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R&D value measurement

Is R&D earning its investment?

R&D

 

Background

Deloitte and Thomson Reuters have collaborated in this study of R&D value measurement, combining Deloitte’s R&D advisory experience and financial expertise with Thomson Reuters R&D data and business insights. Please download the full paper to learn more about how Pharmaceutical innovation is facing a fundamental productivity challenge

Key findings

“Is R&D earning its investment?” has generated the following key points:

  • An R&D investment model based on ‘percentage of sales revenue’ is no longer fit for purpose against a backdrop of declining R&D productivity.
  • The complexity of the R&D business model has outgrown the capabilities of portfolio or value based management techniques to guide business decision making.
  • Deloitte and Thomson Reuters ‘whole R&D business’ assessment of R&D returns indicates that the 12 largest pharmaceutical companies (by R&D spend) are each achieving a positive return (IRR) relative to the group’s average WACC.
  • We have developed a case company IRR simulation to quantify the impact of key change drivers on R&D returns. Our value modelling pinpoints improvements in product differentiation and cost efficiency as having the greatest impact on IRR performance.

 

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