Healthcare companies in the top R&D investors

November 15, 2007

Numerous healthcare companies feature among the top 20 of the world?s largest corporate R&D spenders.

Numerous healthcare companies feature among the top 20 of the world's largest corporate R&D spenders. Companies including Pfizer, Johnson & Johnson and GlaxoSmithKline have all doubled their R&D investment since 2005. For the first time in 3 years, the pace of R&D spending in 2006 caught up to the rate of sales growth among these companies.

At 13.3%, the healthcare industry has the highest intensity of R&D spending as a percentage of sales - a position shared jointly with the software and internet industry. The healthcare sector also leads other industries with a 13% average growth rate of investment in R&D over a 5-year period (2001–2006).

The analysis, conducted by Booz Allen Hamilton, identified a variety of innovation strategies, but John Potter, vice president of Booz Allen in London, concluded: "While there is more than one innovative strategy that can win the marketplace, it is clear that the key to superior performance lies in linking innovation strategy and corporate strategy - and in focusing on the customer in ways that can best promote strategic success." Companies that did this had 40% higher operating growth and twice the shareholder returns during the last 3 years.

Analysis of the 2006 1000 also confirms that there is no statistically significant relationship between R&D spending and the primary measures of financial or corporate success. "We found that companies place an increased value on innovation, but more spending doesn't necessarily lead to smarter spending or better results," advised John Potter. "With increased competition leading to thousands of new products being released every year, companies must improve their innovation processes to succeed."

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