Be brave, be bold.

This positive trend is driven by a surge in high-value products entering the late-stage pipeline, particularly in areas of high unmet need like obesity and diabetes. However, this progress is fragile. Rising R&D costs driven by factors such as increasing research complexity and high competition in research areas, continue to pose a threat to sustainable R&D and a highly productive industry.

The increase in IRR is driven by promising late-stage pipeline candidates and impressive trial outcomes (the average forecast peak sale has increased to US$510 million). However, rising R&D costs, which reached an average of US$2.23 billion per asset in 2024, present a continuing challenge.

While companies are diversifying their portfolios, there is still a heavy concentration in oncology and infectious diseases. There is a strategic opportunity for companies to build expertise in less saturated therapy areas. Being a first-mover or fast-follower in underserved areas like Alzheimer’s, stroke, and multiple sclerosis could provide a competitive advantage and the potential to accelerate innovation for patient benefit.

Our research shows a direct link between investing in novel mechanisms of action (MoAs) and higher returns. While novel MoAs make up just over a fifth of the development pipeline (averaging 23.5% over the past four years), these drugs are projected to generate a much larger share of revenue (37.3% average over the past four years of analysis). Despite the inherent risks in navigating uncharted development territory, prioritizing these novel approaches is essential for developing breakthrough therapies with improved efficacy and patient outcomes. This is turn can help secure a higher IRR.

With a looming patent cliff threatening revenue streams, biopharma companies are increasingly relying on M&A to replenish their pipelines. However, a shift toward smaller-scale, early-stage acquisitions focused on promising innovation, rather than late-stage acquisitions to "plug the gaps," will be crucial for building a sustainable and robust pipeline.

To sustain this positive momentum and deliver life-changing therapies to patients, the industry needs to embrace bold innovation and strategic portfolio management. This involves:

The pharmaceutical industry delivers innovative and effective therapies to patients worldwide. By embracing bold action, fostering a culture of innovation, and adopting a long-term vision, biopharma companies can unlock the full potential of R&D, drive sustainable growth, and shape a healthier future for all.