The pharma and life sciences industry faces a dynamic year ahead, driven by AI, sustainability, and evolving regulations. Stricter ESG reporting and economic uncertainty create new challenges. Success will depend on embracing AI to advance research and development while prioritizing sustainability initiatives.
The pharma and life sciences industry are set for a game-changing year, with innovation, regulation, and sustainability dominating the agenda. Companies will need to stay ahead to seize opportunities and tackle challenges in a fast-evolving landscape.
From the rise of AI-driven drug development to tighter ESG reporting mandates and a push towards personalised medicine, 2025 is poised to redefine the industry’s priorities.
The sector will continue to embrace artificial intelligence, machine learning, and blockchain technology to enhance efficiencies and accelerate pharmaceutical research and development. These technologies are revolutionising the industry by rapidly analysing patient data, improving drug effectiveness, and leveraging ‘digital twins’ as part of the trial process to predict success rates.
To unlock AI’s full potential, companies must establish solid foundations to mitigate risks and avoid costly mistakes. Navigating regulatory requirements and managing risks—particularly around patient data confidentiality—is essential. Given the sensitivity of this data, failures can result in substantial fines and reputational harm.
Developing a clear digital strategy is crucial to integrate AI seamlessly into their overall technology landscape and ensure it complements existing systems. Companies must define how AI will address specific needs and use cases, while updating and maintaining data quality: without accurate and comprehensive data, AI simply becomes “artificial information”. Addressing talent gaps through hiring and upskilling staff with AI expertise is also vital.
The industry will maintain its efforts to reduce environmental impact, with a particular focus on hard-to-measure Scope 3 emissions, which account for an estimated 80-90% of the sector’s climate footprint. Companies are increasingly evaluating manufacturing processes and adopting green technology to reduce waste, minimise energy and water consumption, and increase the use of renewable energy.
Regulatory pressure is mounting, driven by two key initiatives coming into play: the Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD). The CSDDD requires large companies to identify, mitigate and, where necessary, remedy human rights and environmental impacts in their operations and value chains, while aligning their transition plans with the Paris Agreement. The CSRD, meanwhile, mandates around 50,000 companies operating in the EU to publicly disclose the impact of their environmental, social, and governance (ESG) activities on their business, as well as their operations’ effects on people and the planet. The first sustainability statements are expected to be published in 2025.
A key trend for 2025 will be a shift towards more patient-centric, medically effective approaches, including personalised medicine. Examples include genomic and molecular profiling, which aim to understand a patient’s genetic makeup to identify precision treatments and therapies. Developing these pharmaceuticals requires intensive research and development, alongside a highly skilled and innovative workforce.
However, recent changes in the Autumn Budget—such as rising employment costs and new rules for non-domiciled individuals affecting global recruitment- will compel businesses to reassess their employee rewards. Adapting these strategies will be crucial to attracting and retaining top talent in an increasingly competitive landscape.
Businesses must prepare for economic fluctuations, geopolitical developments, and environmental challenges, which could impact market stability. Heightened regulatory compliance across numerous jurisdictions may drive up costs, while proposed trade policies in the US could further exacerbate global inflation.
To address these challenges, ensuring a robust and resilient supply chain is more critical than ever. With increased regulation and unforeseen disruptions, supply chain management remains a top priority for sector. Some businesses, where possible, are turning to onshoring or ‘nearshoring’ their supply chains, prioritising local or regional suppliers to reduce complexity and risk. Potential production cost increases can be offset, in part, through the implementation and integration of AI and machine learning technologies.
As we move into 2025, we have observed increased regulator activity following a post-Covid lull in the sector. The US FCPA (Foreign Corrupt Practices Act) and the UK Bribery act enforcement remain key risks for the pharma industry, particularly when dealing with government entities. We expect higher levels of enforcement than in recent times. Any pharmaceutical or life sciences organisations that fail to meet these requirements will face adverse financial and reputational damage, that will have a significant impact on their business.
After a quieter year for mid-sized and large-cap mergers and acquisitions in 2024, activity is expected to rebound in 2025, supported partly by greater UK government stability. However, with the Autumn Budget leading to increased employment costs, some businesses are accelerating their sale timelines amid uncertainty over potential impacts on valuations.
Investor demand is expected to remain strong in key areas such as pharmaceuticals and medical devices, particularly those where the use of AI is involved, though valuation uncertainty persists.
More broadly, the sector welcomed the retention of R&D tax reliefs and the Patent Box regime, which provide a 20% tax credit for R&D spending and a 10% corporate tax rate on profits from qualifying patents. However, increased scrutiny from HMRC on R&D claims has led to a rise in reviews. To mitigate risks, businesses must maintain comprehensive documentation to support their claims.
Overall, in light of changes introduced in the Autumn Budget, businesses in the sector will need to closely monitor costs to protect profit margins and remain competitiveness.
The Pharma and Life Sciences sector is poised for significant transformation in 2025 and beyond, driven by technological advancements, a stronger emphasis on sustainability, and the growing shift towards personalised medicine and therapies.
To remain competitive and resilient, companies must navigate economic and political uncertainties, adapt to evolving regulatory requirements, and optimise their supply chains. Success will depend on embracing emerging technologies such as AI and blockchain, committing to sustainable practices, and addressing talent shortages to ensure access to a skilled workforce.
