As DDW launches its new event series Drug Discovery Innovators & Investors, Lu Rahman looks at the challenges and opportunities that exist for both drug developers and investors looking to bring a new drug to market. 

It’s no news that the discovery and development of a new drug is not only costly and lengthy – over $1 billion across 10 to 15 years – but it also involves a range of stakeholders – pharmaceutical and biotech companies, venture capital investors, governments, and non-profit organisations all contributing to funding research and innovation.  

Opportunities within the drug discovery and development sector are high – new technologies can expedite the process and as populations age we have increased health issues to overcome. The global need for healthcare is increasing particularly as emerging economies seek new drugs. Meanwhile regions such as Asia, Latin America, and Africa and being highlighted as key areas for pharma investment and research.  

The potential for growth and innovation is strong. With advances in AI, machine learning and data, the drug discovery and development process is changing. Timelines are shifting as technology helps researchers to identify drug targets, map and predict compound behaviour and create optimum clinical trials which help cut costs while increasing success rates. Companies using technology to create efficiencies throughout the discovery process. 

However, the challenges are still considerable…a large proportion of drug candidates fail during laboratory testing, animal studies, or clinical trials. This serves to increases financial risk and creates caution within the funding arena as many investors become reluctant to committing resources to early-stage research projects.  

Regulatory requirements also play into the process. Designed to safeguard they can also increase development costs and extend timelines. In addition, delays in regulatory approval may negatively affect the commercial value of investments while adding financial pressure on companies. Other challenges include pricing pressures, the expiration of patents and competition within the generics market. 

Still research into the discovery and development of new drugs continues. We are still seeing areas such as advanced therapies, precision medicine and RNA-based medicine, attracting interest in terms of potential opportunity. Cancer research remains a steady area for research and development. According to IQVIA’s Institute report Global Oncology Trends 2025: “Phase II trials, including Phase I/II, IIa and IIb, represent the largest share of trials, with 48% of oncology trials started in 2024 being Phase II compared to 38% Phase I and 14% Phase III”. We are also seeing growth within the global metabolic market. Market Growth Reports says that the total metabolic disease therapeutics market is estimated to be over $100 billion and is projected to reach upwards of $150 billion to $260 billion by the mid-2030s.

The changing financial investment scene

Investment in the drug discovery and development sector has shifted over the last five years. From what was period of contraction – a dip in post-Covid investment, rises in inflation and interest rates –  we are now seeing a cautious recovery. This has been driven by demand for innovation – in both medicines and technology – and carefully aligned partnerships.  

Research into this area by IQVIA in its report, Global Trends in R&D 2025: Progress in Recapturing Innovation in Biopharma Innovation, released by the IQVIA Institute for Human Data Science, notes that life sciences innovation ecosystem continued to evolve and expand in 2024 as the industry continued to adapt to a complex and dynamic range of geopolitical, technological and social uncertainties.  

“Increases in funding, normalisation of clinical trial starts, stabilisation or acceleration of key cycle time drivers, and improvements in late-stage success and clinical productivity — all of which were observed in 2024 — demonstrate meaningful year-on-year progress in biopharmaceutical R&D,” says Murray Aitken, Executive Director of the IQVIA Institute for Human Data Science. “Although geopolitical, economic and other external ecosystem factors are increasing pressure on innovators, effective application of a range of productivity enablers has had a positive impact on the efficiency of clinical development.” 

Despite economic pressures, many pharma companies continued to increase their research budgets. In its 14th Annual Pharmaceutical Innovation Report: Pharma R&D Return on Investment Rebounds After Record Low, Deloitte notes that the leading 20 global pharmaceutical companies collectively spent $145 billion on R&D in 2023, up 4.5% from 2022. And according to Statista Global pharmaceutical R&D spending has nearly doubled since 2016, reaching around $300 billion.

Investment trends

Areas of interest for investment include mRNA therapeutics, obesity and metabolic treatments, gene-editing technologies and precision medicine.  

One of the key trends in drug discovery and development is the move to integrate AI and many pharma and biotech companies see this tool as a way to slash costs, boost success rates and shorten development timelines.  

Earlier this year Eli Lilly and Insilico Medicine announced a collaboration that uses Insilico’s AI engine to accelerate the discovery and development of novel therapeutics across multiple therapeutic areas. The agreement grants Lilly an exclusive worldwide license for the development, manufacturing, and commercialisation of potentially best-in-class, novel oral therapeutics in preclinical development for certain indications. In addition, Insilico and Lilly will collaborate on multiple R&D programmes focused on targets selected by Lilly, by combining Insilico’s Pharma.AI platforms with Lilly’s development capabilities and disease-area expertise.  

“From its inception, Insilico Medicine has been developing deep learning for end-to-end drug discovery. By deploying frontier AI technologies that scale from biomarkers to life models, world models of human and animal life, we can identify multi-purpose targets driving multiple diseases at the same time,” said Alex Zhavoronkov, Founder and CEO of Insilico Medicine. “Working with Lilly, we aim to deliver transformative therapies that treat diseases with high unmet need. This collaboration is a testament to the power of AI in tackling the most complex challenges in human health.”  

Andrew Adams, Group Vice President of Molecule Discovery at Lilly added: “This collaboration allows us to explore novel mechanisms and accelerate the identification of promising therapeutic candidates across multiple disease areas.” 

Collaboration and strategic partnerships

We are seeing a shift from go-it-alone research by pharmaceutical companies to collaborative licensing agreements with biotech businesses. A key example of this was highlighted via the Pfizer and Innovent Biologics’ $10.5 billion deal to research and develop 12 new breakthrough early-stage and de novo cancer medicines. 

“At Pfizer, everything we do starts with patients and the urgency to change what’s possible for people living with cancer,” said Jeff Legos, Chief Oncology Officer, Pfizer. “This collaboration brings together two highly complementary engines of innovation with a shared ambition to move faster, go further and deliver truly transformative medicines to patients who are waiting. By combining Innovent’s discovery and early clinical development with Pfizer’s global research and development and commercialisation capabilities, we have an opportunity not only to strengthen our pipeline, but to accelerate the delivery of breakthroughs that can redefine standards of care and make a meaningful difference in patients’ lives.”

Regional changes in investment

We can see that regionally , investment patterns have changed with China emerging as a major force. According to Statista, industry numbers suggest the industry has entered a consolidation phase rather than a new investment cycle. “The baseline has simply grown large enough that sustaining high growth rates has become structurally harder. Regional dynamics reinforce this shift: China expanded its R&D spending at over 16% annually between 2020 and 2024, far outpacing both Europe at around 8% and the U.S. at some 4% over the same period. China now accounts for almost one fifth of all companies with active pipelines globally. This divergence points to a structural rebalancing of where pharmaceutical innovation capacity is being built — with implications for long-term competitive positioning between regions. 

It seems that today’s drug discovery investment has evolved from one of trepidation to one of selective growth. While opportunity is clear, it is evident that drug research and development is viewed more favorably if it is backed by technological investment and clear processes to help cut timelines and boost efficiencies. Investment is focused on AI, precision medicine, gene therapies, and strategic collaborations seems to be leading the way and these trends suggest that the future of drug discovery investment will be focused on technological innovation, efficiency, and targeted scientific breakthroughs rather pure volume.  

From DDW Volume 27 – Issue 3, Summer 2026 – Read the digital issue here