, however, against the backdrop of the start of the COVID-19 pandemic, there was a small uptick in the average IRR.
Measuring the return from pharmaceutical innovation:
– In 2021 Deloitte observed a notable rise in average IRR to 6.8 percent, driven by high forecast values for COVID-19 assets (including vaccines and treatments) and one high-value late-stage neurological asset. This resulted in two companies with IRRs that were significant outliers. However, as some of these approved COVID-19 assets moved into the commercial portfolio, the IRR has declined again to 1.2 percent. Indeed, the forecast value of approved assets leaving the pipeline has tripled from 2021 to 2022. Moreover, despite the reduction in IRR, the interquartile range of individual company IRRs has narrowed compared to previous years and therefore this decline can, in part, be attributed to the absence of a high-value company outlier.
– In 2022, the top 20 companies spent a total of $139 billion on R&D, a two percent decrease in underlying R&D expenditure compared to 2021 ($141 billion). The average cost to develop an asset was $2,284 million, an increase of $298 million from 2021, mainly due to an increase in average cycle time length as the impact of COVID-19 on cycle time acceleration has not continued. Moreover, the average cost to develop an asset from discovery to launch is in line with the pre-pandemic 2018-2020 data.
– In 2022, only one of the companies we analyzed is predicted to achieve average forecast peak sales greater than $1 billion across all their assets, and only five companies improved their projected peak sales per asset compared to 2021. In 2022, the average forecast peak sales per pipeline asset for the combined cohort decreased from $500 million in 2021 to $389 million in 2022. However, the 2022 value is almost identical to the forecast peak sales of 2020. This decline in the average forecast peak sale per asset is driven mainly by the number of high-valued assets that have left the pipeline this year.
A large uptick in the forecast of self-originated assets:
1. After observing a continuous decline in the proportion of forecast revenue from self-originated assets over the past five years, there has been a significant rise, from 29 percent in 2021 to 51 percent in 2022.
2. Consequently, over half of the forecast revenue from the late-stage pipeline is now being generated in-house. This notable increase in the revenue share of self-originated assets can be partly attributed to the addition of five new blockbuster assets, including a high forecast COVID-19 therapeutic. The proportion of self-originated assets by volume count has increased by four percent from 2021 to 2022, with 35 percent of total assets being generated in-house.
Transforming R&D through digitalization, diversity and sustainability:
The 2021 report highlighted key learnings from the accelerated development of COVID-19 vaccines and therapies that we believed could help biopharma companies improve their R&D productivity. However, the increase in cycle times and cost to develop an asset, alongside lower average forecast peak sales, which we have seen in this year’s analysis, suggests that it may be too early for the lessons from the pandemic to have an impact. While we continue to believe that these lessons will make a difference, we have reflected on the immediate actions that we believe will help transform R&D productivity in greater detail.
These are:
– optimizing digitalization to bolster meaningful data collection and analysis for decentralized clinical trials
– broadening clinical trial diversity to advance equity and improve clinical outcomes for al
– Pivoting toward environmentally sustainable R&D operations while improving efficiency.
As noted last year, the pandemic has accelerated biopharma’s approach to digitalization, instilling it into every aspect of work, and using it to transform the experiences of patients and partners. Digital transformation road maps spanning years were suddenly deployed in months, bringing about radical changes in how companies conduct operations and paving the way for more innovation in clinical trials.
This acceleration has continued with the adoption of Al technologies helping to:
– energize drug discovery and trial design
– improve patient and trial site selection
– monitor and manage patients remotely
– reduce the need for travel while improving adherence and reducing attrition
– optimize data collection and collation and consolidate all data onto a shared cloud-based analytics platform.
Biopharma companies and industry stakeholders have acknowledged the need to address the access, awareness, and trust issues that can limit racial and ethnic diversity in clinical trials. Differences in age, life experiences and genetics can all influence how individuals respond to treatments and interventions. To increase our understanding of treatment effectiveness, clinical trials need to be inclusive of racial and ethnic minority groups, as well as other populations. This requires companies to put diversity at the forefront of their study design; the more diverse the clinical trial participants, the more companies will learn about the safety and efficacy of the potential medicine. Working with communities and building a network of trusted community-based trial sites could help engage more diverse study populations and build trust in medical research, and in turn, could potentially reduce development cycle times.
The pharma industry is facing growing pressure to improve its environmental footprint across the product lifecycle with most companies adopting ambitious and measurable sustainability targets. Given 80 percent of a pharma product’s environmental impact is determined in the design phase, adopting a sustainability-by-design mindset can improve productivity by optimizing raw material use, reducing energy and water consumption, and minimizing waste and pollution without compromising quality or safety. Moreover, developing study guidelines that require new products to be made in green labs, championing virtual trial design, minimizing staff travel and ensuring the trial is necessary and managed efficiently, are within the pharma companies’ control. Adopting transparent qualitative and quantitative metrics to analyze the changes will be essential in ensuring pharma companies deliver their environmental sustainability targets. To optimize outcomes, scientists and other staff involved in clinical trials need to be trained in the use of digital and Al-enabled innovation and in the adoption of novel ‘green’ technologies.
The clinical trials of tomorrow:
Tomorrow’s clinical trials will be tailored to the convenience, medical, and behavioral needs of diverse patient populations impacted by diseases. With trial decentralization as the norm, the virtual clinical trial of the future will place a lower burden on patients.
It will be data-rich due to the high frequency and volume of measurement and reduce the environmental impact due to reduced travel, fewer research centers and minimized patient non-adherence and dropouts. Such clinical trials will fundamentally improve the productivity and cost-effectiveness of drug development through purpose-led digital innovation. At an industry level, the central pillars of R&D will be the establishment of clinical trial networks, an ingrained focus on sustainability and extensive collaboration across the health ecosystem will form the central pillars of R&D.
