, /PRNewswire/ -- The 35th edition of the Ernst & Young LLP (EY US) Biotech Beyond Borders Report finds that the biopharma industry is currently in a challenging market. The industry is grappling with a unique environment of macroeconomic uncertainty and constrained access to capital such as high interest rates, inflation, shifting regulatory policies and tariff turmoil. This is the time for companies to focus on fundamentals and get ready to bounce back when the conditions improve.

Arda Ural, PhD, EY Americas Life Sciences Sector Leader, says:

"While predictions don't age well in this environment, there is light at the end of the tunnel. The biopharma industry has dealt with periods of uncertainty before, and 2025 will be a year of inflection during which companies will need to focus on the fundamentals, with scenario planning and cash efficiency being top areas of consideration as we watch for positive indicators such as settling tariff policies, pricing headwinds, lowering interest rates and turning to a pro-growth macro narrative."

Biotech Beyond Borders analyzes the state of the industry through a summary of US and European public company revenues, financing, M&A activity, alliances, product approvals and other factors. The report offers executives a deep dive into current dynamics as well as a perspective on the outlook.

"During a challenging time for biopharma and biotech, the industry needs to look for the best ways to be efficient and extend cash runways," says Rich Ramko, EY Americas Life Sciences Sector and Biotechnology Leader. "Successful companies and management teams will be those who embrace AI and new technologies to maximize efficiency and nurture innovation."

Other key findings include:

In 2024, US and European public biotech revenues were relatively strong, growing 6.8% year-over-year to $205.4 billion, with public company revenue over the last four years nearly $50 billion more annually than in the four years prior. However, follow-on financings were a particularly big problem in 2024, with biotechs reporting the worst rates since 2016. Follow-on and other financings came in at only $19.9 billion — about $10 billion lower than in 2023, a third of what was seen during the boom years. In companies' efforts to grapple with revenue loss, public biotechs trimmed personnel, dropping the overall workforce by 3.1%.

Looking ahead, there are expectations that the industry will move back toward a greater emphasis on scientific milestones in 2025. A shift toward companies with more mature pipelines, clear clinical milestones, experienced management teams and strong scientific rationale are likely to continue as an environment of haves and have-nots materializes.

On top of this, the implementation of pharmaceutical tariffs will likely impact business with Europe, China and India, as many of these drugmakers hold IP and conduct manufacturing in these countries, on top of an already looming patent cliff, which threatens the value of the US drug market. The disruption of global supply chains, considerations of nearshoring or reshoring manufacturing, the building of strategic stockpiles of certain drugs and the securing of APIs could lead some biopharma companies to localize manufacturing in the US. While the implications of tariffs will apply differently to companies based on their respective business models, companies who can't make the shift can adopt capital allocation strategies that support growth by aligning on long-term goals, rebalancing assets, and communicating a consistent message.

Ashwin Singhania, Principal, Life Sciences Strategy, EY-Parthenon, Ernst & Young LLP says, "While the current business environment means there is no one-size-fits-all advice, to the executives and clients reading this report, we say, focus on fundamentals. Scenario planning around workforce changes, manufacturing networks and a tax efficient supply chain will be key areas for companies to consider so that there is a strategy no matter which way the macro and regulatory direction takes the industry."

To read Biotech Beyond Borders, visit ey.com/beyond-borders.

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SOURCE EY