Biotech Market Forecast: Top Trends for Biotech in 2025

Biotech sector starts 2025 with M&A flurry

A 2025 preview from Evaluate suggests cautious optimism for biotech in 2025. Industry experts anticipate increased M&A activity and improved access to capital, fueled in part by a looming US$300 billion patent cliff.

Companies facing steep revenue losses will be seeking to refill their pipelines, creating a ripe environment for “the biotech innovation engine,” as noted in a December market report authored by Dr. Arda Ural, Americas life sciences sector leader at EY-Parthenon. Promising biotech companies could become attractive acquisition targets.

Acquisitions announced around JPMHC underscore this trend, with several significant deals revealed.

The day before the conference began, Gilead Sciences (NASDAQ:GILD) announced a strategic partnership with LEO Pharma. LEO can receive up to US$1.7 billion to accelerate development of its inflammation drugs.

The first day of JPMHC saw even more action. Johnson & Johnson (J&J) (NYSE:JNJ) made one of the largest biotech acquisitions in recent memory when it announced plans to acquire Intra-Cellular Therapies (NASDAQ:ITCI) for US$14.6 billion. Intra-Cellular is the maker of Caplyta, an atypical antipsychotic approved to treat schizophrenia and bipolar depression. This acquisition expands J&J's presence in the neuroscience market.

GSK (NYSE:GSK) also announced a strategic acquisition at JPMHC, striking a US$1.15 billion buyout deal for IRDx, a company developing non-invasive diagnostics for gastrointestinal cancers.

Vera Therapeutics (NASDAQ:VERA) later announced a licensing agreement with Stanford University for VT-109, a fusion protein designed to treat B cell diseases by targeting two proteins involved in overactive immune cell activity.

Inflammation and immunology (I&I) were two other prominent areas of interest at the conference.

AbbVie (NYSE:ABBV) CEO Rob Michael highlighted the company's strong performance in this area, driven by the success of Skyrizi (risankizumab) and Rinvoq (upadacitinib); he said at JPMHC that they have effectively offset the revenue decline from Humira's patent expiration. The company’s planned acquisition of Nimble Therapeutics for its preclinical IL-23 inhibitor highlights the ongoing search for innovative treatments for inflammatory diseases.

Meanwhile, Kyverna Therapeutics (NASDAQ:KYTX) presented its ambitious goal of developing the first chimeric antigen receptor T-cell (CAR-T) therapy for autoimmune diseases.

Insights shared ahead of the conference by Jessica Fye, equity research analyst at JPMorgan (NYSE:JPM), indicate that oncology is currently another therapeutic area of focus. That was evidenced by the January 13 news that Eli Lilly (NYSE:LLY) intends to purchase Scorpion Therapeutics for US$2.5 billion, positioning it as a potential leader in the development of a new class of cancer drugs with the acquisition of experimental drug STX-678.

This focus on oncology was further underscored by several partnerships and developments announced before and during JPMHC, including Boehringer Ingelheim licensing Lonza Group's (SWX:LONN) antibody-drug conjugate (ADC) technology, Chugai Pharmaceutical (OTC Pink:CHGCF,TSE:4519) and Araris Biotech's research collaboration to develop ADC treatments and Ginkgo Bioworks Holdings' (NYSE:DNA) collaboration with Astellas Pharma (OTC Pink:ALPMF,TSE:4503) to optimize next-generation cancer treatments. Meanwhile, GSK highlighted Blenrep, its upcoming ADC, and Novartis (NYSE:NVS) emphasized the potential of its breast cancer drug Kisqali.

Beyond oncology and I&I, the conference highlighted continued interest in gene and cell therapy.

Peter Marks, director of the US Food and Drug Administration's (FDA) Center for Biological Evaluation and Research, told attendees that his agency is aiming to accelerate approvals for gene therapies like CRISPR medicine Casgevy, Pfizer’s (NYSE:PFE) Beqvez and PTC Therapeutics' (NASDAQ:PTC) Kebilidi.

