2023 Top 10 Pharma R&D Spenders: A Strategic Shift Toward ADCs, Obesity, and Radiopharmaceuticals

2023 is a year of reshuffling in the pharmaceutical market. With the rise of the obesity market, COVID-19 is no longer the focus of the pharmaceutical industry. The new trend is led by Eli Lilly's Zepbound, Mounjaro and Novo Nordisk's Ozempic, Wegovy. In addition, radiopharmaceuticals have also become a new trend area where multinational corporations (MNCs) are rushing to enter.

According to the adjusted GAAP metrics, Fierce Biotech, an industry media outlet, conducted an annual top ten review and recap of MNC pharmaceutical R&D investments in 2023. In 2023, Roche, which had held the top position for multiple consecutive years, was surpassed by Merck and Johnson & Johnson, falling to third place. Among the top ten pharmaceutical companies with the largest R&D budgets, seven showed an upward trend in R&D investment compared to 2022.

But it is worth noting that the data of many MNCs (such as Merck, Roche, and Novartis) comes with an important footnote: more than half of the funds are allocated for collaborations and acquisitions. In 2023, Gracell Biotechnologies became the first Chinese biotech company to be fully acquired by an MNC; Pfizer's $43 billion acquisition of ADC giant Seagen... This may suggest that mergers and acquisitions targeting biotech companies, or even pharmaceutical companies, have been regarded by MNCs as a crucial component of "R&D renewal."

More notably, faced with a reality starkly different from the previous two years, MNCs have unanimously raised the banner of reform—whether by cutting business units, adjusting strategic priorities, or entering new drug markets through acquisitions. Out with the old, in with the new. Using MNCs as a weathervane, we can glimpse the ebb and flow of trends.

R&D Investment: $30.53 billion

Comparison of Changes in 2022: 126%

Total Revenue in 2023: $60.1 Billion

R&D Investment Ratio: 50.8%

In MSD's 2023 R&D expenditure, $5.5 billion was allocated to its large-scale ADC collaboration with Daiichi Sankyo, while an additional $11.4 billion was related to the acquisitions of Prometheus and Imago Biosciences. If the prescribed business expansion and acquisition costs are subtracted from the total, the R&D expenditure figure will drop to $13.6 billion, representing only a $100 million increase from 2022 and accounting for 23% of the company’s 2023 revenue.

In October 2023, MSD and Daiichi-Sankyo reached a global development and commercialization agreement for three antibody-drug conjugate (ADC) candidates to jointly develop and potentially commercialize the candidate ADC therapies (Daiichi-Sankyo will retain exclusive rights in Japan). According to the terms of the agreement, MSD will pay $4 billion + $1.5 billion upfront, with potential future commercial milestone payments of up to $16.5 billion.

In April 2023, MSD acquired Prometheus, a company focused on autoimmune diseases, for a total amount of up to 10.8 billion US dollars. In November 2022, MSD announced that it would acquire Imago for approximately 1.35 billion US dollars in cash through a subsidiary, gaining a drug pipeline for the treatment of myeloproliferative neoplasms and other bone marrow diseases.

MSD's internal and external efforts indicate that the post-Keytruda strategy is gradually coming into focus — future oncology endeavors will primarily concentrate on ADCs. This trend is prominently reflected in MSD's multi-billion-dollar collaborations with Daiichi Sankyo and Kelun Biotech. Nevertheless, MSD has not ceased exploring the potential possibilities of Keytruda (including the potential for a patent thicket) — Keytruda is currently being evaluated in combination with Pfizer’s Padcev as a first-line treatment for locally advanced or metastatic urothelial carcinoma.

In addition, MSD is also expanding its presence in immunology and cardiology. Sotatercept, a new drug for pulmonary arterial hypertension (acquired from Acceleron in 2021), is expected to be approved before the end of March; MK-0616, the world's first oral PCSK9 inhibitor for lowering cholesterol.

It has also entered Phase III clinical trials, demonstrating outstanding efficacy in lowering LDL cholesterol in previous Phase II data.

R&D Investment: $15.1 billion

Comparison of changes in 2022: 6.7%

Total Revenue in 2023: $85.2 Billion

R&D Investment Ratio: 17.7%

In 2023, Johnson & Johnson's R&D expenditure reached the highest record in the company’s history, even exceeding the amount spent on spinning off its consumer health division, Kenvue, in 2022, by nearly one billion dollars. Nevertheless, the increase in total expenditure did not alter the proportion of R&D spending relative to revenue, remaining the same as in 2022.

