Biopharma R&D Faces Productivity And Attrition Challenges In 2025
By Daniel Chancellor, VP of thought leadership, Evaluate

With 23,000 drug candidates currently in development, biopharmaceutical companies are operating at unprecedented levels of R&D activity. 2025 is shaping up to be another strong year for pipeline growth, but difficulties lie ahead as the industry approaches the largest patent cliff in history, in addition to rising drug development costs and timelines adding immense strain on budgets.
Despite the high volume of activity, R&D spending is expected to lag behind top-line revenue growth. The surge in R&D, coupled with rapidly evolving industry dynamics, will present a productivity and attrition challenge for the sector in the coming year.
Strained R&D Budgets, Lower Productivity, And Rising Barriers To Entry
The abundance of drug candidates in the pipeline is a result of record levels of biopharma R&D investment. Over 10,000 drug candidates are at the various stages of clinical development, highlighting the industry’s committed pursuit of new treatments. As a result, pharma companies are doubling down on research investments, with over $300 billion spent on R&D annually. This investment is supporting an impressive expansion as industry revenue is projected to grow at a 7.5% compound annual growth rate (CAGR), reaching $1.7 trillion by 2030.
However, despite this robust top-line growth, research budgets are not expected to keep pace. By the end of the decade, R&D margins are expected to decline significantly, from 29% of total revenue down to 21%.
Several key factors are driving the decline of R&D margins. First, the commercial performance of the average new launch on the market is shrinking. Second, diminishing performance is coupled with rising costs per new drug approval, which encompass the expense of conducting clinical trials, prolonged development timelines, and decreasing success rates across the pipeline. Third – and as a result of the first two factors – pipeline attrition rates continue to grow, with the success rate for Phase 1 drugs plummeting to just 6.7% in 2024, compared to 10% a decade ago.
These challenges contribute to overall lower R&D productivity. Biopharma’s internal rate of return for R&D investment has fallen to 4.1% – well below the cost of capital. Compounding this issue, drug developers are constraining research budgets as they struggle to navigate high barriers to market entry and intense clinical competition, further complicating the path to innovation.
Expedited Regulatory Pathways
A key R&D cost-saving opportunity for drug developers is the FDA's increased support for accelerated approval pathways, which brought 24 accelerated approvals and label expansions in 2024. However, to qualify for accelerated approval, R&D timelines must adhere to the FDA's stringent confirmatory trial requirements, which include a target completion date, evidence of "measurable progress," and proof that patient enrollment has already begun.
For example, Regeneron’s CD20xCD3 bispecific antibody was rejected for accelerated approval because it failed to meet the criteria in its confirmatory trials, further delaying its market entry. While accelerated approvals provide an opportunity for faster market access, companies will need to balance speed with rigorous evidence generation to succeed in a competitive and tightly regulated environment.
Smarter Decision-Making In 2025
To navigate the constraints of finite budgets and intense competition, pharmaceutical companies must adopt data-driven strategies. In clinical programs, every trial and potential participant must count.
Trials need to be designed as critical experiments with clear success or failure criteria, rather than as exploratory fact-finding missions. It is vital that study endpoints have tangible, real-world clinical relevance, and comparator arms must be commercially meaningful.
AI-driven models can be powerful tools for optimizing clinical trial designs. Pharma companies should leverage AI platforms that can identify drug characteristics, patient profiles, and sponsor factors to design trials that are more likely to succeed. Drug developers also can use real-world data to identify and match patients more efficiently to clinical trials. With these insights, companies can adjust trial designs proactively, saving valuable time and resources.
A New Age Of Competition
On the portfolio side, the industry is bracing for dozens of high-profile drugs to lose their exclusivity and face competition from lower-cost generics for the first time. Between 2025 and 2029, an estimated $350 billion of revenue is at risk, according to Evaluate.
Pharma companies must carefully assess where they have a "right-to-win" and strategize about how to build and sustain leading portfolios. Acquisitions and licensing deals also will play an important role in internal R&D efforts and expanding market reach.
Long-term strategic planning is crucial, as opposed to reacting impulsively to short-term market trends. For example, even though Gilead has one of the longest runways without facing new meaningful generic competition, the company has already mapped out a strategic plan for seven drug launches to maintain its leadership in the HIV market.
Reversing the trends of declining R&D productivity is essential for the long-term sustainability of the biopharma market. By combining more efficient R&D processes with strategic portfolio management and thoughtful trial design, pharma companies can not only survive the coming challenges but position themselves for success in an increasingly competitive landscape.
About The Author:
Daniel Chancellor has more than 15 years of experience in the biopharma industry, spanning roles in drug discovery, market analysis, competitive intelligence, and strategic consulting. Beginning his advisory career at Citeline, Daniel now oversees the thought leadership program for Evaluate and its sister companies under Norstella, producing materials that support clients across a range of hot topics in the biopharma industry. As part of this, Daniel regularly participates in webinars, conferences, and other speaking arrangements, and he has provided expert insights across a wide range of leading industry and business publications. Prior to joining Citeline, Daniel worked as a medicinal chemist at Summit Therapeutics and graduated with First Class Honors in Natural Sciences from the University of Bath.