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Biotech and Pharma Market Update: Q1 2025 in Review
Apr. 23, 2025 01:15PM PST
The healthcare sector faced a whirlwind of challenges and opportunities in Q1, from major acquisitions to regulatory uncertainties. What will Q2 bring for biotech and pharma?
National Cancer Institute / Unsplash
The healthcare sector was impacted by a dynamic mix of factors in the first quarter of the year, including increased dealmaking, competitive pressures and significant policy shifts.
Major acquisitions highlighted strong investment in specialized therapeutic areas, but the market also faced challenges related to rising development costs, funding gaps and regulatory uncertainties.
Read on for a look at key trends and events that shaped Q1, as well as an outlook for Q2.
M&A activity, IPOs make waves
Q1 brought continued investments and acquisitions in the healthcare arena, starting with Johnson & Johnson's (J&J) (NYSE:JNJ) substantial US$14.6 billion acquisition of Intra-Cellular Therapies.
Announced in January and finalized in April, the deal expands J&J’s portfolio of treatments for mental health disorders and neurological conditions, reflecting ongoing investment in specialized therapeutic areas.
January also brought an agreement from Eli Lilly (NYSE:LLY) to purchase Scorpion Therapeutics’ mutant-selective PI3Kα inhibitor program for US$2.5 billion; it will enhance the company’s cancer drug offerings.
The first quarter also saw initial public offerings in specific market segments.
Obesity drugmakers Sionna Therapeutics (NASDAQ:SION) and Metsera (NASDAQ:MTSR) both debuted, as did Maze Therapeutics (NASDAQ:MAZE), whose lead asset is in earlier stages of clinical development.
Companies hone in on oncology, obesity
Oncology remains an active area in the healthcare space, with Ginkgo Bioworks Holdings (NYSE:DNA) and Astellas Pharma (TSE:4503) entering into a research collaboration on cell therapies for solid tumors in Q1.
The quarter also saw multiple US Food and Drug Administration (FDA) approvals in oncology, including Novartis' (NYSE:NVS) Kisqali, and AstraZeneca (NASDAQ:AZN) and Daiichi Sankyo's (TSE:4568) Datroway for HR+/HER2- breast cancer, which entered a competitive space with Gilead Sciences' (NASDAQ:GILD) Trodelvy.
Amgen's (NASDAQ:AMGN) Lumakras was approved for KRAS G12C-mutated colorectal cancer, and AstraZeneca's Calquence also gained first-line approval for mantle cell lymphoma. Additionally, GSK's (NYSE:GSK,LSE:GSK) Blenrep for relapsed and refractory multiple myeloma reached a development milestone with positive Phase III trial results.
Beyond oncology, J&J’s Spravato was approved as a standalone treatment for resistant depression, and Vertex Pharmaceuticals (NASDAQ:VRTX) received FDA authorization for its non-opioid painkiller, Journavx.
Developments in the obesity and weight loss treatment space continued in the first quarter, marked by efforts to enhance drug efficacy and the emergence of new therapeutic approaches.
Ongoing research by Novo Nordisk (NYSE:NVO) focused on higher dosing strategies, with details of a Phase 3b trial and another high-dose study for patients with diabetes expected at an upcoming 2025 scientific meeting.
The field also saw the emergence of new players developing novel mechanisms, including dual agonists and combination therapies. Complementary hormonal pathways were explored, with promising early stage results for Novo Nordisk’s amycretin and headline results of a Phase III trial of its experimental drug, CagriSema.
Pricing and accessibility continue to be key considerations.
Eli Lilly is exploring discount strategies, while Viking Therapeutics (NASDAQ:VKTX) has secured production capacity for its experimental obesity drug as manufacturers of GLP-1s face potential drug price negotiations.
Healthcare policy changes under Trump
2025 has brought shifts in healthcare policy under the administration of US President Donald Trump.
Robert F. Kennedy Jr.’s (RFK) confirmation as the country's new secretary of health and human services (HHS) was marked by controversy due to his past anti-vaccine rhetoric. As one of his first official acts, RFK announced the establishment of a commission to investigate, among other things, several childhood vaccine schedules — this came despite prior assurances regarding the federal vaccine schedule during his congressional hearings.
