Medical Devices

Healthcare R&D in 2013: Globalization & collaboration will rule

Investment in research & development in the U.S. life science industry will turn a corner in 2013 after three years of reduced spending, if a new market analysis is correct.

In their 2013 R&D Funding Forecast (PDF), research and development organization Battelle and R&D Magazine propose that U.S. life science companies will bump up their total R&D spending from $181.6 billion in 2012 to $189.3 billion in 2013. Better access to healthcare information, via data analysis, will accelerate and enhance pharmaceutical R&D and adoption of connected health technologies, they say.


Among the 10 pharmaceutical and medical device companies that spend the most money on R&D, Eli Lilly & Co. (NYSE:LLY) and Abbott Laboratories (NYSE:ABT) appear to have boosted spending this year, as well as other companies that fall just shy of the top 10, including Biogen Idec (NASDAQ:BIIB) and Gilead Sciences (NASDAQ:GILD). Meanwhile, Allergan (NYSE:AGN) opened a new R&D facility in New Jersey this year, and Watson Pharmaceuticals (NYSE:WPI) committed to a new facility there as well.

On the other hand, Pfizer (NYSE:PFE) and Merck & Co. (NYSE:MRK), the top two spenders, are on track to finish 2012 having spent less than in 2011, according to the Battelle and R&D analysis.

A Deloitte and Thomson Reuters study released earlier this month remarked that, while pharmaceutical labs are becoming more efficient, low productivity is still their biggest challenge. Their average internal rate of return is only 7.2 percent, compared to 10.5 percent two years ago.

That kind of pressure is changing the way companies look at R&D; they’re relying more on strategic partnerships and other models of open innovation to fill their pipelines.

About 275 members of the global life science R&D community responded to Battelle and R&D’s annual survey as part of the analysis, most of them expressing optimism about the coming year. More than half expected their 2013 R&D budgets to increase over 2012, and 85 percent of them reported positive feelings about recent changes in relevant technology development.

Forty percent said they would be more involved in collaborative research next year, and just as many expect their efforts to take on a more global context.

Globally, R&D as a whole is also on the rise, especially in China, where Covidien (NYSE:COV) dropped $45 million on a new R&D facility and Johnson & Johnson and Medtronic opened innovation centers as part of their globalization strategies.

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