2025 Biopharma Industry Outlook: Growth, Innovation, and Emerging Risks

Biopharma is reshaping the healthcare industry, and smart investors are paying close attention.

The healthcare sector could see major changes as artificial intelligence accelerates drug discovery, vaccines, and therapies drive billions in sales, and looming patent cliffs create both risk and opportunity. Revenues at the top 17 biopharma firms under Morningstar coverage are projected to grow at a 4.5% compound annual growth rate through 2029.

In the 2025 Biopharmaceuticals Landscape, we dive into biopharmaceutical innovations to provide a complete look at the industry. We also explore industry growth, pricing pressures, and innovation, and highlight the best stock picks for investors in the biopharmaceutical space.

What Is the Biopharma Industry?

The biopharma industry supply chain has five components.

At the beginning of the supply chain are biopharmaceutical firms such as Pfizer PFE or Amgen AMGN, which conduct research and development to manufacture and eventually commercialize drug treatments.

These companies produce some drugs that use larger, more complex molecules, and some that are made with small molecule structures. They all produce a wide range of products like vaccines, gene therapy, cell therapy, and other treatments.

From there, the drugs are sent to the second component: the wholesalers who handle the distribution of the treatments.

The third component is pharmacies like CVS CVS and Walgreens WBA, or hospitals where doctors prescribe the drugs to patients (who are the fourth component).

Finally, either the government, through programs like Medicare or Medicaid, or insurance companies cover most drug costs for consumers.

As new themes and drug development innovations take shape, keep an eye on the key drivers of this industry’s growth.

Biopharma Industry Trends

Innovations in drug development and upcoming patent expirations are shaping up to be catalysts for biopharma industry growth.

We expect expiring patents to create a $128 billion headwind over the next five years, particularly in 2028, when almost $80 billion is at risk. Some of the biggest patent losses on the horizon include Stelara (Johnson & Johnson JNJ), Keytruda (Merck MRK), and Opdivo (Bristol-Myers Squibb BMY).

Still, we predict that this dip will be offset by over $300 billion in growth from drugs already on the market or in the pipeline, especially in the fields of obesity treatment, immunology, and oncology.

Here‘s what’s on the horizon in key therapeutic fields.

Areas of Biopharma Industry Growth

Obesity Treatment

A rise in demand for obesity and diabetes treatments has led to a boom in the GLP-1 market, with more than $50 billion in sales in 2024. We think the market could peak ahead of the $200 billion patent expiration for Novo Nordisk’s NVO Wegovy (in 2031), while competitors prepare to launch new drugs by 2028.

Oncology

Iqvia IQV forecasts oncology drug spending to hit $440 billion by 2028, with the largest growth drivers being checkpoint inhibitors. Checkpoint inhibitors prevent cancer cells from binding to T-cells and passing a healthy cell recognition test, allowing the immune system to fight cancer.

The recent emerging use of these drugs in earlier-stage cancers is further driving midterm growth.

Iqvia also estimates that US oncology drug spending will reach $187 billion by 2028, about a third of net US drug spending.

Immunology

The roughly $100 billion immunology market for the top 17 biopharma firms is poised to start slowly shrinking by 2029, as biosimilar versions of established drugs, like Humira and Stelara, reduce sales. But new drugs like Skyrizi (AbbVie ABBV) and Dupixent (Regeneron REGN and Sanofi SNY) are predicted to drive growth and counteract headwinds.

HIV Treatment

The $30 billion global HIV treatment market is also expanding, with new combination regimens offering better safety and efficacy. Biktarvy, made by Gilead GILD, is the leading daily pill for HIV treatment, but injectable medications may gain popularity as administration is less frequent and as new options are available to help prevent infection.

Vaccines

The multibillion-dollar vaccine market is expected to resume growth in 2025 after declines from waning demand for covid vaccines. Because vaccines have a longer, more complex development process than most drugs, it can take years for them to hit the market.

This leads to only one or two vaccines dominating each category. For example, Pfizer and Moderna MRNA control the covid vaccine segment, though sales are expected to decrease modestly by 2029.

Other leading vaccines—like GSK’s GSK Shingrix for shingles and Merck’s Gardasil for HPV—remain top sellers, though most are expected to see flat or slightly declining sales through 2029. Innovation in flu and meningitis vaccines may help sustain competitiveness in the post-covid landscape.

Genetic Therapies

mRNA technology was quickly validated by the pandemic, driving massive early sales for Pfizer/BioNTech and Moderna. Although updated vaccines and boosters have had limited uptake, long-term demand for covid vaccines is expected to persist, supporting a roughly $8 billion annual market.

