Measuring innovation: The top five R&D metrics

The following are the top five R&D metrics used by industry (2008):

  1. R&D spending as a percentage of sales (77%)
  2. Total patents filed/pending/awarded/rejected (61%)
  3. Total R&D headcount (59%)
  4. Current-year percentage sales due to new products released in the past six years (56%)
  5. Number of new products released (53%)

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    Source: Goldense Group Inc.’s 2008 Product Development Metrics Survey
    Base: 200 companies that design and develop new products
    Discovered via ThomasNet’s Industrial Market Trends

    Big Pharma faces big problems

    “Over the next few years, the pharmaceutical business will hit a wall.” That’s how a major Wall Street Journal article begins (6 December 2007). The wall sits at the year 2012. The industry is “doomed, if we don’t change,” says Eli Lilly & Co. Chairman Sidney Taurel. The problems:

    • Patent protections for the industry’s top-selling drugs will expire, allowing lower-priced generics to rush in. “Generic competition is expected wipe $67 billion from top companies’ annual U.S. sales between 2007 and 2012.”
    • The industry’s science engine has stalled. “The century-old approach of finding chemicals to treat diseases is producing fewer and fewer drugs.” New blockbusters are lacking.

    The industry is still profitable and will continue to produce new drugs — but “at too slow a rate to sustain its size and cost structure.”

    That explains the recent spate of layoff announcements.

    The future is said to be biotechnology (vs. chemicals) to develop drugs to treat diseases, which is why pharmaceutical companies are snapping up biotech companies and/or creating in-house biotech units. (They’re also getting into the generics business.)

    By the way, this paradigm shift is bad news for chemists. See: “As Drug Industry Struggles, Chemists Face Layoff Wave,” The Wall Street Journal (11 December 2007).

    Update: A new study says there are too many pharmaceutical sales reps taking up physicians’ time.