What Is Research and Development (R&D)?

Businesses put a lot of time and energy into developing the products and services they put on the market. This gives them a competitive advantage over their peers. These efforts require an investment in what the financial industry calls 澳洲幸运5开奖号码历史查询:research and development (R&D). It's a series of activities ♒that companies undertake to innovate and introduce new products and services.

R&D is often the first stage in the development process. The goal is to take new products and services to market and add to the company's 澳洲幸运5开奖号码历史查询:bottom line. Companies don't conduct their R&D to make an immediate profit and that makes it different from other corporate activities. It helps companies achieve their long-term growth potential and this can lead to copyrights, patents, and trademarks.

Some 澳洲幸运5开奖号码历史查询:industries spend more on R&D than others💃, i𝔍ncluding telecoms, computing, health care, chemicals, and software.

Res🌃earch and Development (R&D) Spending in the Pharmaceutical Industry

The pharmaceutical industry is responsible for discovering, producing, and 澳洲幸运5开奖号码历史查询:marketing drugs for use in the healthcare sector. These drugs are used to treat and cure short- and long-term medical conditions. This is considered to be one of the largest s💫ectors in the global economy.

According to research, the pharma industry recorded more than $1.23 trillion in sales in 2020, with about 46% of sales coming from North America. Sales are expected to grow to $1.7 trillion in 2025. Getting to this point doesn't happen without R&D.

R&D is the pharmaceutical industry's lifeblood. The success of major drug companies almost wholly depends upon the discovery and development of new medicines and their allocation of 澳洲幸运5开奖号码历史查询:capital expenditures (capex) reflects this fact. The average spending is over 25% of revenues but some companies spend substantially more.

No other in♋dustry other than the semiconductor industry spends more on R&D. The pharmaceutical industry makes up nea𝓰rly half the list of the 20 largest R&D spending industries in the world.

Who Are the Big Spenders?

The largest pharmaceutical companies in the indust🌳ries in 2020 inclu🥀ded:

• Johnson & Johnson: $82.6 billion
• Roche: $26.9 billion
• Novartis: $48.7 billion
• Merck: $48 billion
• Pfizer: $41.9 billion

As noted above, many of these firms spend as much as 25% of their revenue on R&D. B🐭ut just how much did these firms spend on R&D? Here's a breakdown of how much they spent in 2020:

• Johnson & Johnson: $12.2 billion (14.8% of revenue)
• Roche: $6.5 billion (24.1% of revenue)
• Novartis: $9 billion (18.5% of revenue)
• Merck: $13.6 billion (28.3% of revenue)
• Pfizer: $9.4 billion (22.4% of revenue)

Some of the other major names in the industry include AstraZeneca, which spent $6 million in R&D compared to $26.6 million in revenue (22.6%), and Eli Lilly, which earned $24.5 billion in revenue and spent $6 billion in R&D (24.5%).

Spending During COVID-19

The global COVID-19 pandemic forced pharmaceutical companies to reevaluate their R&D activities. Not only did a number of companies have to interrupt the clinical trials for some of their drugs, but many found themselves rushing to step up to help the general public. A number of these corporations helped by providing medical supplies to health care providers and patients.

Some major pharma companies ramped up their R&D efforts to develop vaccines, according to a report by McKinsey & Company. The study reported that 90% of the companies polled executed emergency protocols under their business plans, with more than 50% of these companies pausing existing clinical trials until things return to normal. As much as 50% of the industry was operating under normal capacity with productivity dropping by as much as 75% because of telecommuting.

Res✅earch and Development (R&Dไ) Spending by Industry

R&D is an important component of any business model, regardless of the industry. R&D in the pharmaceutical sector, though, continues to have a great impact on global spending in this business area. Health care, which includes the pharmaceuticals sector came in second with a total of 21.7% in spending. The computing and electronics sector spent the most on R&D in 2018 with a total of 22.5% of its total revenue.

Spending by 澳洲幸运5开奖号码历史查询:technology and internet companies is closer to that of pharmaceutical firms. Total spending during the 2018 fiscal year amounted to 22.5%. The chemicals sector, one of the larger R&D sectors, spends an average of 4.1%. Aerospace and defense firms only dedicated about 2.8% of revenues to R&D spending in 2018.

The Bottom Line

Research and development is a pivotal component of any company's success, whether that's a chemical, energy, computer, or pharmaceutical company. Companies that fall into the latter sector are among the top spenders when it comes to R&D. The high level of R&D expenditures in this industry is easy to understand given the 澳洲幸运5开奖号码历史查询:cost of developing a new drug ✨and bringing it to market. The average R&D to marketplace cost for a new medi🌸cine is nearly $4 billion, and can sometimes exceed $10 billion.