What does the future hold for pure-play pharma companies? 

Over the last decade, pharmaceutical giants such as Novartis, Merck, GSK, Bristol Myers Squibb, Pfizer, Johnson & Johnson and Sanofi have separated their consumer health divisions—refining their portfolios to focus solely on pharma/Rx products. Two key exceptions are Bayer, which owns key OTC brands such as Aspirin and Claritin, and AbbVie, which owns aesthetic treatments such as BOTOX as a result of its 2020 acquisition of Allergan Aesthetics.  

Post-separation, “pure-play” pharma companies are more reliant on patent protection and regulatory exclusivity to protect their revenue streams without the stable income from their consumer health divisions—and cannot afford to be complacent about the looming patent cliff facing the industry, which will see drugs worth some USD300bn in sales face competition from generics over the next five years.   

As a result, we are seeing these companies under greater pressure from shareholders and investors to fill pipeline gaps through acquisitions and in-licensing using their capital, including that released from the sale or separation of their consumer health units. They face the critical (and, at times, unenviable) choice of where best to deploy that capital—for which assets, in which therapeutic areas, and in which territories. 

Strategic focus: therapeutic area prioritization and reducing reliance on internal R&D

With pharma companies moving away from a historic reliance on internally generated R&D leads, this year has seen a steady stream of transactions targeting oncology and immunology in particular—structured both as M&A and licensing transactions. In January, GSK entered into a collaboration with Oxford University to establish the GSK-Oxford Cancer Immuno-Prevention Programme. In February, GSK completed the USD1.15bn acquisition of oncology drug developer IDRx and Lilly signed a partnership and license agreement with Magnet Biomedicine to develop and commercialize oncology molecular glue therapeutics. In March, Lilly completed its acquisition of Scorpion Therapeutics, a developer of precision oncology therapies, for up to USD2.5bn in cash. In April, Johnson & Johnson completed its acquisition of neuroscience drugmaker Intra-Cellular Therapies for USD14.6bn, while three months later, Merck KGaA paid USD3.9bn for biopharmaceutical rare cancer specialist SpringWorks. 

Notably, licensing deals relating to obesity, diabetes and other metabolic disorders reached record levels in the first half of 2025, with announced transactions providing for aggregate payments of up to USD18.2bn in headline value —more than double the total for the whole of 2024. A key example was Roche and Zealand Pharma’s partnership to advance Zealand's mid-stage obesity candidate petrelintide, which provides for payments up to USD5.3bn.   

We expect these therapeutic areas to continue to be a priority target for dealmakers—in particular, given the increasing prevalence of cancers and metabolic disorders in ageing populations in key territories.   

Going forward, it will also be key for pharma companies to keep a critical eye on R&D prioritization in order to quickly discontinue investment into pipeline assets that are not meeting established evidence criteria (ideally before reaching the more expensive trial phases). To avoid overdependence on a single blockbuster drug, we expect pharma companies to seek to maintain a diverse pipeline by ensuring both R&D investment and deal spend is spread across multiple core therapeutic areas, as well as different modalities and mechanisms of action within each. 

Given pure-play pharma companies are typically valued on their R&D success, pipelines and current portfolios (as well as related patent protection and regulatory exclusivity), expert shareholder engagement will also be imperative. 

Navigating geopolitical headwinds and evolving regulatory landscapes

Chinese-domiciled biopharma continues to be a popular target for acquisitions and in-licensing transactions by global pharma companies, especially in respect of oncology and ADC technology. In the first half of 2025, 38% of large-cap biopharma's major deals originated from Chinese biopharma. In particular, according to Morgan Stanley, Chinese biotech partnerships are attractive from a financial standpoint, with in-licensing offering a 76% discount in net value as compared to an acquisition. 

However, geopolitical challenges, resulting supply chain issues (interruptions, increasing costs etc.) and rapidly- changing regulatory landscapes (including the implications of the proposed U.S. BIOSECURE Act), mean that pharma companies must carefully navigate the integration of these assets into their wider business.  

