Discovering and developing effective new medicines has always been difficult—but it is particularly hard today. The world’s biopharmaceutical companies face challenges ranging from rising R&D costs to the evolving impact of the US Inflation Reduction Act, all while focused on delivering innovative solutions for patients. Yet leading companies remain effective despite these pressures, with the past few years seeing the emergence of innovative modalities and novel mechanisms of action (MoAs) that can better treat patients in areas with high levels of unmet medical needs. We examined what can be learned from their approaches and identified three actions leaders are taking to better position their portfolios1:
- increasing “shots on goal” while moving to quickly discontinue assets that do not meet established evidence targets
- investing in established therapeutic areas (TAs) while maintaining sufficient breadth
- balancing portfolios with different types of distinctiveness, such as novel MoAs and capabilities in new modalities
There is no “one size fits all” approach to a successful portfolio strategy, and mechanisms to optimize portfolio strategy are nuanced. Overall, we see leading biopharmas embracing a variety of tactics, including relying on depth of therapeutic area expertise, investing in a specific innovation (for example, novel modality) and then expanding that innovation across different diseases, and prioritizing external sourcing to further enhance pipeline blockbuster potential.
We recommend players thoughtfully shape and execute their investment thesis while maintaining other healthy habits—such as undertaking robust and consistent portfolio prioritization (rather than in response to a cost transformation effort or acquisition), opportunistically expanding into high-value areas beyond TAs currently in focus, and carefully balancing both first-in-class targets (higher biological risk) and differentiated modalities (higher technical risk) to better manage risks and optimize rewards of their portfolios.
1. Increasing ‘shots on goal’ and discontinuing assets early
Stringent portfolio prioritization has always been central to the portfolio strategy of biopharma companies. Among top biopharmas, the number of unique assets in the clinical pipeline increased by an average of 15 to 30 percent between 2018 and 2024,2 indicating leading players were moving to grow their portfolios and total number of “shots on goal.” With larger portfolios, top biopharmas routinely discontinue portions of their pipelines to focus on high-quality assets and create space for ongoing portfolio renewal. During this period, top biopharma companies discontinued an average of 22 percent of programs annually from 2018 to 2019 and 21 percent a year from 2023 to 2024. Individual biopharma companies discontinued 11 to 37 percent of programs in any given year (Exhibit 1).
While there were variations in the proportion of discontinued programs among leading biopharma companies, some that experienced larger “swings” had undertaken a sizable acquisition or gone through a cost transformation likely followed by a reprioritization of the portfolio. This suggests the narrative of program “cuts” having increased in recent years may be an artifact of the growing size of the clinical pipeline for leading biopharmas (both organic and through M&A) and that the rate of typical pipeline “pruning” will likely vary year by year but has largely remained consistent across leading players.
Discontinued assets skew toward early-pipeline programs
It is best practice to discontinue assets before they reach more expensive registrational trials and to use results from early-stage clinical trials to prioritize assets with the most compelling evidence for patient impact. About 50 percent of assets discontinued by leading biopharma companies in both 2019 and 2024 were in Phase I. While this trends in the right direction, it still leaves a large portion of the portfolio discontinued in Phase II or III (Exhibit 2). Our analysis found that no particular therapeutic area was subject to a disproportionate number of discontinued clinical pipeline programs.
2. Investing in established therapeutic areas while maintaining sufficient breadth
Treatment of metabolic and endocrine-related diseases has experienced recent success (for example, GLP-1 agonists Ozempic and Wegovy) and is expected to have greater revenue growth than any other therapeutic area through 2028.3 While leading biopharma companies on average did not increase the proportion of their pipeline devoted to metabolic, endocrine, or cardiovascular diseases in 2023, we see movement by many leading players to heavily invest in a few select, cardiometabolic-focused assets that likely represent new strategic priorities for their organizations (for example, Roche’s acquisition of Carmot Therapeutics obesity candidates CT-388 and CT-996 or Amgen’s MariTide). When we examined how the pipelines of leading biopharmas had changed during the past five years, we found that oncology remains the largest focus (37 percent in 2023 compared with 35 percent in 2018), followed by anti-infectives and diseases of the central nervous system (Exhibit 3).4
In the period we examined, the percentage of the clinical pipeline focused on specific therapeutic areas barely shifted across leading players. Yet individual players did make moves: four leading biopharmas increased their oncology presence by ten percentage points or more between 2018 and 2023, while there was a reduced pipeline focus in areas such as respiratory diseases. Other therapeutic areas showing adjustments in focus5 were cardiovascular disease, diseases of the central nervous system, gastrointestinal issues, immunomodulators, and anti-infectives. The pattern of portfolio redistribution within a five-year span varied, with some big players making shifts of ten percentage points in either direction for one or two therapeutic areas and others “drifting” five or fewer percentage points across several.
