The pharmaceutical industry invests a significant portion of its revenues in research and development (R&D) activities although majority of the investment does not bring expected returns.

Projected returns on R&D investment for the top 12 pharmaceutical companies fell to 1.8% in 2019, which is the lowest level since 2010, according to GlobalData. Further, the average peak drug sales declined to $376m during the same year.

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Rising cost of drug development

Rising cost of drug development, high attrition rate for pipeline products and increase in average clinical cycle are the primary causes for the decrease in R&D returns for pharmaceutical companies.

The average cost to bring a drug to market, for example, increased by 25% between 2015 and 2019 from $1.58bn to 1.98bn, according to GlobalData. Approximately 38% of companies surveyed by GlobalData believe that R&D departments will benefit the most from digital transformation.

The pharmaceutical industry has been relatively slow in adopting digital technologies although the pandemic has showcased how digital transformation can be quickly achieved. Pharmaceutical companies are turning to emerging technologies as a key tool to streamline operating models and improve the productivity and effectiveness of their R&D activities.

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Digital transformation is also expected to help the pharma industry to overcome existing and long-term business challenges and thrive in a challenging business landscape.

The analysis is based on the assessment of data from Deloitte and GlobalData research.