We forecast non-covid mRNA vaccine sales to reach $10 billion annually by 2034, with promising potential in infectious disease, cancer, and rare disease markets.

Rare Diseases

Rare diseases, accounting for 45% of clinical trials starting in 2024, are gaining prominence due to faster development timelines, strong pricing power, and high success rates, especially when overlapping with rare oncology.

Risks and Opportunities of Investing in the Biopharma Industry

The biopharma industry benefits from the ability to weather macro factors, like recession and inflation, with minimal impact. The need for prescription drugs stays stable, regardless of the state of the economy.

In the past two recessions, the consumption of pharma and medical products has shown resilience, growing steadily despite economic downturns.

Though we don’t expect any major impacts on biopharma operations in a potential recession, we do note that recessions can affect funding for smaller biopharma firms that need capital for research and development.

AI in the Biopharmaceutical Industry

As in many other industries, the use of AI in the biopharma industry could increase efficiency. By improving drug discovery, clinical trial design, and regulatory processes, AI could shorten the overall timeline from 14 years to just six to nine years.

The top biopharmaceutical firms are at various stages of readiness for AI implementation. Roche RHHBY is a leader in this aspect, while AbbVie and Novo Nordisk look slightly behind their peers.

Drug Development Risk

On average, the drug development process takes 10.5 years with a 7.9% overall approval rate.

Most drugs go through three phases, which test safety and efficacy. This process has challenges at every stage that can vary depending on the drug and location.

Other areas of risk include regulatory challenges (that is, getting the drug approved) and commercial risks. For example, the recent passage of the Inflation Reduction Act changed Medicare reimbursement rules.

ESG Considerations in Biopharmaceutical Investments

The biopharma industry stands out for its elevated environmental, social, and governance risk profile, especially when it comes to product governance and access to basic services.

According to Sustainalytics data, biopharma companies have a higher concentration of medium-risk ESG ratings compared with other sectors.

The inherent uncertainty of new drug development also carries litigation risks. This is amplified in the US, where tort laws have enabled multibillion-dollar settlements in past product safety cases.

Access to basic services is another key issue, driven by high drug prices in the US, double those in other developed countries. While international pricing pressures exist, they tend to be more stable and less critical to overall profitability.

Biopharma‘s deep reliance on the US market elevates its ESG risk, making geographic exposure a crucial factor for investors to monitor.

US and Global Pricing Pressures

In the US, drug costs are covered by private insurance as well as public programs like Medicare and Medicaid. Public programs represent a significant share of the roughly $600 billion US drug market, split between retail and nonretail channels.

Pharmacy benefit managers, or PBMs, play middlemen between insurance companies, pharmacies, and drug manufacturers. Their main function is to negotiate with drug manufacturers to get discounts on medications and create lists of approved drugs that insurance plans will cover. Three dominant PBMs—Caremark, Express Scripts, and Optum Rx—control about 80% of US prescriptions. Their increasing use of formulary exclusions and aggressive negotiations have contributed to ongoing pressure on drug prices.

While list prices continue to rise, net prices have flattened due to rebates or actually declined after adjusting for inflation. Beyond the US, international drug pricing remains a headwind.

Reimbursement Outside the US

International pricing and reimbursement policies remain a significant challenge for the industry. Public, or government, payers dominate many of the markets outside the US, exerting downward pressure on drug prices.

In Western Europe (which accounts for 14% of global pharma spending), governments routinely implement price cuts. Germany tightened policies in 2023, reducing the free pricing period for new drugs and increasing mandatory rebates.

Japan (which comprises 5% of global spending) has seen stagnant growth, maintaining cost control through frequent price cuts.

China (representing 10% of global spending) continues to see strong demand and volume growth, especially as more treatments are added to the National Reimbursement Drug List. However, inclusion typically comes with steep discounts.

Overall, drug companies will keep facing challenges from pricing rules and reimbursement policies in countries outside the US.

Should I Invest in Biopharma Stocks?

With a more complete picture of the biopharmaceutical industry, the question becomes: Should I invest?

There are over 50 companies in the biopharmaceutical industry, with a wide range of market capitalizations. GSK, Pfizer, and Roche are among the large-cap stocks to receive a 5-star rating from Morningstar.

Despite ongoing challenges from pricing pressures and patent cliffs, the biopharma industry remains resilient. Breakthroughs in areas like obesity treatment, cancer therapies, and the integration of AI are fueling continued growth.

Looking ahead, the companies that lead will be those that embrace diverse strategies, stay alert to ESG priorities, and remain ready for smart mergers and acquisitions opportunities.