Since 2010, De­loitte has been track­ing the re­turn on in­vest­ment that a hand­ful of top bio­phar­ma com­pa­nies might ex­pect to see from their late-stage as­sets. Last year, the com­pa­ny not­ed “seeds of change” fol­low­ing a six-year de­cline in av­er­age in­ter­nal rate of re­turns.

De­loitte’s lat­est re­port in­di­cates the trend has con­tin­ued this year, as pro­ject­ed R&D re­turns have risen from 2.7% to 7%, the largest an­nu­al in­crease since the study be­gan in 2010.

Son­al Shah

“We had ex­pect­ed an uptick in the IRR this year be­cause of the COVID vac­cines and ther­a­pies,” Son­al Shah, se­nior man­ag­er for the De­loitte Cen­ter for Health So­lu­tions, told End­points News. “But the fact that when you ac­tu­al­ly ex­clude them, you still see an in­crease, and we see this de­crease in R&D costs as well as a de­crease in cy­cle time was sur­pris­ing to me.”

When cal­cu­lat­ing IRR, De­loitte takes in­to ac­count a com­pa­ny’s to­tal R&D ex­pen­di­ture for bring­ing as­sets to launch, plus a fore­cast es­ti­mate of the fu­ture rev­enue that these as­sets could ex­pect to earn fol­low­ing launch.

From this year’s com­bined co­hort of 15 top-earn­ing com­pa­nies — which were not list­ed in De­loitte’s re­port — three achieved a fore­cast peak sales per as­set greater than $500 mil­lion in 2021, with six com­pa­nies im­prov­ing their pro­ject­ed peak sales per as­set com­pared to the year be­fore.

Along­side an in­crease in peak sales fore­casts, De­loitte not­ed that the cost to bring an as­set to mar­ket has de­clined over the last three years, which it at­trib­ut­es to “nov­el tri­al de­signs and im­prove­ments in ef­fi­cien­cy through the dig­i­tal­i­sa­tion of drug dis­cov­ery and de­vel­op­ment.” It’s al­so, in part, due to “very high” sales fore­casts for the com­pa­nies’ Covid-19 as­sets and one high-val­ue late-stage neu­ro­log­i­cal as­set.

How­ev­er, even if you ex­clude the Covid-19 re­lat­ed as­sets, the pro­ject­ed IRR for 2021 is still 3.2%, which is high­er than the 2.7% re­port­ed for 2020.

“This is a big re­ver­sal, af­ter al­most a decade-long de­cline in re­turns on in­no­va­tion. So the fact that that turn­around is hap­pen­ing in spite of Covid is re­al­ly ex­cit­ing,” Shah said.

While the av­er­age cost to de­vel­op an as­set, in­clud­ing cost of fail­ure, was at $2.376 bil­lion in 2020, that fig­ure de­creased slight­ly to $2.006 bil­lion in 2021, ac­cord­ing to De­loitte. How­ev­er, that de­crease is main­ly due to an in­crease in the num­ber of as­sets in the late-stage pipeline. And it’s still quite an in­crease from the av­er­age cost in 2013, which mea­sured in at $1.296 bil­lion.

De­loitte did note an in­crease in tri­al ef­fi­cien­cy, large­ly due to the rapid de­vel­op­ment of Covid can­di­dates. The com­pa­ny re­port­ed that Phase III tri­als for Covid as­sets were 3.7 times faster than non-Covid in­fec­tious dis­ease tri­als.

“Nev­er­the­less, de­spite the dip, the over­all cy­cle time for com­bined co­hort con­tin­ues to re­main above 2019 lev­els, re­in­forc­ing the need to op­ti­mise process­es or fun­da­men­tal­ly change the drug de­vel­op­ment par­a­digm,” the re­port states.

There was al­so an uptick in col­lab­o­ra­tion last year, with De­loitte not­ing that 46% of late-stage as­sets in 2021 were co-de­vel­oped, up from 32% in 2020. On­col­o­gy as­sets still dom­i­nate the group’s col­lec­tive pipeline, rep­re­sent­ing 35% of late-stage as­sets. As ex­pect­ed, the pro­por­tion of in­fec­tious dis­ease as­sets in­creased quite a bit in the last year, now oc­cu­py­ing 14% of late-stage pro­grams.

“We’re see­ing high­er-val­ue pro­grams, low­er ex­pense, and ul­ti­mate­ly more pro­duc­tiv­i­ty for the in­dus­try,” Shah said. “And a lot of that I’ll say re­flects the in­vest­ments the in­dus­try has been mak­ing over the last sev­er­al years in terms of dig­i­tal tech­nolo­gies, re­al­ly look­ing at de­cen­tral­ized tri­als and more ef­fec­tive­ly and ef­fi­cient­ly run­ning clin­i­cal tri­als.”

Amgen is the latest pharma company to appear on the radar of Senate Finance Committee Chair Ron Wyden (D-OR), who is investigating the way pharma companies are using subsidiaries in low- or zero-tax countries to lower their tax bills.

Like its peers Merck, AbbVie and Bristol Myers Squibb, Wyden notes how Amgen uses its Puerto Rico operations to consistently pay tax rates that are substantially lower than the U.S. corporate tax rate of 21%, with an effective tax rate of 10.7% in 2020 and 12.1% in 2021.

After controversially spinning out its talc liabilities and filing for bankruptcy in an attempt to settle 38,000 lawsuits, Johnson & Johnson is now changing up the formula for its baby powder products.

J&J is beginning the transition to an all cornstarch-based baby powder portfolio, the pharma giant announced on Thursday — just months after a federal judge ruled in favor of its “Texas two-step” bankruptcy to settle allegations that its talc products contained asbestos and caused cancer. An appeals court has since agreed to revisit that case.