MassBio’s Align Summit is designed to be a catalyst, a place where early-stage innovation connects with the funding and partnerships needed to advance patient-driven science. To truly drive this growth, we must consistently strive to wholly understand the landscape we’re navigating. At this year’s summit, McKinsey & Company Senior Partner Greg Graves did just that in his insightful keynote, “Biopharma’s Next Horizon: Navigating Uncertainty and Seizing Opportunity.”
As an expert on corporate strategies that thrive amid market uncertainty, Graves laid out the three critical forces that will impact biopharma over the next decade. His message was clear: while challenges abound, a fundamental rethinking of how we innovate will define who leads the industry in the years to come.
The Fragility of the Model: Policy and Pricing Shifts
Graves kicked off the discussion by quantifying the impact of policy shifts on the biopharma industry, particularly from the Inflation Reduction Act (IRA). Despite the industry’s resilience, a host of policy changes—from tariffs to the potential for Most Favored Nation (MFN) pricing, where Medicare would pay no more than the lowest price paid by other developed countries—could cumulatively shave three to four percentage points off the industry’s already challenging 41% margin. The real swing factor is MFN pricing. If applied across Medicare Part D and Part B, it could push the industry margin down to roughly 33%, with spillover effects into the commercial market potentially triggering massive value erosion.
However, analysis of research & development (R&D) Return on Investment (ROI) provides a crucial framework for action. With current R&D ROI stabilizing—thanks in part to the success of GLP-1 drugs for diabetes and weight management—Graves shared that it would take a roughly 25% reduction in U.S. pricing to hit the 1.0x break-even point (where returns equal investment).
The key takeaway? Innovation is needed not only in science but also in business models themselves. How we price, how we commercialize, and how we ensure patients around the globe can access breakthrough therapies is essential to maintaining a sustainable investment environment for future R&D that serves patient needs.
The Innovation Trend: Pipeline Herding and Global Competition
Alongside external policy pressure, the industry also faces intense competition in the market. Graves presented stark data on pipeline herding across the top 20 biopharma companies: 74% of pipeline assets in 2024 are targeting molecules being pursued by more than five competitors—a dramatic increase from just 16% in 2000. This intense focus is heavily concentrated in oncology, which represents more than half of the classes with high herding activity.
For innovators, this means differentiation is paramount. It’s no longer just about being first; it’s about being better for patients. In many cases, second movers with superior data packages have outperformed first movers. Speed is important, but quality matters more. Companies must design trials, develop assets, and package data to stand out in a crowd.
The dynamics of international competition are also shifting. Graves highlighted that 85% of incremental pipeline growth has come from China, with projections suggesting the Chinese pipeline will surpass the U.S. pipeline by 2029. This means biopharma companies must look globally for innovation, raising pivotal questions about how U.S. and European companies can remain competitive if they cannot access this growing international source of breakthrough science.
The Great Accelerator: AI’s Transformative Potential
The third force, and perhaps the greatest opportunity, is the potential of AI to fundamentally reshape biopharma productivity and provide the resilience the industry needs. Graves sees a convergence in strategy emerging: Large biopharma is leveraging AI initially for enabling functions like commercial activities to seek near-term margin expansion, generating cost savings that can be reinvested in patient-focused innovation. Biotech is starting at the core value chain, focusing on R&D to optimize clinical trials, identify the right patients for treatments, and enable breakthrough innovations in drug discovery.
The potential impact is massive. AI could generate up to $100 to $130 billion in cost savings across the industry, according to Graves’ estimate. Crucially, this creates financial headroom that allows companies to offset policy-driven challenges and reinvest in discovering and developing new therapies that address unmet patient needs. The analysis revealed that AI-driven efficiencies in R&D and operations could generate up to a 13% annual upside in revenue, enabling companies to sustain the long-term investments required to bring life-changing medicines to patients.
The Next Horizon Demands Bold Action
Graves’ keynote provided an essential perspective for every company present at the Align Summit. The next five to 10 years will be defined by an industry-wide need to rethink everything—not just what we innovate, but how we operate to best serve patients.
The key to success will be taking these industry-altering forces in concert: harnessing AI to create the financial headroom and operational efficiency needed to sustain investment in patient-centered innovation. Tapping into the global ecosystem of innovation, including emerging centers like China, to maintain a competitive and diverse pipeline that addresses a broader range of patient needs. Differentiating your science to win in increasingly crowded markets, prioritizing the quality of your asset and data package over merely being the first to market.
MassBio’s role, through events like the Align Summit and initiatives like the early-stage accelerator Drive, is to be a catalyst, ensuring that our local ecosystem is equipped to meet these challenges head-on. By facilitating connections and championing the breakthroughs of our early-stage companies, we can secure Massachusetts’ place at the global center of the biopharma industry’s next, more resilient horizon—one that delivers transformative therapies to the patients who need them most.