After a period of post-pandemic uncertainty and uneven growth, a closely monitored metric of biopharmaceutical research and development (R&D) productivity is showing a notable upward trend. According to the 16th edition of Deloitte’s annual “Measuring the Return from Pharmaceutical Innovation” report, tellingly titled “Navigating the GLP-1 Boom,” the projected internal rate of return (IRR) on late-stage pipeline assets increased for the third consecutive year, reaching 7.0% in 2025. This marks a significant jump from 5.9% the previous year, signaling a potential resurgence in the sector’s R&D health. Kevin Dondarski, principal for life sciences strategy at Deloitte Consulting, commented on this unprecedented analytical increase, noting that it reverses a multi-year trend of declining returns, excluding the temporary impact of the COVID-19 pandemic.
However, a deeper analysis of the report reveals a critical nuance: the overwhelming majority of this growth in 2025 is directly attributable to a single class of therapies. Glucagon-like peptide-1 (GLP-1) and Glucose-dependent insulinotropic polypeptide (GIP) drugs, primarily targeting obesity and related metabolic conditions, now account for an estimated 38% of all projected commercial inflows from the 2025 late-stage pipeline. Were these transformative therapies to be excluded from the calculations, the headline internal rate of return would plummet from 7.0% to a mere 2.9%. This sharp contrast is particularly striking when compared to the 2024 figures, where the overall IRR was 5.9%, dropping to 3.8% without GLP-1/GIP drugs. This stark disparity underscores a dual narrative: while the market is clearly recognizing and valuing the profound potential impact of GLP-1 therapies on public health, it simultaneously raises significant questions regarding the long-term sustainability of this growth and the broader health of the biopharma R&D landscape. Dondarski emphasized this dichotomy, stating that while the market’s valuation of these therapies is attractive, it places a considerable responsibility on pharmaceutical companies to identify and develop a robust next generation of assets to diversify their pipelines.
The unprecedented influence of GLP-1s on the overall IRR is a historic first for Deloitte’s 16-year report series. Dondarski confirmed that while certain drug classes have historically contributed significantly to pipeline value, no single class has ever had such a dramatic impact on the headline IRR number, effectively flipping its direction. This concentration of value highlights both the immense commercial success of GLP-1s and a potential underlying fragility in the innovation ecosystem if other therapeutic areas are not delivering comparable returns.
The Ascendance of GLP-1s: A Paradigm Shift in Metabolic Health
The emergence of GLP-1 receptor agonists has revolutionized the treatment landscape for type 2 diabetes and, more recently, obesity. These injectable and now oral medications mimic the action of natural gut hormones that regulate blood sugar and appetite. Drugs like semaglutide (Ozempic, Wegovy) and tirzepatide (Mounjaro, Zepbound) have demonstrated remarkable efficacy in promoting significant weight loss, improving glycemic control, and showing promise in reducing cardiovascular risks. The market for these drugs has exploded, driven by a global obesity epidemic and a growing understanding of obesity as a chronic disease requiring medical intervention.
This unprecedented demand has reshaped pharmaceutical pipelines. For the first time in the report’s 16-year history, obesity now commands the largest share of late-stage pipeline value at 24.7%, effectively displacing oncology, which historically held the top spot at 20.3%. The concentration within the obesity segment is even more pronounced: nearly 96% of that value resides with just three companies, primarily Eli Lilly and Novo Nordisk, who are the current frontrunners in the GLP-1 race. This intense concentration, while indicative of highly successful innovation, presents a unique set of challenges and opportunities for the industry.
Mixed Signals from the Market: Navigating the GLP-1 Boom
Despite the undeniable success and projected growth, investors have been receiving mixed signals regarding the durability and long-term trajectory of the GLP-1/GIP boom. Recent corporate developments at the leading players underscore the complexities inherent in this rapidly evolving market.
