Image courtesy of  Johnson & Johnson

The pharmaceutical industry is akin to a human body – a living, breathing force supplying life-saving therapies to an ever-increasing global population. This intricate system, driven by human demographics and global health needs, comprises numerous interconnected parts working together to systematically discover, develop and deliver medicines. If a single part was removed, the body would cease to function. 

The current environment presents significant challenges like cybersecurity risks, regulatory compliance, and policy uncertainty. Playing at parity is insufficient; companies must focus on their unique strengths and direct capital and talent where they can truly outperform. Greg Rotz, pharmaceutical and life sciences advisory leader at PwC, said: “A few years ago, everyone was focused on execution and then during COVID, it was business continuity and speed. Now, the focus is really on reinvention. We are standing at the edge of significant change.”

The heart: The biotech beat

Biotechnology remains the heart of this body, continuously pumping the lifeblood of innovation throughout the system. After the cardiac arrest of the biotech in 2022 and 2023, it seems 2024 delivered a much-needed AED, and 2025 will see the biotech heart begin to beat again. 

While investor caution persists, the biotech investment cycle appears to be rebounding, breathing life back into the sector. Venture capital, the oxygen for this heart, is flowing, albeit cautiously, towards companies demonstrating proven science, strong data, and clear pathways. However, a tale of two cities exists, with mega-rounds dominating funding while smaller Series A and B companies face struggles. The IPO market reflects this caution. While 2024 saw 16 IPOs, a 46% increase over 2023’s 11, many struggled, and the environment remains challenging. As Christiana Bardon, managing partner at MPM BioImpact puts it: “Companies hesitate to go public, and when the best do, investors hesitate to participate. It is a classic chicken-and-egg problem.”   

There were eight IPOs in Q1 2025, which is only one greater than 2024’s seven IPOs during Q1. “If 20–30 venture-backed IPOs happen in 2025, it would be a positive signal”, said Jonathan Norris, managing director at HSBC Innovation Banking. 

Innovation increasingly originates from small to medium-sized companies, with nearly 80% of new molecules coming from these nimbler players, many without their own manufacturing. High-growth areas attracting significant interest include oncology, advanced cell and gene therapies (CGTs), rare diseases and platforms leveraging AI. CGTs are gaining momentum with more products reaching the commercial stage, though significant safety and CMC challenges remain. Experts anticipate a continued rise in CGT approvals through 2025.   

Lungs and oxygen: Capital markets’ vital breath

Funding and capital markets act as the lungs, supplying the essential oxygen (capital) that allows the entire pharmaceutical body to function. However, the breathing has been strained. “The uncertainty on the capital markets over the last two years created a narrative of ‘cautious optimism’ which ultimately led to ‘optimism fatigue’,” said Arda Ural, life sciences sector leader at EY Americas.

Investors are prioritizing reduced risk, often favoring mega-rounds in later-stage assets over earlier, riskier ventures. Many companies that raised funds in 2021-2022 relied on smaller insider rounds later, creating pressure to hit milestones in 2025 or face difficult consolidation. “Life sciences companies are focusing on managing cash burn and ensuring that their runway lasts as long as possible,” remarked John Pennett, partner-in-charge of the national technology and life sciences group at EisnerAmper.

There is a need for innovation beyond science. “The biggest theme is the ongoing paradox between advances in science and lagging shareholder returns for the sector. With a few notable exceptions, great science is not enough to drive outperformance in the capital markets,” said Rotz.

A potential easing of Fed rates in 2025 could spur a rebound in IPO activity based on historical correlations, but investor sentiment remains key.   

The organs: Big Pharma’s specialized roles

The large pharmaceutical companies function as the body’s vital organs, each playing a specialized role and bringing expertise in different domains. 

Modality shifts are coming in waves: “The tsunami of interest in RNA has touched virtually every entity in the pharmaceutical industry. Eli Lilly has a massive interest in genomic medicines, Pfizer goes without saying, and even companies like Novo Nordisk that had not previously had collaborations or partnerships in this area are now looking to enter the field,” said Kate Broderick, chief innovation officer at Maravai LifeSciences and TriLink BioTechnologies.

In 2025, Big Pharma remains a strong force, but the operating environment is undeniably shifting. They face a significant loss of exclusivity (LOE) wave, projected to impact revenues by an estimated US$300 billion by 2028. This patent cliff, reminiscent of the 2008-2010 period, is driving portfolio reshaping and M&A activity. The balance between top-line revenue and pipeline strength turned negative in 2023 and is expected to remain so until 2028. “Leaders must recognize that market economics are changing and decide where they can truly excel. Some companies will disrupt R&D, accelerating speed and reducing costs through AI, data, and startup partnerships. Others will focus on consumers, expanding beyond therapeutics to holistic healthcare solutions. Companies must choose how they will win in this evolving landscape,” emphasized Rotz. 

This often involves acquiring innovation externally, as historically, 70% of top-selling products originated outside Big Pharma, primarily from biotech. “Heading to 2025, the outlook is positive, particularly with Fire Power of US$1.3 trillion of capital available for dealmaking. This positions the industry to pursue external growth aggressively if internal pipelines fall short,” highlighted Ural.

Many large pharma companies are also restructuring, potentially divesting plants, which could create opportunities for CDMOs.

