Pro-Innovation M&A Allows Life Sciences Innovators to Weather the Significant Costs of R&D

Feb 7, 2024 | Blog Post

Life sciences companies of all sizes face extended time and cost pressures as they work to bring new medicines to patients, as the average cost of research and development (R&D) can exceed $2.8 billion, and it can take more than 10-15 years to bring a new therapy to market.

As described in a recent PULSE webinar, navigating this long, costly process of new medicine development is like a relay race where each company has a crucial role to play in advancing to the next phase, no matter their size. Within the dynamic U.S. life sciences ecosystem, mergers and acquisitions (M&A) allow these companies to “pass the baton” during different stages of development, drawing on specialized expertise and utilizing complementary resources, all while attracting critical outside investments to help them navigate the lengthy and costly journey of R&D more efficiently.

One recent analysis adds that developing a new medicine is “an iterative process that builds on prior knowledge — both successes and failures — and that often may benefit from advances from sources outside the company.” Within this process, R&D is often the single most expensive stage of bringing a new medicine to market. Consider the following components the of R&D process where M&A can help the life sciences ecosystem bear the significant costs of innovation:

Clinical Trials

Estimates place the average cost of recruiting and conducting clinical trials at $200,000 per participant. Accordingly, life sciences companies can spend more than $740 million* on clinical trials before a single new medicine reaches the market. Importantly, of the novel treatments that enter clinical trials, 90% will stall before ever reaching patients.

For rare diseases, there’s an even greater risk of clinical trial “failure.” Rare diseases often represent complex, small patient populations, which escalates R&D costs – in some cases, raising the clinical trial costs to more than $2.4 billion.* Given that 80% of biopharmaceutical companies operate without a profit, these costs are often steep enough to prevent new treatments from ever leaving the lab.

By creating a valuable investment incentive, M&A helps the life science ecosystem mitigate these costs by attracting much-needed funding for clinical trials. M&A also supports companies of all sizes in conducting clinical trials more efficiently, by connecting one company’s innovations with the established resources and expertise of another company, thereby reducing potential cost redundancies from duplicating sophisticated infrastructure.


One study estimates that developing the manufacturing processes to produce the required doses and secure regulatory approval for a single new therapy can cost upwards of $102 million*. This estimate does not account for the subsequent cost of scaling up manufacturing

capabilities for the treatment after it has been approved. This added cost alone has proven to be a daunting hurdle in getting new therapies to patients, especially for smaller companies without established infrastructure. In addition, more than half of the manufacturing costs associated with R&D ($71 million*) are incurred during later-stage clinical trials, which are often longer than early-stage trials and require more patient participants.

M&A is particularly critical for a new medicine’s success during these late-stage clinical trials. M&A allows smaller companies which specialize in early and initial biopharmaceutical discovery to translate their promising discoveries into life-changing medications by more efficiently securing the resources and infrastructure necessary to develop and distribute them at scale.

As policymakers at the Federal Trade Commission and Department of Justice have signaled an increasingly hostile stance toward M&A through recent policy changes, it is vital that the agencies keep the reality of the costs of life science innovation top of mind. A balanced approach to M&A enforcement is invaluable for companies of all sizes to advance the generation of treatments and cures to the patients who need them.

*Note: Estimates utilize modelling in Appendix A, based on published R&D costs from DiMasi & Grabowski. Costs of pre-clinical manufacturing and trials have been excluded.