The 2008 R&D Scoreboard

thirdsafflowerBiotechnology

Dec 1, 2012 (4 years and 11 months ago)

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The 2008 R&D
Scoreboard
Pharmaceuticals
& Biotechnology
Sector Summary
Pharmaceuticals & Biotechnology – Sector Summary
2 The 2008 R&D Scoreboard Sector Summary
This summary provides a brief overview of R&D expenditure by
companies within the pharmaceuticals & biotechnology sector based on
the data which underpin the 2008 R&D Scoreboard. It:
describes the broad features of R&D in the sector;•
explains the pattern of R&D both in the UK and globally;•
identifies the leading investors in the UK and globally; and•
highlights key trends in R&D spend by the sector.•
The pharmaceuticals & biotechnology sector was the largest •
contributor to R&D in both the UK850 and the G1400 in 2007.
Eight of the top 25 R&D investors globally are pharmaceuticals •
companies: they include two UK firms, GlaxoSmithKline and
Astra Zeneca.
GlaxoSmithKline and AstraZeneca dominate R&D spend in the UK •
pharmaceuticals sector: they spent (89% of the sector total, and
37% of the UK850 spend).
Sixteen more pharmaceuticals & biotechnology companies entered •
the UK850 bringing the total to 130.
R&D in the pharmaceuticals & biotechnology industry continues to •
grow more quickly than sales amongst the largest investors.
Highlights
3 Pharmaceuticals & Biotechnology The 2008 R&D Scoreboard
The pharmaceuticals & biotechnology sector
The complex R&D processes in the pharmaceuticals & biotechnology
sector can be divided into:
basic research, which includes discovery and screening, lead •
development and preclinical evaluation; and
the development process, which includes clinical trials.•
In terms of time and expense, clinical trials are the most challenging: on
average, it takes around 10 to 12 years between a drug entering initial
clinical trials and it receiving approval from regulatory agencies for sale
to the public. As a result, investment in R&D today may take at least a
decade before it impacts on a company’s performance.
The pattern of R&D expenditure
Amongst UK firms
The pharmaceuticals & biotechnology sector was the largest contributor to
R&D in both the UK850 and the G1400 in 2007.
In 2007, the 130 UK pharmaceuticals & biotechnology sector firms among
the UK850 invested £7.9 billion in R&D making the sector the largest
investor in R&D by some distance and accounting for 37% of total R&D
spend (see Table 1). Overall, there are 16 more firms from the sector in the
UK850 than were in last year’s Scoreboard.
Three of the companies are FTSE 100 companies and a further two are FTSE

Mid-250 companies. Between them, these five companies account for 77%
of investment in R&D by firms from the UK850.
There are 56 foreign owned pharmaceuticals & biotechnology companies
in the UK850, 16 more than in 2006. Between them, these firms invest 16%
of the sector’s total R&D.
Pharmaceuticals & Biotechnology – Sector Summary
4 The 2008 R&D Scoreboard Sector Summary
Table 1: The pharmaceuticals & biotechnology sectors – key facts
FTSE 100
FTSE
Mid-250
Other
listed Unlisted
UK850 –
total
Of which:
Foreign
owned
Number of
companies
3 2 47 78 130 56
R&D
(£m, 2007)
6,039.5 27.4 368.3 1,477.5 7,912.8 1,268.7
Amongst global firms
In 2007, the 178 firms from the pharmaceuticals & biotechnology sector
accounted for 19% of R&D investment by the G1400 with an R&D spend
of £52.5 billion. They remained part of the largest sector, having overtaken
technology & hardware in last year’s Scoreboard.
The top five companies in the sector accounted for 35% of total R&D
spending within the sector, and 7% of the G1400. Over half the companies
(93) were American and, of the rest, 60 were from Europe, with the
UK having the largest number of companies (15) but Swiss companies
accounted for proportionately more of the R&D expenditure.
The major firms
In the UK
Investment in R&D by the UK’s pharmaceutical and biotechnology sector
continues to be dominated by GlaxoSmithKline and AstraZeneca (see
Table 2). The two companies combined invested 82% of the sector’s R&D
investment, and 27% of investment by the UK850 and both are in the
top 25 global investors in R&D. This R&D concentration reflects these
companies’ status amongst the global leaders in their industry.
Two of the other three companies amongst the largest five UK investors
in the sector – Shire and Pfizer - are the same as the previous year
although their positions have reversed. Roche Products has replaced
Eli Lilly and Company.
All five of the largest investors in the sector are amongst the UK’s largest
25 companies in terms of expenditure on R&D.
5 Pharmaceuticals & Biotechnology The 2008 R&D Scoreboard
Both AstraZeneca and Shire have increased their investment in
R&D ahead of their sales whereas Pfizer and, to a lesser extent,
GlaxoSmithKline saw R&D expenditure fall as a proportion of sales.
Both GlaxoSmithKline and Astra Zeneca have much higher operating
profits as a proportion of their sales than the other leading investors in
the sector.
Table 2: The top five UK investors in R&D in the pharmaceuticals & biotechnology sector
Company
R&D
(£m, 2007)
R&D as % of
sales
(%, 2007)
Operating
profit as
% of sales
(% 2007)
GlaxoSmithKline 3,246.0 14.3 33.5
AstraZeneca 2,532.9 17.1 27.4
Shire 260.6 21.3 -1.2
Pfizer*#258.3 19.9 -1.0
Roche Products* 163.0 34.8 7.1
Total – top five companies 6,460.8 16.0 29.0
Total – sector 7,912.8 15.3 24.0