Johnson & Johnson was one of the few pharmaceutical companies that experienced significant turmoil in 2023. Record levels of spending coincided with a major overhaul of the company's R&D strategy, including substantial cutbacks in infectious diseases and vaccines (ID&V), despite having invested hundreds of billions of dollars in these areas over the years.

In late January 2023, Johnson & Johnson first communicated this new strategy to ID&V employees, which would terminate many projects, including the once highly publicized coronavirus disease vaccine, and exit the hepatitis B and hepatitis D fields as well as other projects. Executives also stated that the development of the RSV vaccine was put on hold during the company’s evaluation of next steps, and two months later, this effort was also canceled. By the end of summer, Johnson & Johnson had largely ceased R&D activities within the ID&V division.

After a major restructuring, Johnson & Johnson is now a pharmaceutical company focused on three therapeutic areas: neuroscience, oncology, and immunology. In 2023, revenue from these three divisions accounted for 78% of Johnson & Johnson's total income. Key future products include: the CAR-T therapy Carvykti (developed in collaboration with Legend Biotech, which received unanimous support from the FDA advisory committee) for the treatment of relapsed or refractory multiple myeloma (RRMM); Esketamine Hydrochloride Nasal Spray, known as SPRAVATO® (approved for marketing in China in April 2023); and nipocalimab, a potential "best-in-class" antibody for autoimmune diseases, which has reached the Phase III clinical endpoint for the treatment of myasthenia gravis.

However, although a comprehensive reform was carried out last year, the adjustment plan for its R&D costs is still ongoing. Recently, Johnson & Johnson decided to close a research center of nearly 200,000 square feet, which has already laid off more than 50 employees. The center is located in the San Francisco Bay Area and opened in September 2022.

R&D Investment: 13.24 billion Swiss francs (14.97 billion US dollars)

Change in 2022: -5.7%

Total Revenue in 2023: 58.72 billion Swiss francs (approximately 66.4 billion US dollars)

R&D Investment Ratio: 22.6%

Although Roche dropped from the top position to third place in the 2023 ranking, the main reason was the support from Merck and Johnson & Johnson. Roche's R&D expenditure in 2023 was almost the same as that in 2022.

In September 2023, Roche CEO Thomas Schinecker told attendees at a Pharma Day presentation that the company had installed "stronger gates" in its Phase III clinical trial pipeline to prevent a repeat of a series of high-profile late-stage failures in 2022 (such as the Phase III failure of the Alzheimer's drug Gantenerumab). Specifically, this involved establishing a rigorous review system to ensure that candidate drugs can only enter Phase III trials if there is a high likelihood of success.

Objectively speaking, in 2023, Roche did avoid any potentially disruptive events and achieved some positive late-stage readouts: Crovalimab, a drug for paroxysmal nocturnal hemoglobinuria (globally first launched in China in 2024), is set to compete with AstraZeneca's cornerstone product Soliris; the PI3K inhibitor Inavolisib for breast cancer succeeded in Phase III trials; and Tiragolumab, a TIGIT monoclonal antibody that had previously faced multiple clinical trial setbacks, demonstrated excellent efficacy for esophageal cancer at the 2024 ASCO GI meeting.

But in Phase II data, Roche achieved more success last year, including: the BTK inhibitor fenebrutinib crossing the blood-brain barrier in a multiple sclerosis trial; and the hypertension drug zilebesiran, developed in collaboration with Alnylam for which Roche paid $310 million upfront, achieving a mid-term victory.

Moreover, Roche spent $7 billion to acquire the regional rights to Pfizer/Roivant's TL1A antibody for intestinal diseases, which has already entered Phase III clinical trials. A few weeks later, Roche spent another $3.1 billion to acquire Carmot, entering the obesity market. This deal brought injectable dual GLP-1/GIP receptor agonists and oral GLP-1 drugs.

R&D Investment: $11.37 billion

Comparison of Changes in 2022: 23.9%

Total Revenue in 2023: $45.4 billion

R&D Investment Ratio: 25%

Novartis' R&D budget for 2023 increased by nearly a quarter compared to 2022 (after spinning off its biosimilar business Sandoz, Novartis' latest disclosed R&D expenditure for 2022 was $9.17 billion).

While expanding its budget, Novartis is cutting back on its pipeline. By the end of April, the number of pipeline projects had decreased from 150 to 134, a reduction of 10%. Meanwhile, the focus of the expanded budget has been directly placed on five therapeutic areas: cardiovascular, hematology, solid tumors, immunology, and neuroscience.

