R&D in the Pharmaceutical Industry

Pharmaceutical Research and Development is becoming increasingly complex, lengthy and risky, due to a combination of scientific, medical and regulatory factors. 


The process starts with the discovery process which includes all early-stage research to identify a new molecule and the relevant lab testing. Based on average market data, this process takes approximately 3 to 6 years to complete the following phases:


  • Drug Discovery: finding a promising molecule (lead compound) that could become a drug. 
  • Early Safety Tests: performing initial tests on promising compounds to provide an early assessment of the safety of the lead compound. Scientists test Absorption, Distribution, Metabolism, Excretion and Toxicological properties, or “pharmacokinetics” of each lead.
  • Lead optimization: Altering the structure of lead candidates to improve their properties.


Once a new compound has been identified in the laboratory, the development process starts with the pre-clinical assessment phase. 


During rigorous pre-clinical testing, pharmaceutical companies conduct lab and animal model trials to assess the chemical, biological and toxicological properties of the compound against the targeted disease. It is only when these tests show favourable results that a company can proceed with clinical trials, which are conducted on human beings, complying with very strict ethical and technical rules:


  • In phase 1 clinical trials, the candidate drug is tested only on a few (from 20 to 100) healthy volunteers under strict hospital control. 
  • In phase 2 clinical trials, controlled trials are carried out on volunteer patients (from 100 to 500) to gather information on the candidate drug’s effectiveness (dose –response relationship) and safety (identification of possible adverse side effects). 
  • In Phase 3 clinical trials the drug candidate is studied more comprehensively on a large number of volunteer patients in hospitals, focusing especially on any long-term effects. The new candidate treatment is also compared to other treatments already in use. 


Research on a new drug continues even after it has been approved (the so-called Phase 4 trials) to monitor its use. Any cases of adverse effects shall be reported to the relevant authorities.


The development of a new drug from the early stage of lab discovery to the time when it is available to treat patients is estimated to take an average of 10-13 years.


This long process shows a very high failure rate. According to industry statistics:


out of 5,000 molecules tested, only 250 promising new substances will reach the stage of pre-clinical development;

10 will reach the stage of clinical development and only 1 will be approved by the relevant authorities and make it to the market. 


Half of the drugs that reach the final stage of clinical trials fails to be approved and, once on the market, only 3 out of 10 marketed drugs produce revenues that match or exceed the average R&D costs before losing patent protection and having to face the hard competition of generic drugs.


For all these reasons, the average costs to research and develop each successful drug are estimated to range between €800 Mil and €1 Bn.