Why Dealmaking Is Now a Survival Skill: Q&A with Dan Chancellor

As the patent cliff looms, pharma and biotech companies are looking to develop the future blockbuster drugs. As a result, R&D spending increased over recent years, signalling that pharma companies are focused on new drug development.

However, in a conversation with Norstella’s VP of thought leadership Dan Chancellor, he explained that pipeline creation has actually slowed. According to him, this is due to companies shifting their focus and strategy during the R&D phase.

He also discusses the state of clinical trials, which he says aren’t failing at higher rates than previous time periods. Instead, failures are occurring earlier in the process, which he says is actually a good sign.

Pharmaceutical Executive: What is causing the apparent disconnect between pipeline creation and R&D spending?
Dan Chancellor: Across the top 25 cohort, pipeline creation has slowed by 32% over the last five years, even as R&D spend has gone up 45% to $790bn. The industry isn’t losing its ability to innovate, but rather what we're seeing is much tighter selectivity earlier on. Companies are choosing to advance fewer candidates, but holding them to a higher bar before they commit real money downstream. We calculate the average cost of bringing a new drug into the pipeline at $108m, and there's a four-fold spread between the most and least efficient companies, which tells you this is as much a strategy question as a cost one.

2. What is causing higher rates of early-stage clinical trial failure?

I'd actually reframe this. Trials aren't failing more often overall, they're failing earlier. 38% of all disclosed failures now happen in Phase I, up from 32% in 2020, while failures at the approval stage have dropped to under 1%. Companies are killing weak assets before they get expensive rather than letting them limp into Phase III. As development timelines and costs increase, this tighter portfolio governance becomes necessary. And the data backs this up as a smart strategy: companies with higher Phase I attrition tend to post stronger Phase III success rates. Novo Nordisk is the clearest example in our cohort.

PE: What does Lilly's trajectory reveal about what separates the top performers from the rest of the cohort?
Chancellor: Lilly ranked 16th against our 2020 benchmarks and tops the index in 2025. What's interesting is that this isn't just a GLP-1 story. Lilly made genuine operational improvements across pipeline efficiency and development timelines too, and has pulled well ahead of its large pharma peers on speed. UCB has made a similarly sharp climb, while a few companies fell out of the top 10 altogether. The lesson is that execution beats pipeline strength on its own. Companies with the best drugs still lose ground if the strategy connecting R&D to commercial isn't there.

PE: How much of the post-launch revenue growth reflects genuine improvement in commercial performance?
Chancellor: Less than the headline number suggests, honestly. Average seven-year sales per launch have risen to $1.6bn, up from $795m ten years ago. But strip out Wegovy and Mounjaro and that figure comes back down to $1.3bn, which is basically flat against the 2016–20 average. 14 of the 25 companies in our cohort actually had weaker launch performance over the period. So the improvement is real, but it's concentrated in a handful of exceptional launches rather than a broad industry gain. That said, pharma’s economics have always depended on its blockbusters carrying the average so let’s not discount these successes.

PE: What does the decline of newly launched products in total prescription revenue reveal about the industry's pipeline investment to commercial return?
Chancellor: This is one of the most important findings in the whole report. Revenue from drugs launched in the last seven years fell to 26% of total prescription sales in 2025, down from 29% in 2020, and on current trends we project that falls to 18% by 2030. Companies are producing bigger individual launches, but not enough of them to keep pace with ageing blockbusters coming off patent. To me, that's the clearest evidence that an internal drug development engine doesn’t automatically add up to a healthy, self-sustaining portfolio. As we head into the $500bn patent cliff between 2026 and 2032, large pharma companies will become increasingly reliant on deal-making and sourcing externally to rejuvenate and continue to grow. Great news for biotech innovators and their investors.