Many biopharmas are moving to treat smaller patient populations
While the mix of therapeutic areas has remained relatively unchanged, some leading biopharma companies are focusing on diseases that have smaller patient populations. Such efforts are likely a response to rising pressures, such as the Inflation Reduction Act and the push for targeted medicines that are relevant only to small patient subpopulations. For example, ten of the top 14 biopharmas focus a majority of early-stage new molecular entities (Phases I and II) on diseases with smaller patient populations (such as those with fewer than 100 million patients worldwide).
3. Balancing portfolios with different types of distinctiveness
As McKinsey and others have previously reported,6 a relative dearth of both novel and biologically validated targets has contributed to increased target crowding. Across top biopharma, only a quarter of assets are pursuing unique targets, while the proportion of highly crowded targets increased by seven percentage points from 2021 to 2023. A similar increase was observed across the full industry (Exhibit 4).
Biopharmas have explored two options in response to target crowding: invest in technology to identify and validate novel targets, or invest in novel modalities to differentiate within crowded targets. Historically, a select group of biopharmas have been more comfortable pursuing the first option, acting as “leaders” in validating new targets (first in class) rather than “followers” that aim to differentiate biologically derisked targets (best in class).
Investment in new target discovery remains a critical aspect of pipeline strategy, and leading players must develop approaches to address this challenge either by acquiring discovery platforms or by building capabilities in-house. Leading biopharma companies have made deals focused on novel target discovery in recent years; for example, Pfizer invested in Flagship Pioneering’s ProFound Therapeutics with the goal of uncovering new targets in obesity by leveraging a database of previously unannotated proteins in the human proteome.7 Others are trying to build novel target identification capabilities in-house; AstraZeneca invested in synthesizing information from publicly available data sources and merging it with the company’s own proprietary data to form new connections among disease pathology, individual proteins, and signaling pathways.8
Building distinctive technical capabilities
Given the increasingly competitive environment and challenges associated with novel target discovery, many players are building capabilities for novel modalities that allow them to create a differentiated asset with a more established target. For example, the value of transactions for antibody–drug conjugates (ADCs) has surged by more than 216 percent in recent years, driven by major deals such as Seagen and Pfizer ($43 billion), Daiichi Sankyo and Merck ($22 billion), and Immunogen and AbbVie ($10 billion).9
Radioligand-based therapies are another “hot” emerging modality. While leading biopharmas once had limited interest in this space, around $14 billion in deals have been completed since 2022 following the success of several assets (for example, Pluvicto in metastatic, castration-resistant prostate cancer). Future activity may focus on a shift toward higher-potency payloads with reduced off-target effects (such as alpha emitters) as well as the expansion of available isotypes.
Given the risk and unique considerations of identifying novel biology and developing novel modalities, a deliberately balanced approach to the makeup of portfolios may help minimize overall risk. On average, top biopharmas focus about half of their portfolio on molecules with the potential to be “first in class,” while the other half focuses on targets that are more established but may hold a technological edge (Exhibit 5).
Today’s imperative: Continuous, effective portfolio management
Without a consistent approach to portfolio evaluation and management, companies may take too many risks or become too cautious. As a result, potentially competitive assets can be out-licensed or discontinued during times of financial stress. Finding the right balance can be challenging, but it starts with the data-driven, objective setting of accurate stage gates and stringency in upholding these stage gates consistently.
One trend we did not observe was a quantifiable shift in therapeutic area focus across leading players, as measured by the total number of pipeline assets. However, we did observe many leading biopharmas enter more selectively into the cardiometabolic space with a few high-priority cardiometabolic assets. The subtle changes in portfolio makeup in a fast-renewing pipeline point to the historic success top biopharmas enjoyed in building therapeutic area expertise and their hesitancy to rapidly shift portfolio makeup.
One approach for players to consider and maintain is designing a portfolio in a “T” shape: building significant depth in two to three therapeutic areas while maintaining sufficient breadth of coverage to rapidly and opportunistically engage in new and emerging science (Exhibit 6).
The risks involved in uncovering new biology remain a clear pain point for the industry. Investing in capabilities that can uncover novel biology at scale (for example, leveraging AI to mine relevant preclinical literature from leading journals) may jump-start leading players’ ability to develop first-in-class assets in-house. On the other hand, becoming an industry leader in a novel modality (such as ADCs, radiotherapies, or T-cell engagers) or, even better, having a portfolio with a diverse modality suite may allow for differentiation in competitive MoAs.
We recommend biopharma companies carefully balance both first-in-class targets (higher biological risk) and differentiated modalities (higher technical risk) to better manage risk and optimize the rewards of their portfolios.
