The difference is particularly important in the pharmaceutical industry, where developing a drug through clinical trials is just as important as creating it. We try to capture the difference in our 12th Annual Pharmaceutical Innovation and Invention Index.

Developing drugs is expensive. The R&D expenditure of the Top 30 pharma companies totalled $162 billion in 2022, representing 18% of revenue, and the estimated average cost of bringing a drug to market is still in the billions. 

The Index ranks companies utilising a range of clinical, regulatory, and commercial metrics, ranging from the corporate level down to individual product decisions and outcomes. The Invention Index measures the potential value of a company's pipeline, and the Innovation Index measures the company's ability to convert potential value to realised value.

Companies in the top 10 indices create greater value than a similar competitor. We can celebrate all the incredible work done by the people working at these top 10 companies in developing and launching more great medicines.

One interesting newcomer in the list is Boehringer Ingelheim, a global enterprise founded in 1885. They exploded from ranking 27th on last year's Innovation Index all the way to number =6 for 2023 due in part to landing the first-ever FDA approval to treat generalised pustular psoriasis. This new approval and the company's successful array of marketed treatments led the way to its estimated $7 billion increase in revenue. 

Boehringer has reshaped its portfolio, not just in terms of having more drugs but also looking at novel uses to go after. And they've been taking a different approach to development. While a company like Novartis goes for high-risk, high-reward bets, Boehringer goes for larger population sizes, more evidence and more reassurance about what to take forward. Their shots on goal have become more effective.

Last year, Eli Lilly fell from first on the Index to 19th. This year they are back at 6th. Over the years, Lilly has been one of the best in the industry for reinvesting dollars back into R&D. In 2022, they successfully introduced their new breast cancer medicine Verzenio (abemaciclib), and Mounjaro (tirzepatide)in T2D. Looking ahead, Mounjaro could easily become Lilly's top product, and they are on a path to success in Alzheimer's Disease following the recent announcement of their positive Ph3 data. 

GSK also re-entered this year's top ten thanks to successes in its vaccine franchise. 2023 looks promising already following the exciting news about the first-ever FDA approval for an RSV vaccine with blockbuster potential. 

The question, 'if you give the same molecule to two companies in phase I, would they be equally successful?' remains a defining one. The answer is clearly 'no', so the more interesting question is 'why?'—perhaps one of the most important questions for our industry.

As you might expect, there is some relationship between invention and innovation – the latter can be delayed by the former. Also, invention does not necessarily predicate innovation, as seen by the 'scatter' in the graph below. 

Excellence in delivering innovation is unevenly distributed across the industry: not every company is consistently able to realise the value in their pipeline. Companies in the top 10 do something meaningfully different than the bottom 10. The best innovators don't necessarily have the biggest pipeline in the industry. Great products are created by all the 1,000+ decisions teams make across the development and lifecycle. Companies that take 'better' decisions launch meaningful products that are better than anything else on the market.

Novartis and Pfizer are almost equally efficient and effective in their R&D spend; however, Novartis is getting less than 10% of its revenue from new products, whereas Pfizer has 60% or $61 billion derived from products launched in just the last three years, which is unparalleled. As was the case in 2021, the key driver of Pfizer's growth came from its COVID-19 products, and revenue exceeded $100 billion for the first time in company history. 

Novartis has shifted focus to the most innovative therapy platforms like gene and cell therapy and RNA technology, which creates a high-risk, high-reward environment for the company's development efforts. Novartis has the most new approvals (14 novel therapeutics over the past five years). Still, several indications are unlikely to yield huge revenue as they are for a small population and experience friction challenges in the US market. Efficiency is good, but efficiency without effectiveness is not sustainable.

Too often, companies tend to set their path with "strategic plans" that don't reward curiosity. All the 'strategic plan' should include is: what do we need to learn, and what is the best way to do that? Planning to have a drug with a certain profile – say a hypertension medicine – is a lot like the anecdote about the person who is searching for his keys under the lamppost because that is where the light is. Often the opportunity is in the dark – as when Pfizer's Viagra (sildenafil), a hypertension medicine, was found to have another effect. Our job is to bring the light.

Full results are here www.ideapharma.com/pii