the pharmaceutical industry has created more than $1 trillion in shareholder value. Yet during the “decade of doubt,” from 2000 to 2010, significant value eroded. That difficult period also coincided with a 60 percent increase in the rate of spending on research and development, to around 16 percent of sales, from around 10, on average.
Indeed, the inability of the pharma and biotech industries to meet shareholder expectations over the past decade makes R&D look like a gambler’s game. Although a few companies have bucked the trend, it’s not clear if they are really improving their models in the long run. Returns for many companies will deteriorate further (exhibit).
