The world’s top 10 pharmaceutical companies spend around $50bn a year on research & development…but have very little to show for it.
The cost of bringing a new drug from the laboratory to market has risen to around $1bn and, in an influential study released last year, McKinsey estimated that the industry’s return on R&D over the past decade has averaged just 7 per cent, below its cost of capital. It is startling that companies boasting operating margins of 30 per cent or more are actually destroying value in their core activity. No wonder the sector has been de-rated so substantially over the past 10 years. Read more