Finding the big spenders beyond big pharma

Developers like Vertex, Regeneron and Novo Nordisk have significantly upped R&D spending in recent years, and become important acquirers.

Big pharma’s spending power might be unrivalled, but an increasingly muscular group of developers is emerging. Companies like Novo Nordisk, Vertex and Regeneron have significantly upped their R&D bills over the last five years, while others have become active acquirers.

Since 2018, Gilead and Amgen have both spent more on M&A than several big pharma names, Evaluate Vantage’s latest look at the sector’s biggest spenders finds. True, these companies boast higher market caps than certain traditional “big pharma” names, a definition that is itself open to interpretation (When is big pharma no longer big pharma?, 25 November, 2022).

For this article Evaluate Vantage chose 10 developers that are among the biggest R&D spenders outside of the 11 big pharma companies in our universe; they were then examined in the same way as was the big pharma pack in yesterday’s similar analysis: Big pharma’s biggest spenders revealed: 2022 edition. A full methodology is below.

The above graph illustrates the growth in spending in both M&A and R&D at these companies over the past five years. True, a couple of names – Gilead and Amgen – are largely responsible for the dealmaking, as the second chart below shows.

But internal investments have gone up almost across the board. Only Merck KGaA and Biogen have pulled back. These numbers are unadjusted for inflation, so the former’s 7% dip over the five years is probably not much of a fall in real terms.

Vertex has overseen the biggest increase in R&D, with its annual bill more than doubling since 2018. The $2.8bn it ploughed into research last year was the equivalent of 31% of its sales, a sizeable proportion even for this peer group, a separate analysis reveals today (Big pharma holds steady on research spending, 21 April, 2023).

Over the same period Regeneron’s R&D spend surged 75%, and Novo Nordisk’s 50%. Moderna is something of an outlier as it only recently had the resources to throw $3.3bn at its pipeline, as it did last year.

This is a diverse group of companies, in both size and focus, so holding their performance against each other is not as fair as with the big pharma group. But we did it anyway, and the below chart plots each company’s combined M&A and R&D spend against the NPV of its pipeline plus any products launched or acquired in the period of this analysis (since 2018). 

Top left is the ideal position on this chart, and while no one has really hit the target Vertex and Novo Nordisk should not be displeased with their positions. Gilead and Amgen, meanwhile, have spent richly to acquire their pipeline value.

The positions of both Regeneron and Biogen suggest that these groups will be tightly focused on generating new sources of value. Both have done it before, although perhaps this time they will be considering looking beyond their own labs, and join Gilead and Amgen among this group's biggest acquirers. 

Notes on methodology:

R&D costs exclude exceptional items, although it should be noted that companies account for IPR&D differently. Where relevant, pharma R&D only is reported, excluding medtech or OTC.

For M&A transactions, only full company takeouts and business unit buys are included, and only up-front fees counted for deals with downstream or contingent payments. Deals are counted in the year the transaction closes; where a deal is still open, the announcement date is used. All R&D and M&A numbers unadjusted for inflation.

NPV is computed by Evaluate Omnium from sellside consensus forecasts.

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