A Revolution in R&D
A Revolution in R&D
A Revolution in R&D
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Introduction<br />
Throughout the pharmaceutical <strong>in</strong>dustry, executives<br />
are worried. They fear they will not be able to<br />
meet the double-digit annual growth expectations<br />
implied by high market capitalizations. The requisite<br />
new drugs will not be forthcom<strong>in</strong>g: R&D just<br />
cannot deliver them all.<br />
One standard response to this problem is to scale<br />
up—that has been the basis of many a recent<br />
merger—but while scale can pay off <strong>in</strong> commercialization,<br />
global development, market<strong>in</strong>g, and distribution,<br />
it is unlikely that scale alone can solve the<br />
R&D problem. Another standard response is to buy<br />
<strong>in</strong> drug candidates. Such a Band-Aid approach cannot<br />
work <strong>in</strong>def<strong>in</strong>itely, and is a risky one anyway,<br />
given that the price of these deals will cont<strong>in</strong>ue to<br />
rise as demand for them grows.<br />
The only sure way to address the problem is to<br />
<strong>in</strong>crease R&D productivity. And the way to ensure<br />
that is either to <strong>in</strong>crease efficiency (lower cost or<br />
higher speed) or reduce failure rates along the<br />
value cha<strong>in</strong>. Many companies have <strong>in</strong>creased productivity<br />
over the past decade, specifically by<br />
reeng<strong>in</strong>eer<strong>in</strong>g the development phase. That optimization<br />
may be reach<strong>in</strong>g its limits, however. As for<br />
the discovery phase, it has long been less amenable<br />
to such improvements. So the problem of produc-<br />
tivity persists. Traditional approaches cannot provide<br />
an answer, but genomics can. (See Exhibit 1.)<br />
It will not be easy, of course. There are some difficult<br />
obstacles en route—difficult, but not <strong>in</strong>surmountable.<br />
By mak<strong>in</strong>g <strong>in</strong>formed strategic choices,<br />
companies can overcome the obstacles and reap the<br />
productivity rewards. Those that embrace the revolution<br />
most boldly could potentially halve the cost<br />
and time it takes to develop a new drug—if they<br />
meet certa<strong>in</strong> challenges successfully.<br />
EXHIBIT 1<br />
GENOMICS IMPROVES R&D PRODUCTIVITY<br />
Cost (time)<br />
spent<br />
Failed targets/<br />
candidates<br />
Successful<br />
drug<br />
SOURCE: BCG analysis.<br />
Total cost to develop a drug<br />
Reduce<br />
failure<br />
Improve<br />
efficiency<br />
Total cost (time) per step<br />
9