Arteries and muscles: CDMO/CRO powerhouses 

Contract research firm arteries move oxygenated blood (funded innovations) away from the heart and into the ecosystem. Contract manufacturers perform the heavy lifting—producing APIs, formulating drugs, and scaling manufacturing. They support movement initiated by the heart (biotech). Without CDMOs and CROs, ideas would not become actions, and innovation, the lifeblood, would not be delivered. 

The US pharmaceutical CDMO market alone is valued at US$43.62 billion for 2025 and projected to grow steadily. Significant investments are being made in expanding capacity and capabilities across the globe. Dirk Lange, CEO of Pyramid Labs, a US-based CDMO, elaborated on trends that are trickling down into the CDMO space: “The pharmaceutical landscape is rapidly evolving, with biologics, peptides and oligonucleotides gaining prominence. While monoclonal antibodies have long dominated the field, more complex modalities such as bispecific antibodies and fusion proteins are becoming increasingly common. The success of GLP-1 receptor agonists has fueled further investment in peptides, solidifying their place as a viable drug class.”

The acquisition of Catalent by Novo Nordisk significantly impacted the market, reducing available capacity (especially for injectables) and forcing clients to seek new partners. This has created opportunities for other CDMOs, particularly those serving smaller players underserved by the consolidation. It also created challenges reminded Andrew Mears, CEO and co-founder of Lead Candidate, a life sciences recruitment company: “The expanding GLP-1 market is increasing demand for specialized talent. Companies must adapt to secure the right talent, with growth-focused organizations needing individuals skilled in expansion.”

The nervous system: Regulators in control

Regulators, particularly the FDA, function as the body’s nervous system, controlling its movement and direction. The current regulatory environment can be described in a single word: unpredictable.

The proposed US BIOSECURE Act, restricting federal funding for work with certain Chinese companies, has created significant uncertainty. While full decoupling is unrealistic, some version is expected to pass, shifting spending and prompting supply chain reengineering, likely at added cost to patients. Despite user fees (PDUFA) intended to speed up reviews, the process can remain slow, with FDA requests for information extending timelines, particularly compared to Europe. Regulatory scrutiny, especially for foreign manufacturers, has intensified. Proposed cuts to NIH funding raise long-term concerns, particularly for research hubs like Massachusetts. “While cuts do not immediately impact industry, long-term reductions in research funding slow the creation of new companies. Fewer companies mean less innovation and fewer clinical trials —delaying life-changing treatments for patients,” said Ben Bradford, head of external affairs at MassBio.

Messing with the pharmaceutical industry is not the way to go. “Science is apolitical — both Republicans and Democrats get brain cancer and need treatment,” warned Bardon.

The frontal cortex: Data and AI 

Technology, particularly Artificial Intelligence (AI), acts as the frontal cortex, processing vast amounts of intelligence and accelerating decision-making across the pharmaceutical body. The market for AI in life sciences is projected to expand rapidly, from US$2.14 billion in 2024 towards US$9.17 billion by 2032. Early AI-discovered products are already in development. “From clinical trial optimization to procurement, AI and machine learning can expedite drug development by helping companies fail faster or find more likely successful paths. These technologies could also improve capital efficiency, which is crucial in an industry where traditional methods can be slow and fraught with failure,” said Pennett. 

AI tools are becoming more accessible to smaller biotechs, leveling the playing field. Adoption faces hurdles. The biggest challenge is not generating ideas but executing those ideas in ways that truly deliver transformation. Data readiness is another issue; many companies lack the necessary data foundation despite investments. Risk avoidance can also slow adoption for legacy products. 

The medulla: Patients 

The medulla is a part of the brainstem (the connection point between the brain and nervous system) which controls the things that keep you alive without having to think about like heartbeat, circulation, and breathing. While not consciously directing the body’s lifesaving functions, patients—given the prevalence of diseases and need for treatments—fundamentally dictate the industry’s direction, influencing funding flows and R&D focus. 

There is a major shift towards patient-centricity, influencing everything from drug delivery to logistics. Demand is soaring for user-friendly formats like pre-filled syringes and autoinjectors for at-home administration. “Convenience remains a strong trend. Consumers want portable, easy-to-use products,” said Jeff Reingold, COO of Contract Pharmacal Corp.

This shift requires CDMOs to be well versed in more complex and advanced drug delivery technologies, said Robert Lee, senior vice president, BD at Particle Sciences: “There is growing interest in patient-centric dosage forms—long-acting injectables, nanomilling, engineered particles, PLGA microspheres, and implants (both bioerodible and biodurable). We are getting more interest in bioerodible implants, including intraocular and intraarticular administration.”

Major health challenges guide investment. The obesity epidemic fueled massive growth for companies like Novo Nordisk and Eli Lilly with GLP-1 drugs, generating billions that will flow back into R&D and M&A. Cancer also remains a primary focus.   

An evolving body

The pharmaceutical industry body in 2025 is a dynamic, complex organism navigating significant change. Innovation beats strongly from the biotech heart, oxygenated with recovering (though cautious) capital flows. Big Pharma organs adapt to patent cliffs through M&A and restructuring. CDMO muscles grow stronger and more specialized. AI provides new cognitive power, while the regulatory system attempts to maintain balance. Ultimately, patients are at the center, directing the body’s purpose.