Eli Lilly, the developer of tirzepatide (marketed as Zepbound for obesity and Mounjaro for type 2 diabetes), has experienced notable fluctuations in its stock performance. Since the beginning of the year, despite launching its oral GLP-1, orforglipron (marketed as Foundayo), in April 2026, the company’s stock has seen a skid of roughly 10-13% year-to-date. This dip occurred even as Lilly raised its full-year revenue guidance to an impressive $82-$85 billion, primarily on the strength of Mounjaro and Zepbound’s volume growth. The company’s first-quarter 2026 earnings report highlighted a clean beat, with revenue reaching $19.8 billion (exceeding expectations of $17.6 billion), representing a substantial 56% year-over-year increase. This growth was largely propelled by Mounjaro sales hitting $8.7 billion (+125%) and Zepbound reaching $4.1 billion (+79%). However, underlying these impressive figures, Lilly’s 56% revenue growth was driven by a 65% volume increase, partially offset by a 13% decline in realized prices, suggesting increasing market competition or pricing pressures.
Novo Nordisk, another dominant player in the GLP-1 market with semaglutide (Ozempic, Wegovy), has also faced its share of turbulence. In 2025, the company announced a significant leadership change, with longtime CEO Lars Fruergaard Jorgensen being replaced by Maziar Mike Doustdar, amidst reports of slowing momentum and share-price pressure. This corporate restructuring was further underscored by seven board members stepping down at an extraordinary general meeting in November 2025. Concurrently, Novo Nordisk announced ambitious plans to cut approximately 9,000 roles from its global workforce of 78,400 by late 2026. Their Q1 2026 release indicated a workforce of approximately 67,900 employees, implying that roughly 10,500 roles had already been shed since the restructuring announcement.
Adding to investor concerns, Novo Nordisk’s anticipated next-generation therapy, CagriSema—a combination of the amylin analogue cagrilintide and semaglutide—failed to meet expectations. In February 2026, the REDEFINE 4 Phase 3 head-to-head trial reported that CagriSema did not demonstrate non-inferiority against Lilly’s Zepbound, delivering 23.0% weight loss compared to Zepbound’s 25.5%. This outcome triggered another wave of investor disappointment, highlighting the intense competitive landscape and the high bar set by existing GLP-1 therapies. Despite these setbacks, Novo Nordisk’s Q1 2026 report showed a complicated version of strength, with Q1 sales of DKK 96.8 billion ($15.2 billion). The company’s oral Wegovy pill, launched on January 5, generated DKK 2.26 billion in its first quarter, nearly doubling analyst expectations of DKK 1.16 billion. However, similar to Lilly, Novo’s adjusted sales still fell 4% at constant exchange rates once a one-time $4.2 billion 340B provision reversal was excluded, indicating underlying pricing challenges.
Pricing Pressures and Market Access
Further complicating the financial outlook for GLP-1s are increasing pricing pressures and efforts to expand market access. Both Eli Lilly and Novo Nordisk have agreed to lower U.S. prices for their GLP-1s through government programs like Medicare, Medicaid, and the newly established TrumpRx initiative. Under a November deal, Medicare and Medicaid coverage for weight-loss indications was expected to expand for the first time, with eligible beneficiaries potentially benefiting from $50 monthly copays. The live TrumpRx site now lists the Wegovy pill at $149 per month, the Wegovy pen at $199, Ozempic at $199, and Zepbound at $299. These pricing adjustments, while expanding access to a wider patient population, inevitably impact the realized prices for pharmaceutical companies, adding another layer of complexity to their revenue forecasts and profitability.
The Spiraling Cost of R&D Beyond GLP-1s
While GLP-1s present a gleaming success story, the broader R&D landscape continues to grapple with escalating costs. The Deloitte report found that the average cost to develop a drug from discovery to launch surged to $2.67 billion in 2025, a significant increase from $2.23 billion the year before. This rise is not an isolated incident or attributable to a single outlier; Dondarski noted that 17 out of the 20 companies surveyed experienced cost increases, indicating a persistent industry-wide trend.
