Pharmaceuticals Sector Risk Report

The pharmaceuticals sector plays a critical role in global health but faces a range of risks, including regulatory challenges, pricing pressures, and lengthy R&D cycles.

Strengths & Weaknesses

Large and Diverse Global Market

The pharmaceutical industry offers a wide range of products and services worldwide, operating on a massive scale.

Concentrated Market Share

The sector is relatively consolidated, with the top five companies holding 30% and the top ten controlling 50% of the market.

Rising Demand from Chronic Diseases

The global increase in chronic health conditions continues to drive steady demand for medications and supplements.

High Entry Barriers

Significant R&D investment and the need for highly skilled professionals make it difficult and costly for new players to enter.

Strong Cash Generation

Despite R&D spending averaging 19% of revenue, companies typically generate sufficient operational cash flow to support ongoing activities.

Expanding Healthcare Access

Improved healthcare access in emerging regions such as Latin America and Asia is fueling additional market growth.

Strict Regulatory Oversight

The pharmaceutical sector is heavily regulated to ensure drug safety, efficacy, and quality, with enforcement by global standards and agencies like the FDA and EMA.

Intense Generic Competition

Generic and biosimilar drug makers increase competition by offering lower-cost alternatives, putting pressure on profit margins.

Complex Drug Approval Processes

Despite some streamlining, regulatory approvals for new drugs remain lengthy and complex, delaying market entry.

Access Challenges in Developing Regions

Industry leaders are concentrated in the U.S. and Europe, limiting affordability and access to essential medicines in Latin America, Africa, and parts of Asia.

Sector Overview

What to watch ?

The pharmaceutical industry is evolving rapidly amid shifting demographics, growing health demands, and increased innovation. However, it also faces headwinds from changing market dynamics and rising competition.

Life expectancy has increased to 73.2 years, emphasizing the need for targeted solutions for aging populations.
The global population has reached 8 billion and is projected to grow to 8.5 billion by 2030, intensifying demand for new treatments and vaccines.
FDA approval processes have become more efficient, with an average of 53 new product approvals annually from 2018–2021, up from previous decades.
The sales surge from pandemic-related products is fading, with revenue growth dropping from +16.7% in 2021 to a projected -2.0% in 2023.
Expiring patents in 2023 are expected to boost competition from generics, which can cut branded drug revenues by up to 80%.

Post-Pandemic Shift and Long-Term Growth Drivers

The pharmaceutical industry saw extraordinary growth during the Covid-19 pandemic, driven by rapid vaccine development and high demand. As the global health crisis subsides, the sector is transitioning to a more stable phase, with modest growth and a focus on long-term innovation.

The Covid-driven surge in 2021 and 2022 has tapered off, with the sector now seeing single-digit sales growth instead of the previous double-digit highs.
A more stable market outlook is emerging, with lower earnings growth expected in the near term.
Continued investment in R&D is fueling innovation, ensuring a strong pipeline of new and improved treatments.
Oncology remains a top revenue driver, while immunology and metabolic diseases like diabetes show strong growth potential.
Growth rates vary by region: +4.2% in North America and Europe by 2025, +11% in Latin America and India, and +5.5% in Africa, supported by demographic expansion and rising healthcare access.
The largest pharmaceutical consumers are the U.S., Germany, Switzerland, Belgium, and China, while the U.S. and Europe lead in production and revenue.