Do Kim, senior research analyst at Water Tower Research, told the Investing News Network:
"With RFK Jr. confirmed as HHS Secretary by a 4-vote margin, he may feel empowered to back away from his assurances to Senator Cassidy, particularly his promises to leave vaccine policies in place. As a leading vaccine critic, RFK Jr. could hinder vaccine development and approvals by enacting unreasonable safety data guidelines, disincentivizing large vaccine makers, and preventing capital-constrained small biotechs from innovating in the space.”
Kim went on to describe a scenario in which RFK’s potential changes to federal health agencies, support for workforce reduction and cuts to grant funding could impact biomedical research and life science innovation.
For example, the US may lose its competitive edge in therapeutics to China-based biotech players. Additionally, RFK's views on the FDA may result in delayed drug approvals.
The Trump administration also rescinded an executive order requesting that the HHS establish a task force to govern how the federal government will safely use artificial intelligence (AI) in healthcare. This was part of broader action by the government to remove “unnecessarily burdensome requirements” on AI development.
AI's influence in drug discovery and development
This move carries implications for the use of AI technologies in healthcare.
Ai is already playing a growing role in the industry, with an example being ImmunoPrecise Antibodies' (NASDAQ:IPA) LENSai AI platform, which created a new class of GLP-1 therapies in just two weeks. AI is also revolutionizing protein engineering, exemplified by OpenAI's GPT-4b micro, which designs stem cell-inducing proteins.
Workflow efficiency is improving as well, as seen in Novo Nordisk’s reduced document drafting time using Anthropic’s Claude 3.5 Sonnet, and the automation of clerical tasks with Microsoft’s (NASDAQ:MSFT) Dragon Copilot.
This trend is further illustrated by a partnership between Merck (NYSE:MRK), Eli Lilly and Purdue University, and the MeiraGTx spinoff of central nervous system programs into an AI-driven startup.
The New York Times has also explored AI’s acceleration of drug repurposing, while scientists at the UK’s Oxford Drug Discovery Institute are using AI to prioritize Alzheimer's disease drug test targets.
How will tariffs affect the pharma industry?
US Department of Commerce Secretary Howard Lutnick said on April 14 that the department began an investigation into pharmaceutical imports and their starting materials on April 1, setting the stage to impose "sector-specific" tariffs on pharmaceutical ingredients in a bid to encourage US manufacturing.
While big companies like Pfizer (NYSE:PFE), Merck, J&J and Eli Lilly are building plants and research facilities in the US, most experts agree that bringing back local manufacturing at a larger scale would be challenging, expensive and would take time. Michael Abrams, managing partner of Numerof & Associates, told PharmaVoice’s Kelly Bilodeau that reshoring efforts could hit generic drugmakers especially hard.
Biotech and pharma market forecast for 2025
Q2 will likely bring a mix of challenges and opportunities to the healthcare industry.
Panelists at a March webinar hosted by BioCentury & Oppenheimer discussed a shift in capital toward the private sector as public markets display increasing volatility. The speakers remain cautiously optimistic, seeing current market conditions as an opportunity to find undervalued, high-potential companies.
UBS Group (NYSE:UBS) has hired three investment bankers specializing in biotechnology from RBC Capital Markets as the bank looks to expand its healthcare dealmaking in the US, signaling an optimistic outlook.
Panelists also noted that venture capital remains active, although investors are likely to be more selective, prioritizing capital-efficient companies and de-risked assets with early clinical proof of concept.
Areas like obesity drugs are projected to be highly lucrative, and in vivo CAR-T cell therapies are garnering interest, although manufacturing constraints and high costs continue to present widespread adoption challenges.
Headwinds could present in the vaccine market as RFK takes the helm at the HHS and immunization rates continue to fall. Meanwhile, the Trump administration may pull back funding for R&D into new drug formulas.
Overall, the healthcare industry will have to navigate challenging factors in Q2, balancing opportunities with potential disruptions caused by policy changes and economic volatility.
The sector's ability to adapt and innovate will be crucial in determining its trajectory in the coming months.
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Securities Disclosure: I, Meagen Seatter, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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