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Investments in drug research and development are paying dividends while the cost to do so stays flat, a trend that appears to be benefitting local firms.
Large pharmaceutical companies’ returns on research and development investments rebounded in 2023, according to the latest report from Deloitte released today. The report measures returns on investments for the 20 companies that spend the most on R&D for drugs globally and found that projected returns on investment climbed to 4% in 2023, a 3 percentage point increase over 2022’s record-low of 1.2%. The 20 firms, which include Merck, Johnson & Johnson, Bristol Myers Squibb and Pfizer, spent a total of almost $146 billion on R&D in 2023.
While 2022’s record-low returns didn’t necessarily spell trouble for firms in New York and New Jersey, Kevin Dondarski, Deloitte’s life sciences R&D strategy leader, said the report’s results suggest an even brighter future for the metropolitan area’s pharmaceutical companies. He added that the increase is one of the larger ones since Deloitte began publishing the report more than a decade ago.
The positive performance was driven by companies bringing more drug candidates into the later stages of development as their value grew, Dondarski added. This includes Merck, which is based in Rahway, New Jersey, and New Brunswick-based Johnson & Johnson.
In the fourth quarter of 2023, Merck received multiple Food and Drug Administration approvals for its cancer drugs, such as a green light for its blockbuster Keytruda to be used with Padcev for adult patients with locally advanced or metastatic urothelial cancer. The firm also began phase 3 trials for four investigational oncology medicines. Keytruda brought in $25 billion in 2023, a 19% jump from 2022.
Johnson & Johnson gained FDA approval for its cancer drug Balversa to treat certain locally advanced or metastatic bladder cancer in the fourth quarter of 2023. The firm also submitted applications to the European Medicines Agency for Rybrevant to be used, in combination with chemotherapy, to treat adults with a certain type of non-small cell lung cancer who don’t respond to prior medicines.
Cancer continues to pique large companies’ interest, according to the report. Oncology medicines made up about 30% of the cohort’s overall late-stage portfolios, holding steady from 2022. Infectious disease drugs represent a growing area of interest, making up about 10% of the pipeline, a slight increase over the prior year. Cardiovascular therapies also held steady while central nervous system therapies comprised slightly less of the companies’ overall portfolios in 2023.
The report also shows that the average cost of taking a medicine from discovery to launch stayed flat at just over $2 billion. Dondarski said that’s a positive development because, among other factors, it signifies that fewer drugs are failing to launch.
While there are signs of success, company leaders surveyed in the report said there are still challenges to be wary of. Although the average cost of developing a drug stayed flat from 2022 to 2023, it has still grown overall, and about a third of executives said they are very concerned about the impact that could have on their firms. A quarter said they’re most concerned about the country’s regulatory environment; the federal Inflation Reduction Act sparked the most worry.
However, Dondarski emphasized that New York and New Jersey’s buzzing pharma ecosystem is well-positioned to continue a rebound.
More drug startups are popping up around the metropolitan area, he said, which he called “fertile ground” for partnerships and innovation. Although the influx of new firms could create competition, he described it as an opportunity for positive change, particularly with more companies beginning to use artificial intelligence to drive drug development.
“There’s so much activity and interest and investment in everything, every single domain of data,” he said. “The sky’s the limit.”
Deloitte is headquartered in Midtown and has published reports on pharmaceutical R&D returns since 2010.
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Jacqueline Neber , 2024-04-26 11:33:04
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