Like the recording artists of old, Big Pharma is on the production treadmill.

Stockbroking analysts are like rock stars. It’s not only the late nights they put in, it’s in their production cycle.

The rock model is straightforward: time is spent in the studio recording an album, which is released and promoted (pre-Covid anyway) by extensive UK, US and European tours. After a brief respite, as brief as the record label can make it, the artist is back in the studio recording the next album, and so the cycle – or treadmill – starts again.

Similarly, an investment analyst writes a report, publishes, markets it across the UK, US and Europe before returning to base and, after a brief respite, as brief as research management can make it, returns to their ‘studio’ to compose the next. All creative industries – and a good analyst should be as imaginative as a rock star, possibly more so than some members of the rhythm section – have the same pattern of existence: a period of inspirational hibernation followed by marketing and exposure, the cycle repeated as often and for as long as there is an audience for the work.

The pharmaceutical industry, whose products are not unknown in the world of rock, has a similar rhythm. Years of lab-bench R&D undertaken by highly creative scientists are followed by the release and global marketing of, hopefully, a blockbuster that will pay for research into the drugs that follow, cover the cost of cul-de-sac R&D and plump the cushions in the C-suite. In Big Pharma, big music and big stockbroking, the margins gouged from the few successful releases pay for myriad failures and ensure the wheel keeps turning.

The problem for the pharmaceutical industry is that, Covid-19 vaccines aside, the average time and cost of finding, testing, producing and bringing to market a new drug has ballooned to 14 years and $2.6bn, more even than a late-period Guns N’ Roses album. Only one in 10,000 drugs makes it through pre-clinical trials and, according to Deloitte, the average return on pharma R&D has sunk to a painful 1.9%, comfortably below the cost of capital. The problem is compounded by genomics and the evolution of more targeted biologic drugs with better outcomes, but smaller market opportunities. Although these can be developed more quickly, the regulatory requirements remain as onerous and expensive as ever, undermining the economics of development at the same time as they satisfy Eroom’s Law. What is the solution?