Three primary factors converged to drive this spike: R&D costs continuing to outpace general inflation, large-scale mergers and acquisitions (M&A) deals inflating the R&D cost base through integration challenges and write-downs, and attrition rates shrinking the overall number of late-stage programs by approximately 4-5%. This combination of higher per-program costs and fewer successful candidates places immense pressure on companies to identify truly transformative assets, further highlighting the industry’s reliance on blockbuster therapies like GLP-1s. The average forecast peak sales per pipeline asset jumped to $598 million in 2025, but this figure is heavily skewed by the top-performing GLP-1s, which approach $5 billion. Without GLP-1s/GIPs, the average peak sales per asset drops to $353 million, actually lower than the previous year, signaling a decline in underlying pipeline productivity when these blockbuster drugs are excluded.
Artificial Intelligence: Still Awaiting Liftoff
Last year’s Deloitte report, titled “Be brave, be bold,” urged pharmaceutical companies to aggressively adopt AI-powered drug development platforms, automation, and advanced analytics as a crucial pathway to reversing decades of declining R&D productivity. The vision was clear: AI could significantly reduce development time and costs, streamline clinical trials, and improve target identification.
However, the 2025 data paints a picture of promise largely unfulfilled at scale. Despite the enthusiastic rhetoric, R&D costs have continued their ascent, reaching a record $2.67 billion per asset, while clinical cycle times remain stubbornly long. The report candidly concedes that AI’s anticipated impact on reducing development timelines and costs “has not yet been realized at scale, largely due to a pilot-driven, function-by-function approach.”
This is not to say that pharmaceutical companies are ignoring AI. Dondarski confirmed, “Everybody’s actively focusing on AI, and everybody’s had some degree of success.” However, the challenge lies in scaling these individual successes across the entire R&D value chain. The industry’s cautious, incremental adoption of AI, often confined to specific functions or pilot projects, prevents the widespread, transformative impact that a fully integrated AI strategy could deliver. The variability in the velocity at which organizations are scaling these efforts suggests that while the intent is there, the execution of a comprehensive, value-maximizing AI strategy is still a significant hurdle for many.
Broader Implications and the Path Forward
The Deloitte report serves as a critical barometer for the pharmaceutical industry, revealing both exhilarating successes and persistent challenges. The GLP-1 boom undeniably injects a much-needed shot of optimism into R&D returns, demonstrating the immense value that truly innovative therapies can generate. These drugs are not just financial blockbusters; they represent a significant medical breakthrough with the potential to improve the health outcomes of millions suffering from obesity and related metabolic diseases.
However, the unprecedented concentration of value in GLP-1s presents a unique set of risks. An over-reliance on a single therapeutic class, even one as impactful as GLP-1s, raises questions about portfolio resilience in the face of future competition, patent expirations, or unforeseen regulatory changes. The industry’s long-term health depends on a diversified pipeline across multiple therapeutic areas, driven by consistent, sustainable innovation.
The escalating R&D costs and the slow, fragmented integration of AI further underscore the need for strategic shifts. To maintain and build upon the current momentum, pharmaceutical companies must move beyond pilot projects and embrace comprehensive, enterprise-wide AI strategies that can truly optimize drug discovery and development processes. This will involve significant investment in data infrastructure, talent acquisition, and cultural transformation to foster an environment where AI can unlock its full potential.
Ultimately, the “Navigating the GLP-1 Boom” report presents a complex picture of a pharmaceutical industry at a crossroads. While celebrating a remarkable period of innovation and commercial success driven by GLP-1s, it simultaneously issues a clear call to action for diversification, cost efficiency, and accelerated technological adoption to ensure a robust and sustainable future for pharmaceutical innovation beyond the current golden goose. The responsibility now lies with industry leaders to leverage the lessons from the GLP-1 success story while addressing the underlying challenges to foster a truly healthy and resilient R&D ecosystem for the benefit of patients worldwide.
Leave a Reply