Biotech and Pharma Market Update: Q2 2025 in Review
The second quarter of 2025 was a period of dynamic evolution within the biotech and pharma sectors.
Critical factors like escalating policy pressures, pipeline pivots by leading companies and the increasingly transformative impact of artificial intelligence (AI) shaped the landscape and presented both challenges and opportunities for growth.
Here, the Investing News Network provides an in-depth analysis of key trends and their implications for investors.
Escalating policy and tariff pressures
The biopharmaceutical industry is currently grappling with significant headwinds, primarily driven by an evolving and unpredictable tariff landscape. This uncertainty has already impacted market activity, with only two initial public offerings in the second quarter compared to five in the first quarter of the year.
Regulatory shifts and concerns about an imminent trade war caused a nearly 9 percent drop in the SPDR S&P Biotech ETF (ARCA:XBI) in the first week of April. The exchange-traded fund’s decline followed US President Donald Trump’s announcement of a 10 percent global tariff on nearly all goods entering the US.
Subsequent discussions have led to a dynamic and often unpredictable landscape. Throughout May and June, negotiations saw a temporary de-escalation, with some of the more severe tariffs being paused or substantially reduced for many goods until mid-August; however, a cumulative tariff of up to 245 percent on certain Chinese active pharmaceutical ingredients (APIs) has been in effect since April, significantly impacting the pharmaceutical supply chain.
Lingering uncertainties have also persisted; as of mid-July, while direct negotiations are ongoing, the US has signaled an intent to potentially increase the baseline reciprocal tariff rate to 15 to 20 percent and has threatened a hike of 35 percent on goods currently subject to the 25 percent fentanyl tariff, effective August 1.
Further intensifying the pressure, Trump has recently proposed a dramatic 200 percent tariff on imported finished pharmaceutical products, as well as 30 percent tariffs on the EU and Mexico, slated to begin on August 1.
For pharmaceuticals, the higher import costs for APIs and finished drugs are forcing companies to continuously re-evaluate their supply chains and brace for potential price increases. Tariffs on steel and aluminium could also increase costs for stainless-steel bioprocessing equipment, lab equipment and medical devices.
Picton Mahoney’s 2025 mid-year report discusses the risks associated with tariffs, including increased recession odds, stagflation risks and the possibility of renewed protectionist policies creating ripple effects across global equity markets.
The authors add that policy uncertainty is bad for corporate planning and could lead to a pause in spending.
Evaluate Pharma’s World Preview 2025 report, released in June, states that biopharma M&A is “off the pace so far in 2025,” with the slowdown…
