Big increase in R&D spending historically, but decline expected over forecast period.
By Amanda Micklus, Principle Analyst
19 August 2016
I am a Principal Analyst for the strategy team at Datamonitor Healthcare. I have a Bachelor of Science degree in Chemist...
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Pharma companies have seen a period of strong growth for their R&D budgets, but that is forecasted to change. R&D spending by the Big Pharma, Mid Pharma, and Japan Pharma peer sets drastically increased from $70bn in 2006 to $109bn by 2014, growing at a compound annual growth rate (CAGR) of 6%. This growth was driven by mounting pressures to improve R&D productivity while dealing with the high costs associated with clinical trials, coupled with the high attrition rate of drug development. However, beginning in 2015 and through to at least 2020, Datamonitor Healthcare forecasts that R&D expenditures will begin decreasing, including a significant $4bn drop between 2014 and 2015 (from $109bn to $105bn), and slightly decreasing thereafter. Overall, pharma companies will experience a -0.4% CAGR in R&D spend during 2015–20. Between 2006 and 2014, revenues grew at the same rate as R&D, at a 6% CAGR, but while R&D spending is forecasted to decrease over the forecast period, revenues are expected to continue to trend up from 2015 through 2020 at a CAGR of 2%, implying that companies are investing less in R&D amid increasing cuts to budgets.
Source: Datamonitor Healthcare, PharmaVitae Forecast Analysis, July 2016
Datamonitor Healthcare’s R&D Trends 2016 is a comprehensive analysis on R&D spending historically and over the forecast period by the Big Pharma, Mid Pharma, and Japan Pharma peer sets, as well as an analysis on R&D productivity measurements.
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