Biotech R&D spend jumps by more than 15%

Two reports show big increases in R&D spending among both biotech and pharmaceutical drug developers.

In an annual review of the biotech sector, analysts at EY (formerly Ernst & Young) found that biotech companies spent US$40.1 billion on R&D in 2015, up 16% from their 2014 spend (see Fig. 1). For the second year in a row this increase was led by the sector's smaller companies, which cumulatively increased their R&D budgets by 28% (to $15 billion). Established companies with revenues of at least $500 million per year increased their R&D spend by a lower level of 10%. R&D expenses grew more quickly than revenues, the analysts write, “suggesting a continued willingness to bet on the industry pipeline.”

Figure 1: R&Dspend.

Biotech R&D spending data are from the EY Biotechnology Reports 2008–2016. Where annual reports provided inconsistent R&D spending data, data from the latest report were used. Pharmaceutical R&D spending data are from the PhRMA 2016 Profile.

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The analysts note that, although the biotech sector enjoyed a record performance in 2015, revenue and market cap growth slowed in 2015. These data suggest that “biotech's wave of unprecedented success may have crested,” they write.

A separate report by the industry lobby group PhRMA, meanwhile, showed that pharmaceutical companies spent $58.8 billion on R&D in 2015, up 10% from their 2014 spend.

The R&D budgets of some companies are captured in both cohorts.