Biopharma R&D Varies Year to Date

At the mid-point of 2018, changes in R&D spending by the world’s largest biopharmaceutical companies is a mixed bag, negatively affected by one-time events and currency. The table below shows the first-half 2018 R&D spending for the world’s top 10 biopharmaceutical companies, according to Evaluate. For three companies, R&D changes are expected as new executives take control.

Fastest Reported Growth

R&D spending for 6 of the 10 companies increased in the first half of this year. Although Merck and Bristol Myers-Squibb (BMS) reported the largest jumps in R&D, the results reflect adjustments. For Merck, excluding a charge of $1,400 million charge, R&D still increased at a healthy pace, rising 12.7% to $4.070 million. In its results, BMS specially cited a one-time $1,050 million collaboration payment to Nektar Therapeutics as part of an immuno-oncology partnership as contributing to its 23.6% R&D increase. Excluding specified items such as this, the company’s R&D rose 9.4% to $2,511 million or 8.3% excluding currency effects.

Like Merck, Johnson & Johnson’s R&D also increased double digits in the first half, rising increasing 15.5%. As CEO Alex Gorsky told investors on the company’s second quarter conference call, the increase is tied to the benefits of last year’s US tax reform. Johnson & Johnson reportedly plans to repatriate $12 billion according to an earlier conference call, as reported by CNBC.

Currency Effects

Negative currency affects affected R&D expenditure growth for 2 of the 3 companies among the top 10 based in Europe. Although French firm Sanofi reported a 3.3% increase in R&D, in constant currency, R&D leaped 8.9%. However, the accounting for a third-party agreement resulted a one-time 4.5% increase in the second quarter, as spending in the quarter grew 13.1%. In July, John C. Reed, MD, PhD, took over as head of Global Research & Development, replacing Elias Zerhouni, MD, who retired.

With a less prominent currency effect, Novo Nordisk R&D spending grew 2% in local currency versus a 1.3% reported decline. In contrast, for Roche’s Pharmaceuticals Division, currency effect had no impact. On a reported basis, R&D increased 4.9% the first half, as well as around 5% in constant currency.

Flat Spending

For 3 companies among the top 10, R&D was essentially flat in the first half of 2018. Amgen’s 0.8% reduction in R&D, which began in 2015, continued into the first half this year. But the decline slowed considerably from the first half of 2017, when R&D spending plunged 7.3%. Similarly, for the full-year 2017, R&D spending dropped 6.8%. In July, the company named David M. Reese, MD, senior vice president of Translational Sciences and Oncology, to replace Sean E. Harper, MD.

Eli Lilly & Company recorded a 0.3% decline in R&D spending the first half. The company attributed the decrease to a $50 million charge in the same period in 2017 related to its collaboration with DEKA for the development of an insulin pump. In June, Dan Skovronsky, MD, PhD, took over as senior vice president for science and technology and president of Lilly Research Labs, replacing Jan Lundberg, PhD.

Finally, Pfizer reported a minimal increase in first half 2018 R&D spending. A 12.0% increase in spending by its Innovative Health segment (Consumer Healthcare, Inflammation & Immunology, Internal Medicine [cardiovascular and metabolic diseases and pain], Oncology, Rare Disease and Vaccines) was offset by a 10% R&D decline for Essential Health business (Anti-infectives, Biosimilars, Emerging Markets, Global Brands, and Sterile Injectables). The decrease was the result of the end of biosimilar development programs, according to the company. In January, Pfizer announced that it was exiting research for treatments for Alzheimer’s and Parkinson’s disease.