R&D return on pharma investment picks up for the first time in six years, despite pandemic

In 2020, projected returns on investment in research and development (R&D) for a combined cohort of 15 global pharmaceutical companies was 2.5%, 0.9 percentage points higher than in 2019.

This represents the first sign of a reversal in the declining trend seen over the past seven years, according to  research by Deloitte’s Centre for Health Solutions.

The range in performance between the top performing and bottom performing companies has narrowed, however, with all but one company having an internal rate of return (IRR) below the industry weighted average cost of capital, which is the most common discounted cash flow method to derive enterprise value.

In 2020, the cohort saw an increase in average forecast peak sales per pipeline asset - the amount of money a drug is expected to generate annually - to $421 million, from $357 million in 2019.