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NEW YORK – The projected return on investment in pharmaceutical research and development has climbed to 5.9% in 2024, continuing an upward trend from 4.1% in 2023. A new report by Deloitte attributes much of this increase to the success of GLP-1 therapies, which have emerged as a major driver of industry returns by addressing large, unmet medical needs.
The 15th annual “Measuring the return from pharmaceutical innovation” report, analyzing 20 leading biopharma companies, underscores GLP-1 therapies’ financial impact. If these assets were excluded from the model, the average projected return would drop to 3.8%, illustrating their substantial influence on industry performance.
- GLP-1 therapies have significantly boosted ROI, showcasing the value of targeting high unmet medical needs in areas such as diabetes and obesity.
- The cost of developing a drug has risen to $2.23 billion, marking a continued increase in R&D expenses.
- Phase III clinical trial cycle times have increased by 12%, contributing to rising development costs and extended time-to-market.
- 13 out of 20 companies analyzed saw growth in their internal rate of return (IRR), with three exceeding a 5% increase.
- The average time from Phase I to regulatory filing now exceeds 100 months, further stressing the need for efficiency improvements.
GLP-1 therapies, widely used in diabetes and obesity treatment, are transforming the industry’s financial landscape. Their success highlights the financial and clinical benefits of addressing large patient populations with significant unmet needs. Deloitte experts suggest that this model could extend to other high-impact areas, such as Alzheimer’s disease and stroke prevention.
“The upward trend in pharmaceutical R&D returns indicates a positive sign for the industry, and the influence of several pronounced asset classes suggests that there is still substantial value in addressing unmet patient need. Identifying the next wave of breakthrough innovation that will have life-changing impact on patients is likely to remain a key challenge to driving sustainable pipeline flow,” said Kevin Dondarski, Life Sciences R&D strategy leader, and principal, Deloitte Consulting LLP.
Despite rising returns, clinical trial cycle times remain a significant hurdle. The average Phase III timeline has increased by 12%, further delaying market entry and escalating costs.
“It's encouraging to see this continued increase in IRR for biopharma companies despite our analysis showing increased clinical cycle times and climbing costs of drug development. Sustaining this upward momentum, will likely involve bold moves to offset escalating costs including concentrating on shortening clinical cycle times, investing in AI and other technologies to improve efficiencies, and diversifying pipelines to capitalize on less saturated therapy areas, said Pete Lyons, U.S. Life Sciences sector leader,” and principal, Deloitte Consulting LLP.
The report suggests AI and automation could help reduce trial times and improve R&D efficiency, though industry adoption is still in its early stages. As the demand for innovative therapies continues to grow, capital allocation strategies must emphasize early-stage investments to ensure long-term pipeline sustainability.
The full Deloitte report, “Measuring the return from pharmaceutical innovation 2025”, is available here.
