The throne of Big Pharma is shaking

To assess the innovative capacity of the leading pharmaceutical companies, the researchers focused on the approvals granted by the US Food and Drug Administration (FDA) for new drugs between 2014 and 2023. They found that the number and share of FDA approvals of drugs from the top 20 pharmaceutical companies fell sharply during this period. While in 2014, 90% of new FDA approvals came from the top 20 pharmaceutical companies, by 2023 it was only 35%. The share of so-called “first-in-class” drugs originating from the companies studied also decreased from 82% to 35% during this period. These are drugs that have a completely new mechanism of action and are considered indicators of significant scientific progress. “Our results show that research and development (R&D) productivity in big pharma has declined dramatically. In the long term, this endangers the profitability of these companies,” says Prof. Dr. Oliver Gassmann from the Institute of Technology Management at the University of St.Gallen, who was involved in the study.

Smaller innovative companies on the rise

Most of the drugs approved by the FDA now tend to come from biotech or specialized pharmaceutical companies that focus on innovative therapies, explains Oliver Gassmann. “These smaller and specialized companies have innovative approaches that are leading to an increase in approvals by the FDA.” Examples include Moderna, a leader in RNA-based vaccines and therapies, and Regeneron Pharmaceuticals, which is active in the field of biologics and monoclonal antibodies. But even within the 20 major pharmaceutical companies analysed, there are differences in terms of innovative strength. Companies such as AstraZeneca, Novartis and Pfizer were able to position themselves more successfully than the other large companies examined.

AI has some catching up to do in Big Pharma

The authors of the study point out that the decline in innovation performance does not necessarily have to be linked to a decline in R&D activities. Rather, it could be that R&D resources are being allocated less successfully. In order to increase competitiveness in the innovation race, large companies would have to break new ground, says Oliver Gassmann: “Innovation processes must be opened up to external partners and external knowledge. We summarize this in the “Collaborative Advantage” approach, in which more can be achieved together in partnerships and complementary alliances.” The use of artificial intelligence should also be pushed more in the early stages.” Companies like Insilico show that AI-driven drug development can work successfully.”
The study was conducted by the Institute for Technology Management at the University of St.Gallen in collaboration with the Technical University of Ingolstadt, the Fresenius University of Applied Sciences and the University of Tübingen.