The European Pharmaceutical Industry 2025: Innovation, Competitiveness, and the Path Forward

Introduction

For decades, Europe has been a cornerstone of biomedical progress, giving rise to some of the world’s most transformative medicines and sustaining one of its most advanced industrial ecosystems. Today, however, it faces the challenge of maintaining that momentum in the face of intensifying global competition, evolving healthcare demands, and structural pressures that test both its innovative capacity and economic resilience.

In 2024, Europe’s research-based pharmaceutical sector generated an estimated €440 billion in production value, employed around 950,000 people directly, and invested over €55 billion in research and development. These figures reflect not only the sector’s scale but its strategic role as one of the continent’s most R&D-intensive and high-value industries. Yet, despite this strength, the continent’s share of global pharmaceutical innovation has eroded in recent years. Between 2019 and 2023, only 15.8% of new medicines launched globally entered the European market first, compared with 66.9% in the United States. China, meanwhile, has surged ahead, accounting for a growing share of newly originated active substances. This shift signals a deeper transformation in the geography of medical innovation — one where Europe must act decisively to preserve its influence.

The European Federation of Pharmaceutical Industries and Associations (EFPIA) highlights that while Europe remains a global hub for manufacturing and scientific talent, a gradual migration of research investment is underway toward faster-growing markets in Asia and North America. This movement is driven by more agile regulatory systems, stronger access-to-market pathways, and greater incentives for innovation. In contrast, Europe continues to struggle with a fragmented market structure, divergent national pricing systems, and prolonged reimbursement processes that delay patient access to breakthrough therapies. As IQVIA’s Pipeline Review 2024 underscores, these systemic inefficiencies risk undermining Europe’s long-term competitiveness by constraining its capacity to translate research into tangible medical innovation.

At the same time, the global burden of disease is shifting — and with it, the priorities of the pharmaceutical pipeline. Europe’s ageing population, expected to double its over-65 demographic by 2050, is driving increased prevalence of chronic and degenerative diseases such as dementia, diabetes, cardiovascular disease, and cancer. Mental health and antimicrobial resistance have also emerged as significant public health challenges, exerting enormous social and economic pressure on European healthcare systems. Against this backdrop, the continent’s scientific community continues to pursue groundbreaking therapeutic solutions: from next-generation obesity medications and anti-interleukin treatments for chronic respiratory conditions, to gene and cell therapies targeting rare and neurological diseases.

IQVIA’s 2025 analysis, The Case for Investment and Change in European Life Sciences, argues that revitalizing the sector requires a renewed policy commitment — one that aligns Europe’s industrial strategy with its public health goals. This means fostering a regulatory environment that rewards innovation, ensuring predictable access for patients, and leveraging Europe’s academic and technological strengths to build a globally competitive ecosystem. The European pharmaceutical industry’s future depends not merely on scientific excellence, but on its ability to convert innovation into accessible, affordable, and sustainable healthcare solutions.

As this report will explore, Europe’s pharmaceutical landscape in 2025 is defined by both opportunity and urgency. It remains a global powerhouse — but one that must evolve quickly to stay ahead in an increasingly competitive world.

Europe’s Pharmaceutical Powerhouse: The Scale and Economic Weight of the Industry

The European pharmaceutical industry represents one of the continent’s most robust and strategically significant sectors, combining scientific innovation, industrial capacity, and global economic influence. Its magnitude is reflected in the impressive financial and employment figures that define the ecosystem. As of 2024, the sector generated €440 billion in production value, exported €705 billion, and imported €485 billion, resulting in a €220 billion trade surplus — a figure that underscores Europe’s enduring strength as a global exporter of high-value, research-driven medicines. This trade balance places pharmaceuticals among Europe’s top contributors to positive foreign trade, highlighting the industry’s critical role not only in public health but also in maintaining the region’s economic stability.

Beyond sheer economic output, these figures illuminate the depth of Europe’s scientific and industrial infrastructure. With an R&D expenditure of €55 billion, the industry remains one of the most research-intensive sectors in Europe, accounting for a significant share of total private investment in innovation.

This R&D intensity is not only a marker of competitiveness but also of societal value, as every euro invested in research translates into improved healthcare outcomes, extended life expectancy, and reduced disease burden across populations. The pharmaceutical industry’s high value-added contribution — far exceeding that of traditional manufacturing sectors — reflects its dual character as both an economic engine and a scientific enterprise.

However, these numbers must also be read as both a testament to strength and a call to vigilance. Europe’s share of global pharmaceutical sales has gradually declined over the past two decades, dropping to around 22.7% in 2024, compared with 54.8% in North America. This divergence reveals a structural imbalance in innovation dynamics, with the United States now capturing the majority of new medicine launches and market growth.

Yet Europe’s substantial production and export performance demonstrate that the region continues to play a dominant role in global supply chains — manufacturing and distributing vital medicines to markets around the world.

Employment data further illustrate the human dimension of this economic footprint. The European pharmaceutical industry employs approximately 950,000 people directly, generating an estimated three times that number indirectly through research partnerships, supply chains, and healthcare networks.