Novartis CEO Dr. Vas Narasimhan explained in an earnings call: "We have more programs than our peers, which means we invest less per program than they do. We think that's important because strong investment in preclinical or early clinical stages also helps us move faster and broader into more therapeutic areas, more indications." As a result, its ongoing focus area of solid tumors took the biggest hit.

Despite cuts, Novartis continues to heavily invest in radiopharmaceuticals, a key pillar of its oncology strategy. In 2023, Novartis signed several agreements, including a collaboration worth up to $1.75 billion with Bicycle Therapeutics to develop bicyclic peptide-based radiopharmaceutical conjugates targeting multiple oncology markers. Meanwhile, in the obesity market, Novartis has temporarily shelved its enigmatic, high-risk, high-reward obesity drug candidate following unsatisfactory Phase II efficacy results.

In addition, Novartis has made a strong push in mergers and acquisitions. In August, it acquired Chinook Therapeutics for $3.2 billion. This "cross-border investment" in kidney disease quickly paid off — Atrasentan, a treatment for IgA nephropathy, showed promising efficacy in Phase III trial data. An application for the new drug is soon to be submitted based on a surrogate endpoint, with an accelerated approval being sought.

In 2024, Novartis once again updated its key focus areas, concentrating on cardiovascular-renal-metabolism, immunology, neuroscience, and oncology.

R&D Investment: $10.94 billion

Comparison of changes in 2022: 12%

Total Revenue in 2023: $45.81 Billion

R&D Investment Ratio: 24%

In 2023, AstraZeneca's R&D investment increased by 12 billion percent. AstraZeneca attributed the excess spending to positive data readings from some uncompleted Phase III clinical trials. In its full-year 2023 earnings report, AstraZeneca highlighted 27 initiated Phase III trials, with 10 projects reportedly having "blockbuster potential."

At the same time, AstraZeneca has continued to invest in platforms, new technologies, and R&D capabilities to improve its R&D success rate. The earnings report highlighted Novartis' antibody-drug conjugate efforts, including its partnership with Daiichi Sankyo Company Limited, as well as six wholly-owned internal targets and "warheads." AstraZeneca believes that there are combination opportunities for these drugs.

In addition, some of AstraZeneca's acquisitions in recent years have begun to bear fruit, including assets from NeoGene (TCR therapy) and Daxi Bio; partnerships with Quell (Treg cell therapy) and Cellectis (gene editing).

AstraZeneca stated that the initiation of multiple Phase III clinical trials in the rare disease field could potentially help AstraZeneca earn billions of dollars in the future. For instance, ALXN2220 for transthyretin amyloid cardiomyopathy and efzimfotase alfa for the treatment of hypophosphatasia.

Novartis CEO Pascal Soriot promised to reformulate the R&D strategy and committed to following scientific principles. "We believe that in the next 10 years, we will achieve outstanding growth. We are investing in new science, which will shape the future of medicine and also the future of this company."

R&D Investment: $10.67 billion

Comparison of changes in 2022: -6.65%

Total Revenue in 2023: $58.5 Billion

R&D Investment Ratio: 18.2%

As demand for the coronavirus disease vaccine Comirnaty and the antiviral drug Paxlovid declined, Pfizer undertook significant introspection and cost-cutting measures in 2023, with research and development spending decreasing by 6% from $11.43 billion in 2022. As part of the company-wide cost adjustment plan announced in October, Pfizer stated it would eliminate approximately 500 positions and scale back operations at a small-molecule pharmaceutical plant in the UK. Additionally, Pfizer terminated five clinical pipelines in October, including three Phase I oncology assets and two Phase II assets targeting eczema and psoriasis.

But at the same time, by the end of 2023, Pfizer completed the $43 billion acquisition of Seagen, a pioneer in ADC, doubling Pfizer's oncology research programs to 60. After the acquisition, Pfizer announced its focus on next-generation ADCs, small molecules, and bispecific antibodies for cancer research. Jeff Settleman, Chief Scientific Officer responsible for oncology R&D, stated: "We believe we are now in a unique position to launch the industry's broadest portfolio of ADC products, including a variety of novel and differentiated projects." At the same event, CEO Dr. Albert Bourla said that, in addition to oncology, Pfizer remains focused on vaccines, metabolic, and inflammatory diseases.

