Deloitte's 15th Annual Pharmaceutical Innovation Report: Pharma R&D Returns Continue Upward for Second Consecutive Year

GLP-1 therapies emerge as a key driver of industry return on investment

NEW YORK, March 25, 2025 /PRNewswire/ --

Key takeaways

• Projected return on investment in pharma research and development (R&D) in 2024 has risen to 5.9%, continuing the upward trajectory from 2023's 4.1%.
• GLP-1 therapies have played a significant role in driving this year's increase in returns, highlighting the return on investment (ROI) of addressing large, unmet medical needs.
• The average cost of developing a drug rose to $2.23 billion, continuing an upward trend seen in 12 of the top 20 global pharmaceutical companies.
• Phase III clinical trial cycle times increased by 12%, adding to R&D costs and time to market.
• Thirteen out of 20 companies in the cohort experienced growth in the internal rate of return (IRR) with three companies exceeding a 5% increase.

Why this matters
Deloitte, in a series of annual reports on "Measuring the return from pharmaceutical innovation," in collaboration with other member firms, has provided insights into the state of biopharma R&D since 2010. The 15^th annual report analysed the current state of R&D for 20 leading biopharma companies in 2024, highlighting an upward trend in projected returns, driven by new high-value products entering the late-stage pipeline and increased commercial forecasts due to positive trial outcomes.

The analysis shows the average returns for the cohort have risen to 5.9% in 2024, following the previous year's increase to 4.1%. This marks continued recovery from the 2022 record low of 1.2%.

R&D executives interviewed as part of the analysis identified key challenges and opportunities shaping the industry:

• R&D costs per asset have risen to $2.23 billion, driven by increasing investments in new technologies, clinical trial complexity, economic factors, and late-stage attrition.
• Clinical trial timelines continue to lengthen, particularly in Phase III (up 12%).
• Capital allocation strategies should continue to emphasize investment in early-stage innovation to help foster a sustainable pipeline and fuel long-term growth.

Key quotes

"The upward trend in pharmaceutical R&D returns indicates a positive sign for the industry, and the influence of several pronounced asset classes suggests that there is still substantial value in addressing unmet patient need. Identifying the next wave of breakthrough innovation that will have life-changing impact on patients is likely to remain a key challenge to driving sustainable pipeline flow."

—     Kevin Dondarski, Life Sciences R&D strategy leader, and principal, Deloitte Consulting LLP

"It's encouraging to see this continued increase in IRR for biopharma companies despite our analysis showing increased clinical cycle times and climbing costs of drug development. Sustaining this upward momentum, will likely involve bold moves to offset escalating costs including concentrating on shortening clinical cycle times, investing in AI and other technologies to improve efficiencies, and diversifying pipelines to capitalize on less saturated therapy areas."

—  Pete Lyons, U.S. Life Sciences sector leader, and principal, Deloitte Consulting LLP

GLP-1s drive gains in pharma R&D returns
The significant role of GLP-1 therapies in this year's analysis underscores the potential of targeting high unmet needs. Widely known for their applications in diabetes and obesity, these therapies appear to be reshaping the industry's financial landscape.

If GLP-1 assets were excluded from this year's modelling, the average projected return would drop to 3.8%, illustrating their substantial market influence. The success of GLP-1s can serve as a model for how companies can achieve strong financial returns by addressing large, unmet medical needs in other disease areas such as Alzheimer's and stroke prevention.

Clinical trial times continue to rise, increasing costs
While returns have improved, clinical development timelines remain a persistent challenge. The average time from Phase I through regulatory filing now exceeds 100 months, with Phase III trial times increasing by 12%.

The ongoing increase in cycle times contributes to higher R&D costs and delayed market entry, particularly for therapies in areas of high unmet need. AI and automation could offer solutions to accelerate timelines, but as explored in the previous edition of this report, industry adoption remains in its early stages.

Methodology
"Measuring the return from pharmaceutical innovation 2024," is the 15th annual report led by the Deloitte UK Centre for Health Solutions, the research arm of Deloitte UK's Life Sciences and Health Care practices, in collaboration with the Deloitte US Center for Health Solutions. The report explores the performance of the biopharmaceutical industry (biopharma) and its ability to generate returns from its investment in innovative new products.

Since 2010, the "Measuring" the return from innovation series has tracked the projected return on investment from the late-stage pipelines from an original cohort of 12 leading global biopharma companies. During that time the cohort has expanded and today the leading 20 global pharmaceutical companies are tracked using the same comprehensive and consistent methodology.

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SOURCE Deloitte