Read our Pharma Services Market Update for our sector insights.

We continue to be optimistic on the fundamentals of pharma services companies over the next decade. However, over the past year, we have seen an elevated volume of study delays and cancellations by small/mid-sized biopharma sponsors, and this is having various negative downstream financial effects on companies in the space. We are also hearing more anecdotes of larger pharma sponsors re-prioritizing their product development strategies in response to the prescription drug price cuts associated with the ongoing rollout of the Inflation Reduction Act (IRA) of 2022.

Key Takeaways

• The Trump administration healthcare policy team has taken shape, including the confirmation of Robert F. Kennedy Jr as Secretary of Health and Human Services. Other key confirmations included Marty Makary as head of the Food and Drug Administration (FDA), Mehmet Oz as Director of the Centers for Medicare and Medicaid Services (CMS), and Jay Bhattacharya as the Director of the National Institutes of Health (NIH).
• Exiting the 4Q24 earnings season, we view the CDMO space as (finally) set up for reaccelerating growth in 2025 and 2026 after struggling through the wind down of COVID-19 projects, capital market pressures on small/mid-sized biopharma sponsors, and weak economic conditions for consumer-related businesses in 2023 and 2024.
• President Trump is showing a willingness to use duties, tariffs, and trade policy as a tool to promote U.S. interests abroad. Already, the Trump administration has put significant tariffs on China and Canada with potential tariffs on Mexico in the near-term. In response to the Trump administration’s aggressive use of tariffs, we have seen an increasing number of pharma companies and CDMOs shift their manufacturing investments to the United States. Most notably, Eli Lilly and Co (NYSE: LLY) announced plans for a significant $27 billion investment in new U.S. manufacturing with a focus on supplies that are typically imported.

In the dynamic healthcare industry, staying ahead of trends is essential for informed decision-making and seizing opportunities. Please reach out to our research team for more information: research@bourne-partners.com

Compare to our Q3 2024 Pharma Services Sector Snapshot here.