Abstract
Research and development (R&D) productivity is continuously declining, and it is said that the conventional model of pharmaceutical business is becoming obsolete. Many research studies on R&D productivity focus on inputs (e.g., strategic transactions to absorb external innovation, R&D expenditures), outputs (e.g., approvals of a new drug), and outcomes (e.g., total sales, incomes). However, few prior studies address the relationship among these three components simultaneously. Therefore, we comprehensively analyzed factors affecting R&D productivity by statistically examining a sample of 30 large multinational companies. Our results show that strategic transactions do not increase the number of approved drugs and negatively affect growth in terms of total sales. Additionally, our results show that a home-region-oriented international strategy positively affects total sales, thus indicating that responsiveness to local medical needs is important for sustainable growth. This paper contributes to the body of research on R&D productivity in the pharmaceutical industry.
Highlights
The business activities of the pharmaceutical industry are composed of several elements: research and development (R&D), regulatory submission and launch, sales and marketing (S&M), and investment collection and reinvestment [1]
While there is no correlation between the number of strategic transactions and the number of approved drugs (r = 0.072, p = 0.352), there is a positive correlation between the eight-year cumulative R&D expenditures and the number of approved drugs (r = 0.406, p < 0.05)
While there is no correlation between the number of strategic transactions and the change in total sales (r = −0.223, p = 0.118), there is a negative correlation between the eight-year cumulative R&D expenditures and the change in total sales (r = −0.320, p < 0.05)
Summary
The business activities of the pharmaceutical industry are composed of several elements: research and development (R&D), regulatory submission and launch, sales and marketing (S&M), and investment collection and reinvestment [1]. Pharmaceutical companies must increase income (i.e., total sales) through a continuous delivery of new products (e.g., new drugs) and optimize expenditures (e.g., R&D expenditures, S&M expenditures) through increased productivity. This idea applies to other industries as well, there are major differences between these other industries and the pharmaceutical sector. The success rate from drug discovery to drug launch is very low (only 4%), and the R&D period takes an average of 14 years Out of these 14 years, clinical trials take an average of seven years for completion, and their costs represent 63% of the overall expenditures per new drug [2]. The continuous delivery of new products in the pharmaceutical industry is more challenging compared to other industries
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