An external review of biopharma’s R&D performance has resulted in unclear responses to a seemingly basic question: Has the industry improved or declined over the last decade? Market reports assert conflicting messages as definitions and measures of performance vary.
This paper from KPMG evaluates the heart of the industry’s mission and the leading indicator of long-term success: R&D performance.
Key findings:
— R&D performance largely improved across the market from 2011–2018 when evaluated on two dimensions: efficiency and innovation
— The market-wide improvements seem unexceptional at first glance but a more detailed review of individual company outcomes uncovers important nuance
— The range in performance metrics within the top 20 global biopharma companies1 was significant, highlighting clear R&D leaders and laggards, and the analysis identified thematic behaviors that drove these results
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Strategic investments in inorganic vs. organic R&D improves overall innovation.
Leaders have seen more success in inorganic R&D than laggards, suggesting companies should diversify R&D spend to cultivate innovation effectively.
Adequate but efficient R&D spend is required to drive performance.
Leaders increased investments in R&D in both absolute spend and as a percent of Sales and also maintained lower spend rates per asset, for both approved and pipeline assets
Focused investments in targeted TAs and consolidating bets sooner improves outcomes.
Leaders adopted a “fail early, fail fast” approach to increase the number of phase III approvals and reduced their number of therapeutic areas to be more targeted
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R&D is multi-faceted and high performing firms excel on two dimensions:
EFFICIENCY
Definition: Ability to successfully drive an asset through the FDA approval process, specifically from phase I to phase III approval. Measured by probability of success (POS)
INNOVATION
Definition: Concentration of new molecular entities (NMEs) and first-in-class (FiC) assets in the company’s overall list of approved assets, distinguishing new innovation from asset lifecycle management. Measured by NME and FiC concentration rates (%)
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— The market as a whole realized incremental improvements in R&D efficiency and innovation from 2011 to 2018, though the performance gap between leaders and laggards is wide
— Market-wide efficiency improved from 8% to 12%, measured by POS
— Innovation when measured by NME concentration improved from 32% to 38%, but innovation when measured by FiC declined from 16% to 12%
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LEADERS
— Higher innovation scores indicate commitment to discovery, exploration, and calculated risk, rather than leveraging a safe, life-cycle management approach to R&D
— Business Development investments have been particularly successful in improving both efficiency and innovation scores through risk sharing models and outcomes-based investments
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LAGGARDS
— Laggards’ declining POS scores highlights a subset of the market that has not established an evaluation process to select the optimal assets from their overall pipeline, and have thus experienced more expensive failures
— Assets approved are more likely to be a re-launch of existing assets or part of a lifecycle management strategy than a new or innovative discovery
Download the full paper at kpmg.us
