Improving return on investment in R&D is “imperative” to the future success of global pharma and biotech companies, warns a new report by Ernst & Young.

The 31st annual Beyond Borders report says R&D productivity remains an ongoing concern for the sector, with larger pharma’s taking a particularly big hit from their failure to sustain the previous level of blockbusters emerging from their pipelines.

The detrimental effect of this downturn, coupled with “aggressive pricing pressures” around the globe, has been magnified by a persistently high development cost for new medicines, which is estimated to range from $1 billion to $2.5 billion per product.

“Unless pharma can start to reduce R&D costs - and time - ROI will eventually fall to levels that threaten the sector’s viability,” the report argues. “The industry must more aggressively address its R&D cost structure and improve development efficiency and effectiveness.”

It goes on to note that “a host of technologies, data and analytics tools offer opportunities to address some of the ROI challenge by driving greater efficiency across the entire R&D value chain, from early discovery through to regulatory submission and commercialisation. “These tools - coupled with pharma’s need - are creating an entirely new biotech subsector built around the intelligent use and analysis of data.”

While artificial intelligence (AI) is “unlikely to radically transform R&D productivity” because of the complexity of biological systems, it does offer the opportunity of streamlining components of drug discovery, such as allowing rapid screening of huge numbers of molecules.

Also, the robotisation of many lab processes is also reducing resource costs, while cloud-based, secure data-sharing platforms are facilitating greater research collaboration across disparate geographies, the report notes.
At the same time, advances in genome sequencing, diagnostics and biomarker identification, are fuelling the advent of personalised therapies, which “appears to be helping reduce failure rates and time-to-approval”.

“The industry continues to shift from a clinical science supported by data to a data-driven science supported by clinicians. And, because of this change, biotech companies need to adopt emerging technologies as well as business model innovations to help ensure their continued success,” commented Glen Giovannetti, EY Global Biotechnology Leader.

According to the report, revenue growth for public biotech companies in 2016 failed to reach double digits for the first time in two years, coming in at 7 percent to $139.4 billion, while net income dropped 52 percent to $7.9 billion, “as the industry continues to be challenged by R&D productivity and the emergence of new business models”. Financing fell 27 percent to $51.1 billion, marking the first decline in four years.