R&D Investment: $9.31 billion

Comparison of Changes in 2022: 29%

Total Revenue in 2023: $34.12 billion

R&D Investment Ratio: 27%

According to the quarterly earnings report, Eli Lilly expanded its late-stage activities and early research in the fourth quarter, potentially linked to the approval of Zepbound in the fourth quarter of 2023. This move led to a 28% increase in R&D spending, reaching $2.56 billion. Additionally, higher incentive compensation costs contributed to the rise in R&D expenses.

However, Eli Lilly, which has initially tasted success in the weight loss and obesity market, has not stopped accelerating its R&D plans. During the Q4 earnings call, Chief Financial Officer Anat Ashkenazi stated that next year's spending is expected to grow at a rate "higher than marketing, sales, and administrative expenses." Since Zepbound's launch in November, its sales have reached $174.9 million.

Eli Lilly is further accelerating the establishment of a sales network for the weight loss and obesity market, particularly its direct sales network. In March this year, Eli Lilly partnered with Amazon to provide prescription drug delivery services through Amazon's pharmacy division for its online service platform, LillyDirect Pharmacy Solutions (Lilly Direct). Deliveries will be made quickly via Amazon Pharmacy or Truepill based on the patient’s insurance coverage and other factors. Meanwhile, Eli Lilly is considering collaborating with U.S. offline retail outlets to offer pick-up services for LillyDirect customers.

In terms of R&D, Eli Lilly is currently working to prove that weight-loss drugs can not only help patients lose weight but also show strong performance in conditions like Zepbound, which recently demonstrated significant results in Metabolic Dysfunction-Associated Steatohepatitis (MASH). An oral weight-loss drug pipeline is also under development, with Orforglipron currently undergoing three Phase III clinical trials for weight loss and four Phase III clinical trials for glycemic control. Another weight-loss product, the GLP-1R/GCGR agonist Mazdutide, is currently in Phase II. Its partner, Innovent Biologics, is advancing more quickly and has already filed for marketing approval in China.

In addition to its heavy investment in the weight loss and metabolism field, Eli Lilly is also officially entering the nuclear medicine sector, having acquired POINT for $1.4 billion in the fourth quarter. In the field of oncology drugs, Eli Lilly may move five new molecular pipelines into clinical trials, including a wild-type selective KRAS G12D inhibitor and a pan-KRAS inhibitor with impressive preclinical data. Several potential blockbuster drugs in the fields of weight loss, metabolism, and oncology have made Eli Lilly highly sought after. Many industry insiders speculate that Eli Lilly, currently valued at $780 billion, could become the first pharmaceutical company in history to reach a market capitalization of $1 trillion.

R&D Investment: $9.29 billion

Comparison of changes in 2022: -2.2%

Total Revenue in 2023: $45 billion

R&D Investment Ratio: 20.6%

Rupert Vessey, who has served as Executive Vice President and President of R&D at Bristol-Myers Squibb (BMS) since the company's acquisition of Celgene in 2019, has announced his departure. Dr. Robert Plenge, former head of the Immunology, Cardiovascular, and Fibrosis Therapeutic Research Center and head of Translational Medicine, has taken over the role. Since Plenge’s appointment, BMS has cut several pipeline products, including the Phase II TIGIT antibody BMS-986207 and the RNAi therapy ND-L02-s0201 for treating MASH.

BMS has also made some significant advances. For instance, BMS-986278, an antagonist of lysophosphatidic acid receptor 1 (LPA1), has achieved success in Phase II trials for the indications of idiopathic pulmonary fibrosis (IPF) and progressive pulmonary fibrosis (PPF). Research suggests that BMS-986278 may be effective in subjects previously treated with antifibrotic therapies such as pirfenidone or nintedanib, showing potential as an add-on therapy. This also places potential competitive pressure on Roche's pirfenidone (Esbriet) and Boehringer Ingelheim's nintedanib (Ofev), two key drugs in this space.

In 2023, BMS was also very active in the field of mergers and acquisitions, spending $18.1 billion in two deals at the end of December to acquire Karuna Therapeutics and RayzeBio. The $14-billion acquisition of Karuna brought BMS a potential "first-in-class" new therapy for schizophrenia, which is currently awaiting FDA's New Drug Application approval. RayzeBio, acquired for $4.1 billion, is a radiopharmaceutical company whose main asset, RYZ101, is currently in Phase III clinical trials for patients with gastroenteropancreatic neuroendocrine tumors, with an expected completion date of July 2025.

