The average rate of return (IRR), which is the return companies expect on investment, for 12 major pharmaceutical firms—Pfizer, Roche, Novartis, Sanofi, GlaxoSmithKline, Johnson & Johnson, AstraZeneca, Merck, Eli Lilly, Bristol-Myers Squibb, Takeda and Amgen—was 7.2% in 2012, compared with 8.4% in 2011. IRRs were determined by approximating future sales from drugs in Phase III clinical trials or those pending regulatory approval. The IRR was slightly higher than their cost of capital. However, replacing inventory of late-stage experimental pharmaceuticals was stronger at 10 of the 12 companies. In 2012, the number of new drugs approved grew 28.1% to 41, but sales of these new drugs are expected to drop 31.7% to $211 billion. The average cost for the 12 companies to bring a drug to market was steady at $1.1 billion, with firms spending a low of $315 million and a high of $2.8 billion to develop a drug.

Source: Deloitte/Thomson Reuters