For its part, Denali Therapeutics (NASDAQ:DNLI) shared an update on its leading asset to treat Hunter syndrome, DNL310 (tividenofusp alfa), announcing its intent to file for regulatory approval in 2025.

The company also said it expects to have one or two new drugs ready to bring to the clinic every year for the next three years thanks to its Transport Vehicle platform, a molecule capable of passing the blood-brain barrier.

Neurology also garnered attention at JPMHC. Apart from J&J’s acquisition, Bayer (OTC Pink:BAYRY,ETR:BAYN) announced it is moving onto Phase II trials for an allogeneic cell therapy to treat Parkinson’s disease.

While M&A is on the rise, companies in the biopharma space have signaled a cautious approach to funding, which could still be challenging for early stage companies. Roche Holding (OTCQX:RHHBF,SWX:RO) recently decided to pull about 30 percent of its pipeline and said at JPMHC that it has US$10 billion for M&A this year, but will only spend it on assets that are "transformative" and complement its portfolio, or "change the game" in important diseases.

Impact of AI on biotech R&D

When AlphaFold, a groundbreaking artificial intelligence (AI) system with revolutionary protein structure prediction capabilities, was awarded the Nobel Prize in Chemistry in October 2024, the potential for AI to play an increasingly critical role in drug discovery and development became a more prominent topic of conversation.

AI applications like AlphaFold, which was developed by Google’s (NASDAQ:GOOGL) DeepMind, could reduce development costs, lessening biotech's reliance on partnerships or acquisitions from Big Pharma to secure funding. This would allow smaller companies to better protect their intellectual property and introduce more innovative drugs.

The FDA's release of draft guidance on AI in drug development further underscores the growing importance of AI in the biotech sector, signaling a shift toward greater acceptance and adoption of AI-based tools in the regulatory process.

Will Trump kickstart a new regulatory era?

US President Donald Trump's second term is expected to bring widespread changes. In the biotech industry, regulatory shifts and leadership appointments have the potential to significantly impact the market.

As Daphne Zohar, CEO of Seaport Therapeutics and former head of PureTech Health (NASDAQ:PRTC), noted in an email to Biopharma Dive, a change in Federal Trade Commission (FTC) leadership could have a positive effect.

Current FTC Chair Lina Khan's policies have been unfavorable to the healthcare industry, and include heavy scrutiny of mergers and acquisitions in the space. Trump’s picks — Andrew Ferguson as FTC chair and Mark Meador as commissioner — are seen as likely to be less restrictive in their approach to dealmaking.

However, in the short term, uncertainty around the confirmation of key health department appointments in the US, along with an evolving tariff situation, may contribute to market volatility.

“Uncertainty always creates volatility, and volatility is not great for the public markets,” said Rebecca Stevenson, according to BioPharmaDive’s coverage of JPMHC. “Ultimately the dust needs to settle before we see generalist (investors) back in. Is that happening in the next six months? Probably not.”

Dr. Marcus Makary, Trump’s choice to run the FDA, has been well received by the industry as well. The Johns Hopkins University pancreatic surgeon is seen as a more conventional pick than Robert F. Kennedy Jr., who is the president's choice to lead the country's Department of Health and Human Services.

Kennedy has stated that the high prevalence of chronic diseases in the US necessitates significant changes to the healthcare system, and has said he would support unconventional medical fields, including stem cell injections and nutraceuticals. Financial disclosures from Stat+ indicate that he has a vested interest in biotech investments, and there is optimism that his oversight could breathe new life into stem cell research.

In a post on X after his October nomination, Kennedy issued a warning: “FDA’s war on public health is about to end.”

Investor takeaway

The biotech sector is at a crossroads in 2025, presenting a dynamic landscape of opportunities and challenges. As the market navigates these complexities, collaboration between academia, industry and government will be crucial to unlocking its full potential and addressing the pressing healthcare challenges of the 21st century.

Investors will need to closely monitor both clinical data and regulatory developments.