It promises to be a year of détente for the life science sector.
According to analysts at Ernst & Young, 2025 is expected to be marked by renewed optimism due to reduced cost of capital, adoption of innovative technologies, and accelerated M&A (M&A).
However, the political and regulatory environment in the U.S. is uncertain and while it may benefit the activities of companies in the sector, it could pose significant challenges, necessitating targeted strategies to ensure sustainable growth.
M&A
With declining interest rates and the need to renew product portfolios before 2028–the year when many patent exclusivities will expire–many companies in the industry are contemplating partnerships, mergers, and acquisitions, which is why analysts are inclined to believe that this year M&A operations will see growth.
At stake are 300 billion expiring patents that are putting pressure on many pharma biggies. Should the decline in interest rates continue, some big deals could occur, although the market will likely continue to be dominated by more strategic and targeted acquisitions.
Life science companies that implement resilience into their operating model are less affected by market downturns and disruptions.”
Enrst & Young
The Trump effect
The U.S. political structure is undergoing profound changes, with significant impacts on the pharmaceutical sector. The Republican administrationcould foster growth through tax reductions and less regulation, particularly with regard to the Federal trade commission (Ftc) and to the Inflation reduction act (Ira).
The Ftc is the U.S. government agency responsible for competition regulation and consumer protection. In the context of the pharmaceutical industry it has often overseen mergers and acquisitions to avoid monopoly positions and has imposed limits on anticompetitive practices, such as some agreements to delay generic drugs from entering the market. Less regulation under the Republican administration could facilitate M&A operations without the previous restrictions.
The Wrath is the nearly 400 billion U.S. law that went into effect in 2022 that has among its goals the reduction of drug costs for consumers. One of the most relevant elements in this regard is the possibility for the U.S. government to directly negotiate prices for some drugs with manufacturers, a measure that could reduce pharmaceutical companies’ profit margins.The new administration may want to intervene to foster a more advantageous environment for companies in the industry.
However, even if Wrath were partially rescinded, drug pricing reform would remain in play. For example, during his first term, President Trump proposed a number of different pricing mechanisms, and could now make them operational. In addition, the introduction of possible tariffs on imports from China, 25% on those from Mexico and Canada, and 10%-20% on other markets could severely burden pharmaceutical supply chain costs, affecting active pharmaceutical ingredients, intermediates, and packaging.
AI generative
Companies in the industry are accelerating the adoption of new technologies to improve efficiency and reduce operating costs. Generative Artificial Intelligence (GenAI) is set to play a key role, with increasingly specific applications for commercialization, research and development, and supply chain optimization.
More and more, data and new technologies are leading threads in all areas of a successful business. To remain competitive, however, companies will need to invest in upskilling their workforce and hiring new talent specializing in AI.
Enrst & Young
Financial Resilience
In an environment of economic and geopolitical uncertainty, financial and operational resilience becomes essential. Companies must focus on sales forecasting, capital optimization, and strengthening organizational structure to mitigate the impact of any crisis.
In parallel, fiscal strategies will have to adapt to new tariffs and trade policies, favoring domestic sourcing and carefully planning the origin of products to minimize duty-related costs.
