A Balancing Act

In a video interview with Pharma Commerce, Kevin Dondarski, Deloitte’s life sciences R&D strategy leader, describes how his company’s 15th annual Deloitte report on the return on investment (ROI) in pharmaceutical R&D reveals a continued upward trend, with a projected ROI of 5.9% for 2024. This marks a notable reversal from the consistent decline seen throughout much of the 2010s. During that period, ROI dropped largely due to a more challenging commercial environment, which reduced the projected value of drug pipelines. This was influenced by both business dynamics and a shift toward developing treatments for more specific, nuanced patient populations, often with smaller market sizes.

However, the past two years have shown a positive turnaround, with year-over-year increases in projected ROI. Two key drivers are behind this recent momentum. First, the overall projected value of late-stage drug pipelines has grown, especially when adjusted for risk, signaling stronger confidence in the commercial viability and clinical success of these therapies.

Second, a small number of exceptionally high-value drug programs have had an outsized impact. Among these, treatments in the GLP-1/obesity space stand out, significantly boosting the total value of the late-stage pipeline. These high-potential programs are reshaping expectations and driving much of the improvement in projected R&D returns.

The renewed optimism in pharma R&D ROI is largely attributed to an increase in risk-adjusted value across the pipeline and the emergence of breakthrough therapies in lucrative areas such as obesity treatment, highlighting a shift toward more valuable and promising innovation.

Dondarski also comments on the strategies companies can adopt to manage or mitigate escalating drug development costs; current best practices for balancing long-term pipeline sustainability with short-term financial returns; how GLP-1’s success influence future investment strategies in high unmet-need areas; how AI and automation realistically reduce clinical development timelines; and much more.

A transcript of his conversation with PC can be found below.

PC: Knowing that investing in early-stage innovation is paramount, what are the current best practices for balancing long-term pipeline sustainability with short-term financial returns?

Dondarski: It's one of my favorite topics quite honestly, and it's a real pain point for a lot of different companies—it’s the cyclical nature. It comes back to the word we used earlier, which is discipline. I think the key to anyone's success is having a diversified pipeline. The word diversified can be interpreted in a lot of different ways.

It's not to say spreading yourself in over a million different areas is better, but rather, it's just important to have—from a capital allocation standpoint—whether it's thresholds or minimum, you just need to ensure that there's some degree of investment and innovation that's being focused on both those topics, early stage and late stage. The reality is, when there's cost constraints, there tends to be a disproportionate emphasis on where to look.

To me, there isn't a perfect answer. The key to success, I would argue, is number one, ensuring that you're continuing to focus on those different areas to some degree or some minimum threshold. And then number two, ensuring that as an executive leadership team, there's the recognition that we're solving for multiple things. Over indexing one way or the other just shifts where you feel that pain, or kicks the proverbial can down the road. It's largely about discipline, and solving for what's going to deliver the most enterprise value and patient value, as opposed to specific financial metrics.