As of April 2025, GlobalData’s Drugs database shows 8,684 investigative drugs under active development by emerging pharmaceutical companies, which are defined in this article as those with an annual R&D expenditure of less than US$300 million. Almost half of these products (46%) are in the preclinical stage of drug development, while 22% are in discovery. Moreover, 57% are sponsored by companies who currently have no approved therapies in their portfolio, while 41% of the drugs are sponsored by firms who have never made it to Phase III trials.[i]
Welcome to the biotech industry, where the road to success is paved with scientific uncertainty and financial risk but where the determination to turn cutting-edge research projects into life-changing, commercially viable therapies drives everything.
Understanding biotech innovation
Emerging pharmaceutical and biopharmaceutical companies, frequently referred to as biotechs, are playing a key role in today’s drug development landscape. In fact, of all the innovator drugs under active development across the industry, only 5% originate from the top 50 companies ranked by R&D spend, suggesting many more are coming from smaller biotech firms, academic institutions, and emerging startups who may operate with greater agility and highly specialised expertise into a specific therapeutic area or indication.[ii]
Biotech companies have a distinct reputation for innovation. Thanks to their smaller size, they may be more willing and able to take on risks than larger companies. Biotechs are also likely to leverage cutting-edge technologies which can help to innovate and streamline the early-stage drug development process. This has put them at the forefront of precision medicine and personalised therapies, supported by advancements in genome mapping and molecular biology.
Despite their limited R&D budgets, emerging biotechs have been responsible for several major breakthroughs in the pharmaceutical industry, including the first gene therapy approved for a genetic disorder[iii]. Many biotechs focus on innovative therapeutic approaches such as cell and gene therapies and antibody drug conjugates. In addition, many biotechs have a specific focus on orphan drug development due to the opportunity to address high unmet medical needs through innovative therapeutic approaches.
The road to commercial success
The success of biotechs is not only limited to the early stages of development. The proportion of biotech-owned drugs that have been among recent approvals by the FDA for innovator drugs is on the rise, as shown in the chart below.
The last decade has seen many success stories for biotechs, but the drug development landscape is nevertheless characterised by risk for these companies. The success of one or two products is crucial for a biotech’s survival, but this is never guaranteed and can take 10-15 years to achieve. During this time, the company must typically rely on venture capital and public markets. Considering the scientifically complex and often pioneering nature of biotech R&D, the chance of failure is higher, with promising treatments often not working as anticipated during clinical trials due to a lack of understanding around their mechanisms.
The business challenges faced by smaller firms trying to commercialise new therapies in today’s drug development landscape means that many biotechs struggle to progress their developments independently. This is where large pharma comes in, snapping up individual biotech assets through one-off licensing agreements or acquiring the firm outright to gain full access to its talent and technologies. 2024 saw several examples of the latter, including Gilead Science’s acquisition of CymaBay Therapeutics, adding a Phase IIII PPARδ agonist to its portfolio[iv], and Bristol Myers Squibb’s acquisition of Karuna Therapeutics, a biotech specialised in neuroscience-based R&D.[v]
Through M&A transactions of this nature and individual licensing agreements, biotechs have become responsible for “fuelling the pipelines” of more established pharmaceutical companies, says Samir Kagrana, Global Head of Strategic Deals at Fortrea, a contract research organisation and key strategic collaborator to biotech firms.
“Large pharma have their own business challenges with bringing new therapies to market,” says Kagrana. “Since clinical development is so complex and their R&D productivity is low, they often choose to acquire biotech companies or enter into licensing deals based on their overall therapeutic area or corporate strategies rather than building those new molecules from scratch.”
The importance of outsourcing
While the potential rewards of a breakthrough therapy are huge, the risks and challenges for biotechs are significant. Biotech funding saw a substantial downturn in recent years, and while many are optimistic about a recovery, today’s biotechs are currently in a race to secure sufficient funds to fuel their drug development plans. Their ability to do so typically rests on meeting specific milestones in the clinic, and strategic engagement with the right CRO is essential to reaching these objectives.
Given the financial constraints and the significant pressure to deliver results, biotech companies are naturally cautious in their collaboration decisions. Collaborating with a CRO who can not only take care of building and executing a successful clinical development plan but also help the biotech navigate funding pathways, prioritise research assets, leverage cutting-edge technologies like artificial intelligence, and meet regulatory requirements is a key priority for these companies.
To learn more about the trends and challenges within the biotech landscape and the importance of CRO collaborations, please download the whitepaper below.
[i] Statistics pulled from GlobalData’s Pharmaceutical Intelligence Center, Drug’s database. Accessed April 2025.
[ii] Statistic pulled from GlobalData’s Pharmaceutical Intelligence Center, Drug’s database. Accessed May 2025.
[iii] https://www.roche.com/media/releases/med-cor-2019-02-25
[iv] https://www.gilead.com/news/news-details/2024/gilead-sciences-expands-liver-portfolio-with-acquisition-of-cymabay-therapeutics
[v] https://news.bms.com/news/details/2024/Bristol-Myers-Squibb-Completes-Acquisition-of-Karuna-Therapeutics-Strengthening-Neuroscience-Portfolio/default.aspx
