According to the latest release of the EU’s annual “R&D Scoreboard,” R&D spending by 2,500 of the world’s largest firms grew 6.6% in total to €696.0 billion ($773.3 billion = €0.90 = $1) in fiscal 2015/2016 (based on the company’s latest available fiscal year-end report) (FY15). This is close to the previous year’s 6.8% increase in R&D spending. In fact, 70% of Scoreboard companies raised R&D spending. Scoreboard companies’ spending accounted for an estimated 90% of total R&D spending by businesses worldwide during the year and over 55% of total global R&D spending. Figures include the currency effects of translation of a company’s financial results into euros (which depreciated against the US dollar and Japanese Yen in calendar year 2015), as well as the effects of acquisitions and divestitures.

R&D spending increased in FY15 for Scoreboard companies despite a 3.6% decline in revenues to €17,686.8 billion ($19,652.0 billion), compared to a 2.2% increase the year before. Consequently, R&D intensity (R&D expenditures divided by sales) was 3.8% for the latest year. Total operating profits also declined for Scoreboard companies, falling 12.3% to €1,517.7 billion ($1,686.3 billion). Total capital expenditures also fell but were only down 0.8% to €1,127.5 billion ($1,252.8 billion).

Top 100 Spenders

R&D spending is definitely weighted toward larger companies. The top 100 companies in the Scoreboard represented 53% of total Scoreboard R&D spending. In 2015, these firms’ R&D spending rose 6.9% to €369.4 billion ($410.4 billion). Sixty-eight of the top one hundred companies increased R&D spending. R&D intensity for the top one hundred was 6.8%.

In contrast to the results for all 2,500 companies, sales, operating profit and capital expenditures all increased for the top one hundred firms, rising 2.6%, 4.0% and 6.3%, respectively. The top one hundred’s sales accounted for 30% of all Scoreboard companies’ total revenues.

Sector Growth

Not surprisingly, of the 38 industry segments highlighted in the report, Software & Computer Services, Pharma & Biotechnology, and Technology Hardware & Equipment Parts showed the fastest increase in annual R&D spending in FY15, rising 12.3%, 9.8% and 7.6%, respectively. By dollar amount, Pharma & Biotech accounted for 19% of total Scoreboard R&D spending, followed by Automobile & Parts at 16%, and Technology Hardware & Equipment at 14%.

 

Pharma & Biotechnology

Among Pharma & Biotechnology companies in the Scoreboard, biotech companies showed much faster R&D expenditure growth at 23.8%, compared to 7.2% for pharmaceutical firms.

Out of the 361 Pharma & Biotechnology firms in the table (lab product companies were removed from the Scoreboard’s original list), 64% showed double- or triple-digit increases in FY15 R&D spending, while 19% reported declines. But, of the companies with declines in R&D spending, only 30% reported a drop in sales.

Forty of the 361 Pharma & Biotechnologies companies reported a decline in their three-year compound annual growth rates (CAGR) for R&D spending, including Abbott Laboratories (-31.8%), Merck US (-5.6%), Eli Lilly (-5.0%) and Glaxo Smith Kline (-4.3%). The five companies with the fastest three-year CAGR for R&D spending were Atara Biotherapeutics (456.9%), Retrophin (323.8%), Kite Pharma (219.6%), La Jolla Pharmaceutical (174.7%) and Seres Therapeutics (163.7%).

For the Scoreboard’s 26 Chinese Pharma & Biotechnologies companies, R&D spending and FY15 sales grew a robust 30.4% and 14.8% to €1,358.9 million ($1,509.9 million) and €50,400.3 million ($56,000.3 million), respectively. But FY15 capital expenditures dipped 7.5% to FY15 sales to 2,554.2 ($2838.0 million). Three-year CAGR for R&D spending was also strong for these firms at 32.7%, ahead of the three-year CAGR of 16.5% for sales and 10.3% for capital expenditures.

Chemicals

Moving to a very different industry, for the 126 Chemical companies in the Scoreboard, 36% recorded double- or triple-digit growth for R&D spending in FY15. However, 38% reported declines. Of these firms, 85% also showed a decline in sales.

As for the three-year CAGR for R&D spending among Chemical firms, 25% recorded a decline. Among these firms were Akzo Nobel (-5.2%), DuPont (-2.8%) and Dow Chemical (-2.2%). The five companies with the fastest three-year CAGR for R&D were Shandong Kingenta Ecological Engineering (91.4%), Sinochem International (89.9%), Rongsheng Petro Chemical (55.4%), National Industrialization (49.3%) and Sound Environmental Resources (42.1%).

For the 11 Chinese Chemical companies in the Scoreboard, FY15 R&D spending grew 28.0% to €403.5 million ($448.3 million) and three-year CAGR rose 45.6%. Both figures outpaced sales and capital expenditures growth during the same periods. FY15 sales and capital expenditures for the firms rose 4.7% to €19,738.4 million ($21,931.6 million) and declined 7.7% to €1,690.0 million ($1,877.8 million), respectively. The three-year CAGR for sales was 11.6%, while three-year CAGR for capital expenditures rose 6.3%.