The pharmaceutical industry is gearing up for a busy 2025, with a focus on research and development to fill gaps in portfolios. Oncology has traditionally been a key area of research, but obesity drug trials are on the rise, along with activity in immunology and neurology. Recent outlooks from Deloitte and Fitch Ratings suggest that these four therapeutic areas will receive the most R&D funding in the coming years.
Despite the challenges in biopharma R&D, with a modest internal rate of return, companies are making strategic investments to offset losses from patent expirations and regulatory costs. Specialty and rare diseases have been a focus for many companies due to their potential for high returns, but there is also renewed interest in fast-selling GLP-1 medications.
One of the key forces shaping pharma’s R&D approach in 2025 is the need to re-align portfolios. The industry is expected to focus on projects with shorter development times to maintain exclusivity and returns, especially for small molecule therapies. External pricing pressures, such as Medicare drug price negotiations, are also influencing companies’ asset selection strategies.
Another challenge on the horizon is the looming patent cliff, which poses a risk of $300 billion in revenue loss through 2030. To address this gap, companies are likely to increase merger and acquisition activity. Despite a decrease in deal volume in recent years, companies are expected to ramp up M&A in 2025, driven by increased confidence and a more stable economic and regulatory environment.
Regulatory barriers are expected to ease in the coming year, with the Federal Trade Commission showing more leniency towards mergers. While some challenges like inflation and high interest rates remain, the pharmaceutical industry is poised to make strategic deals to fill pipelines and drive innovation in 2025. The emerging market for weight loss and diabetes drugs has seen a surge in competition among biopharma companies, with a focus on developing oral GLP-1 medications to gain an edge over existing injectables. Companies are increasingly investing in research and development in this area, with a particular emphasis on obesity medications.
The success of Novo Nordisk and Eli Lilly’s GLP-1 drugs has revitalized interest in primary care therapies, leading to exponential growth in this market. Even for companies entering the market as third or fourth players, the sheer size of the opportunity makes it hard to ignore.
Beyond their applications in obesity and diabetes, GLP-1 drugs like Novo’s Wegovy are proving to have broader implications for healthcare. Wegovy was recently FDA-approved for reducing the risk of cardiovascular disease, and Novo is exploring its potential in treating conditions like Alzheimer’s disease, MASH, and chronic kidney disease. Similarly, Eli Lilly is expanding the use of Mounjaro to include sleep apnea and is studying its efficacy in heart failure, cardiovascular health, and MASH. The impact of GLP-1 drugs on related markets, such as sleep apnea treatments, is already being felt, with potential market share erosion for existing therapies.
The potential for GLP-1 drugs to reshape the healthcare and life sciences landscape is significant, driving investments in new products and research. As these drugs continue to demonstrate their effectiveness, we may see a shift in healthcare practices and treatment approaches.
In conclusion, while investing in GLP-1 drugs may come at a higher cost initially, believing in their potential to fill gaps in your pipeline and revenue curve can lead to strategic moves that pay off in the long run. The evolving landscape of weight loss and diabetes medications underscores the importance of staying ahead of the curve and adapting to emerging trends in the biopharma industry.