R&D Investment: $7.68 billion

Comparison of changes in 2022: 18%

Total Revenue in 2023: $54.32 Billion

R&D Investment Ratio: 14.1%

In 2023, with the launch of multiple generic drugs and biosimilars, AbbVie officially entered the post-Humira era, increasing its R&D investment by over $1 billion. However, AbbVie's two other autoimmune products, the IL-23 monoclonal antibody Skyrizi and the JAK1 inhibitor Rinvoq, have quickly filled the decline in Humira's sales. In the first three quarters, Skyrizi and Rinvoq generated revenues of $5.369 billion and $2.714 billion respectively, with year-on-year revenue growth of 49.6% and 54.9%.

At the same time, AbbVie is also continuously seeking future growth points. At the end of 2023, AbbVie acquired ImmunoGen and Cerevel for $10.1 billion and $8.7 billion, respectively. ImmunoGen brought more antibody drug pipelines, as well as Elahere, the world's first ovarian cancer ADC drug that has been marketed (co-developed with Huadong Medicine). Cerevel is a clinical-stage biotechnology company focused on neuroscience, with five clinical-stage research therapies and several preclinical compounds.

In the autoimmune field, AbbVie's proprietary star pipeline lutikizumab has just shown in a Phase II study that, compared to placebo, it improved skin pain in patients with hidradenitis suppurativa. The plan is to advance to Phase III testing this year. The company also intends to conduct tests on ulcerative colitis and Crohn's disease, with Phase II inflammatory bowel disease testing expected later this year. In the immunology "second-tier" pipeline, giant cell arteritis, lupus, hidradenitis suppurativa, alopecia areata, and vitiligo are all advancing in clinical trials.

Another key focus area is hematologic tumors, where AbbVie's CD3/CD20 bispecific antibody Epcoritamab received its first (conditional) approval from the FDA under accelerated approval. AbbVie has decided to continue with a differentiated indication development strategy, planning to initiate Phase III clinical trials of Epcoritamab for second-line treatment of diffuse large B-cell lymphoma (DLBCL) and first-line treatment of follicular lymphoma (FL) later.

R&D Investment: 6.73 billion euros (7.32 billion US dollars)

Comparison of changes in 2022: 3%

Total Revenue in 2023: $43.07 billion ($46.81 billion)

R&D Investment Ratio: 15.6%

At the beginning of 2023, Sanofi CEO Paul Hudson made it clear that Sanofi would focus on its early-stage cancer assets to regain its "magic," lowering profit margin targets and instead reinvesting cash into the development and growth of key products. This decision shocked investors and caused Sanofi's stock price to drop by nearly 20%. In October, when Sanofi announced its Q3 results, it reiterated the announcement of a new strategic chapter called "Play to Win."

To reassure its supporters, Sanofi pointed out that some encouraging trial news has been reported from the mid-term production line and will soon move into the next phase of clinical trials. For instance, frexalimab achieved the primary endpoint in the Phase II trial for treating multiple sclerosis, with plans to initiate two Phase III clinical trials; OX40L monoclonal antibody Amlitelimab will launch several Phase III clinical trials for treating atopic dermatitis; a Phase III clinical trial will be initiated for the RSV vaccine LID/ΔM2-2/1030s to prevent RSV infection.

In 2023, Sanofi's IL-4R antibody Dupixent (Dupixent), with sales of $11.6 billion, was followed by the recently approved RSV antibody with sales of €590 million. Sanofi stated that the peak sales of several mid-to-late-stage immunology products under development could reach €2-5 billion each. The company aims to achieve sales of over €22 billion in immunology products and over €10 billion in vaccine products by 2030.

While the immunology pipeline is advancing rapidly, Sanofi's oncology sector has suffered a significant setback. Its only clinical-stage ADC drug, tusamitamab ravtansine, failed in Phase III clinical trials, showing less efficacy than chemotherapy and has since been abandoned. Based on the current situation, Sanofi has formulated a series of plans, including spinning off its consumer health business to focus resources on developing products in the pipeline, setting project priorities, reducing investment in oncology, and increasing investment in immunology.

In addition, in 2023, Sanofi launched multiple R&D collaborations and pipeline introductions, including Synthekine's preclinical IL-10 agonist, Johnson & Johnson's late-stage E. coli vaccine, and Teva's TL1A monoclonal antibody for inflammatory bowel disease. This also includes the acquisition of Provention, gaining access to the type 1 diabetes drug TZIELD.

Reference link: https://www.fiercebiotech.com/biotech/top-10-pharma-rd-budgets-2023