This is because pharmaceutical manufacturing and distribution are more specialized and complex than consumer health supply chains (which are more like those in the fast moving consumer goods (FMCG) sector), and because all aspects of the pharmaceutical product lifecycle are much more highly regulated.

Supply chain flexibility and regulatory horizon scanning can help to mitigate these exposures, while pharma companies must also be particularly careful when navigating the integration of Chinese biopharma assets into their wider businesses.

What does life look like for standalone consumer health companies?  

Standalone consumer health companies face a different set of issues, not least because they have lost the ability to leverage their parent’s scientific reputation. They must navigate shifting consumer sentiment, and as well as their heavy exposure to fluctuations in brand reputation and spending preferences, especially in respect of their more discretionary products.

Consumer health companies typically have lower margins and are more cash generative (given their reduced R&D spend) than pharma companies—with many in the post-separation period enjoying the greater returns that come from having standalone financials. Consumer health businesses will be focused on leveraging this to maintain momentum while doubling down on cost discipline and supply chain efficiency.  

There is a fine line to tread between reinvesting in innovation, marketing or bolt-on transactions to boost portfolios, and returning cash to shareholders who have been supportive through the company’s journey to a standalone entity. Analysts describe most standalone consumer health businesses as having “steady growth”—falling short of this expectation can rapidly impact market credibility and share price.  

These companies will need to decide whether to maintain a broad offering across OTC categories or focus on specific high-growth segments. Without protection from patents or regulatory exclusivity, consumer health companies must find new ways to innovate;, for example, by investing in Rx-to-OTC switches or expanding into wellness and digital health markets.

Rx-to-OTC switches

In recent years, the U.S. Food and Drug Administration (FDA), the UK Medicines and Healthcare Products Regulatory Agency (MHRA), as well as national regulators in Canada, Australia and New Zealand, have made it easier for companies to make drugs available over-the-counter. This trend allows consumer health companies to sell a wider range of products; according to IQVIA, the global OTC market increased from USD150bn in 2020 to USD193bn in 2024.   

As a result, consumer health businesses are prioritizing investment in these switch assets. This is largely done by in-licensing from a pharma company that commercializes the Rx version of the product. For example, Opella gained FDA approval to market an OTC version of erectile dysfunction drug rights for Cialis, in a January 2025 agreement that preceded the company’s spin-off from Sanofi.   

Wellness

At the same time, consumers globally are spending more on products and services that promote better health, creating a wellness market worth USD1.8trn that is on track to grow by 5% to 10% per year.  

Standalone consumer health businesses already have robust product offerings in this space, so are well-positioned to benefit from this trend. Furthermore, they are likely to consider bolt-on acquisitions of the most promising new players coming into the market. Now competing head-to-head with FMCG giants, consumer health businesses must leverage their scientific origins to build consumer confidence in their wellness products. However, whether this will be enough to set themselves apart from their FMCG competitors remains to be seen.

Digital health

As individuals take increasing interest in, and control over, their own health, digital solutions such as smartphones and wearable technologies present another valuable source of growth for the consumer health industry. One study predicts that the global market for wearable healthcare devices could reach USD70bn by 2028, with annual growth of more than 11%. 

The potential in this sub-segment of the market is evident from recent financing rounds. In December 2024, fitness tracking ring maker Oura raised USD200m in Series D funding that valued the business at USD5.2bn. In May 2025, MindSpire, which develops AI-powered wearable devices for stress regulation and cognitive enhancement, raised USD850,000 in pre-seed funding.  

As previously mentioned, independent consumer health businesses have been investing in Rx-to-OTC switches. However, they have not yet made significant moves to acquire wellness or digital health assets, although we expect to see this changing over the next few years as independent consumer health businesses seek to build new revenue streams and valuable datasets. In doing so, they will need to move away from their historic working practices and master FMCG-style agility and customer centricity, while still remaining conscious of the traps of consumer regulations and product liability risk.