R&D budget and life science tools spending seen mixed in 2025, finds survey
Overall R&D budgets this year are expected to increase approximately 4% with 41% of survey respondents expecting meso scale discovery (MSD) growth and 31% expecting life science discovery (LSD) growth, according to results of a new survey commissioned by analyst firm Leerink Partners.
At the same time, those surveyed said on average they expect a decline in services spending in 2025 compared to last year.
“Instruments overall are expecting flattish to up LSD, with 40% of participants surveyed expecting overall instrument budget/spending in 2025 to be flattish y/y, but 35% expect 4-6% growth; 16% expect 1-3% growth,” Leerink reported, with large pharma companies “skewed incrementally more positive on growth expectations compared to smaller biotechs.”
The survey — conducted by MEDACorp on behalf of Leerink — included a range of large pharma and biotechnology companies, CROs, CDMOs, as well as small biotechs to assess R&D budget and life science tool spend expectations this year.
“The majority of participants said they expect spend for each of Liquid Chromatography (LC), Mass Spectrometers (MS), Electron Microscopes (EM), and Nuclear Magnetic Resonance (NMR) to be flat y/y in 2025,” according to Leerink analysts.
Thermo Fisher Scientific and Agilent Technologies, in that order, were named by survey respondents as the preferred vendors of choice in the LC and MS categories.
“R&D organizations at larger companies have finalized 2025 budgets, while some in mid-sized or smaller organizations are still in the budgeting process,” according to Leerink, with 100% of participants from organizations with more than 500 employees indicating that they have finalized their 2025 R&D budgets, while 75% and 60% of mid- and small-sized organizations said their budgets were completed.
William Blair estimates for 2025
While large pharma R&D spend increased 9.7% in 2024, William Blair analysts in a report last week on the pharma outsourcing and services sector cited data from Visible Alpha which showed that in 2025 that figure is only expected to grow by 3.6%, with 16.8% growth from Eli Lilly and 8.7% growth from Novo Nordisk — both makers of wildly popular GLP-1 drugs for weight loss and Type 2 diabetes.
“These GLP-1 winners played a large part in driving robust growth in 2024, but total R&D spend from the other companies in this report also grew by a healthy 7.8% last year,” William Blair analysts wrote. “However, R&D spend from these 13 companies is expected to increase by a meager 2.2% in 2025, well below the 4.4% R&D spending CAGR recorded by this subset in the five years leading up to the pandemic.”
William Blair warned that — excluding Eli Lilly and Novo Nordisk — the “outlook looks much worse, with R&D spend from the other 13 companies in this report forecast to grow by an underwhelming 2.4% compound annual rate over the next five years.”
The analysts acknowledged that they “overestimated” the health of the large pharma space in 2024 and “failed” to predict several notable CRO “blow-ups” in the second half of the year, including Charles River Laboratories. Despite only about 30% of the CRO’s revenue coming from large pharma, William Blair downgraded Charles River to a market perform rating.
“We are more concerned about the near-term outlook for Charles River given our view that in light of the looming headwind from loss of exclusivity, large pharma will continue to prioritize products closer to approval that have the potential to contribute revenue in the near term,” according to William Blair’s report, which noted that the only CRO without material large pharma exposure is Medpace with over 95% of its revenue coming from small and midsize biopharma companies.
Despite Lonza generating roughly half of its revenue from large pharma, the company remains William Blair’s top pick for 2025 in the CDMO space, given a “healthy outlook” for commercial demand with total drug sales expected to grow at an 8% CAGR from 2024 through 2029, according to data from Evaluate Pharma.
Lonza will also benefit from “attractive outsourcing trends as biopharma companies increasingly look to leverage CDMOs as an effective way to limit internal manufacturing capital investments,” with the company “recently highlighting its expectations for the total CDMO share of installed manufacturing capacity for mammalian drug substance (Lonza’s largest business) to reach 55% by 2029, representing an impressive 20-point increase over 2019.”