Pharmaceutical Industry Maintains R&D Momentum Despite Economic Headwinds

The global pharmaceutical industry continued to increase its research and development (R&D) investments in 2024, demonstrating resilience in the face of economic and political challenges. According to data from Evaluate Pharma, R&D spending across the sector grew by 1.5% last year, reaching a staggering $288 billion. While this growth rate represents a moderation from the 11.5% surge seen between 2022 and 2023, it underscores the industry's commitment to innovation and pipeline development.

Top Spenders Double Down on Strategic Investments

Merck Leads Despite Scaling Back

Merck maintained its position as the top R&D spender in 2024, investing $17.9 billion despite a 41% year-over-year decrease. This apparent reduction is largely attributed to the company's exceptionally high spending in 2023, which included several major acquisitions and licensing deals. Merck's 2024 R&D budget still represented 28% of its total revenue, reflecting a continued focus on addressing the impending loss of exclusivity for its blockbuster drug Keytruda.

Key areas of investment for Merck include:

• Ifinatamab deruxtecan, an antibody-drug conjugate (ADC) in Phase III trials for esophageal squamous cell carcinoma and small cell lung cancer
• Tulisokibart, an anti-TL1A antibody in Phase III development for ulcerative colitis and Crohn's disease
• Restoret, a trispecific antibody for diabetic macular edema and age-related macular degeneration, acquired through the $1.3 billion EyeBio acquisition

Johnson & Johnson Focuses on Oncology and Immunology

J&J increased its R&D spending by 14.2% to $17.2 billion in 2024, representing over 19% of its total revenue. The company's investments aligned with its strategic focus on oncology, immunology, and neuroscience, with notable acquisitions including:

• Ambrx for $2 billion, expanding J&J's ADC portfolio
• Proteologix for $850 million, bolstering its dermatology pipeline
• A $1.25 billion payment to Numab Therapeutics for a bispecific antibody targeting atopic dermatitis

J&J also achieved regulatory success with the approval of Imaavy (nipocalimab) for myasthenia gravis in April 2025.

Industry-wide Trends and Challenges

Continued Growth Despite Headwinds

Despite facing inflation, rising costs, and geopolitical tensions, the pharmaceutical industry is expected to maintain its R&D investment trajectory. Evaluate Pharma projects that global R&D spending could reach nearly $340 billion by 2030. However, industry analysts caution that R&D margins may decline as companies implement cost containment measures to address external challenges such as drug pricing pressures and increased capital costs.

Strategic Shifts in R&D Focus

As the industry navigates a complex landscape, companies are likely to prioritize R&D projects with greater certainty of profitability and competitive advantage. This trend is exemplified by J&J's pruning of its early- and mid-stage neuroscience pipeline in October 2024, which included the discontinuation of several promising candidates.

Simultaneously, areas such as antibody-drug conjugates, cell therapies, and treatments for obesity have seen increased investment. Roche, for instance, has made significant strides in its obesity portfolio, with promising results from dual GLP-1/GIP receptor agonist CT-388 and oral GLP-1 receptor agonist CT-996.

The pharmaceutical industry's continued commitment to R&D investment, despite various challenges, underscores the sector's resilience and long-term focus on innovation. As companies adapt their strategies to navigate an evolving landscape, the coming years are likely to see a continued emphasis on targeted investments and strategic collaborations to drive future growth and address unmet medical needs.