* - foreign owned firm
# - accounts not prepared using IFRS
Globally
The top five global investors in R&D 2007 were the same as in 2006: the
significant difference from the previous year was that Roche had climbed
to third place and GlaxoSmithKline had fallen to fifth.
Overall, the five companies increased their investment in R&D by nearly
9%. Three of the companies saw their investment in R&D rise ahead of
their sales: Pfizer, Roche and Sanofi-Aventis.
The profitability of two of the five biggest investors (measured by
operating profits as a percentage of sale) – Roche and Sanofi-Aventis
- had increased over the last year in line with the average across the firms
in the sector. In contrast, two firms - Pfizer and Johnson & Johnson – saw
their profitability fall over the same period.
In total, eight of the top 25 global investors in R&D were from the
pharmaceuticals & biotechnology sector: the other three largest investors
were Novartis (Switzerland), Astra Zeneca and Merck (USA).
Pharmaceuticals & Biotechnology – Sector Summary
6 The 2008 R&D Scoreboard Sector Summary
Table 3: The top five global investors in R&D in the pharmaceuticals &
biotechnology sector
Company
Country
R&D
(£m, 2007)
R&D as %
of sales
(%, 2007)
Operating
profit as
% of sales
(% 2007)
Pfizer#USA 4,063.6 16.7 16.2
Johnson & Johnson#USA 3,858.1 12.6 21.5
Roche Switzerland 3,679.9 18.0 31.13
Sanofi-Aventis France 3,351.5 16.3 23.0
GlaxoSmithKline UK 3,246.0 14.3 33.5
Total – top five companies 18,199.1 15.3 24.7
Total – sector 52,464.6 16.1 19.0

# - accounts not prepared using IFRS
Trends in R&D expenditure
In the UK
UK pharmaceutical & biotechnology companies have continued to
increase their R&D spending faster than their sales: investment in
R&D grew by 6.9% (down from 10.5% the previous year) whilst sales
increased on average by 4.7% in 2007.
R&D as a percentage of sales of 15.9% was slightly higher for the global
pharmaceutical sector than for the UK sector.
7 Pharmaceuticals & Biotechnology The 2008 R&D Scoreboard
Globally
Like their UK counterparts, the G1400 pharmaceuticals & biotechnology
companies increased their R&D spending ahead of their sales: R&D
increased by 11.6% to £52.5 billion in 2007 while sales increased
by 9.4%.
Firms in the pharmaceuticals & biotechnology sector worldwide have
increased their investment in R&D in response to a range of factors
including increased regulatory stringency, safety concerns and high
R&D attrition rates. Regulatory stringency has increased the need for
more accurate prediction of drug safety and this has raised the cost
of R&D. At the same time, high attrition rates have led to fewer drugs
being approved, leaving companies with fewer new drugs to sell.
These factors mean that increased investment in R&D alone will not
necessarily produce new, innovative products: other important factors
also affect the success of R&D, including the choice of therapy areas,
the influence of alliances, the effectiveness of in-house R&D processes
and talent recruitment.
First published January 2009.
Department for Innovation, Universities and Skills.
www.dius.gov.uk
©Crown Copyright. URN 148-08-IN-ON