The industry’s workforce is characterized by high levels of specialization, with R&D roles representing a core 88,000 positions, reflecting the sector’s commitment to scientific advancement and technological progress. These jobs are not just numerous — they are also among the most knowledge-intensive in Europe’s economy, helping to sustain a deep reservoir of expertise in biomedical research, data science, clinical development, and advanced manufacturing.

The interplay between economic weight and innovation capacity defines the industry’s strategic relevance to Europe’s future. A sector that accounts for hundreds of billions in trade value and employs close to a million people is more than an industrial success story — it is a cornerstone of Europe’s competitiveness, resilience, and public welfare. As the region faces demographic shifts, rising healthcare costs, and the global race for biomedical leadership, these “big numbers” are not just indicators of past performance but a measure of the foundation upon which future growth will depend. Europe’s challenge lies not in its scale but in ensuring that its economic strength continues to be matched by scientific leadership and policy alignment capable of sustaining this unparalleled momentum.

Fueling Innovation: The Scale and Geography of Pharmaceutical R&D in Europe

Research and development sit at the heart of Europe’s pharmaceutical power — a fundamental engine that sustains innovation, economic resilience, and global competitiveness. Over the past three decades, Europe’s pharmaceutical R&D spending has expanded dramatically, rising from just €7.8 billion in 1990 to more than €52 billion in 2023, marking an extraordinary +574% increase. This exponential growth underscores the sector’s enduring commitment to scientific progress, even amid shifting global dynamics, stringent regulatory environments, and growing cost pressures.

Such sustained investment reflects Europe’s long-standing leadership in biopharmaceutical discovery and its capacity to attract high-value research activities. However, this trajectory is also emblematic of a race that is intensifying worldwide. While Europe continues to increase its absolute R&D expenditure, its share of global research spending has gradually declined, with the United States and China growing at faster rates. The post-2020 period, in particular, saw China’s emergence as a leading originator of new active substances, challenging Europe’s traditional second-place position in global innovation. Still, the European pharmaceutical ecosystem remains one of the world’s most advanced, supported by robust academic networks, a sophisticated regulatory framework, and a highly skilled workforce.

Within Europe, R&D investment is heavily concentrated in a handful of leading economies. The United Kingdom, Germany, and Switzerland dominate the regional landscape, accounting together for more than half of total R&D expenditure. The U.K. leads with €10.2 billion, followed closely by Germany (€9.9 billion) and Switzerland (€9.2 billion). These countries benefit from well-established life sciences clusters, proximity to research universities, and strong public–private partnerships. France (€5.9 billion) and Belgium (€5.7 billion) complete the top five, reflecting their dynamic biopharmaceutical sectors and significant contributions to both small molecule and biologics research.

This geographic concentration reveals an important structural characteristic of Europe’s innovation ecosystem — excellence is not uniformly distributed, but rather anchored in select innovation hubs that drive regional growth. A visual representation of R&D spending concentration across Europe further illustrates this imbalance: Northern and Western European nations dominate the research landscape, while Central and Southern Europe remain underrepresented.

The average national investment across the continent stands at €2.01 billion, but only a minority of countries exceed that threshold, indicating substantial room for convergence and cross-border collaboration.

When measured on a per capita basis, however, a different picture emerges. Switzerland leads by a wide margin, investing over €1,000 per inhabitant, followed by Belgium (€481) and Denmark (€297) — all small but innovation-intensive economies that channel significant resources into research relative to their population size.

Larger nations such as Germany, the U.K., and France fall below this average, suggesting that smaller, more agile markets have been more effective at translating economic scale into research intensity.

Mapping these per capita figures across the continent reveals striking disparities. The average R&D investment per European citizen is €113, yet only a few nations surpass this benchmark substantially.

The contrast between Switzerland’s deep innovation ecosystem and the comparatively modest investment levels in Southern and Eastern Europe underscores the uneven geography of scientific capacity — a challenge that Europe must address to maintain cohesion in its biomedical innovation strategy.

Europe’s R&D performance demonstrates not only a remarkable history of sustained growth but also a warning about concentration and competitiveness. The region’s next chapter will depend on broadening this innovation base, aligning incentives across member states, and reinforcing Europe’s attractiveness for global biopharmaceutical investment. To remain a leader in the discovery of transformative therapies, Europe must transform its fragmented R&D landscape into a truly integrated, high-performance innovation network — one capable of turning scientific excellence into sustainable, continent-wide economic and healthcare impact.

A Global Trade Powerhouse: Europe’s Pharmaceutical Export Strength

Foreign trade has long been one of the defining pillars of the European pharmaceutical industry, positioning the continent as a central hub in global healthcare supply chains. In 2024, pharmaceutical exports reached an extraordinary €705 billion, while imports stood at €485 billion, generating a €220 billion trade surplus. This positive balance not only highlights the industry’s role as one of Europe’s most successful export sectors but also underscores its strategic contribution to the region’s economic and geopolitical resilience.

At the national level, Germany dominates the European pharmaceutical export landscape, shipping medicines worth €112 billion in 2024. Its success reflects the country’s deep industrial base, efficient logistics infrastructure, and concentration of multinational manufacturers. Switzerland, though not a member of the EU, follows closely with €96 billion in exports — a testament to its strong cluster of global life sciences leaders and its well-established regulatory reputation. Meanwhile, Belgium (€77.9 billion) and Ireland (€77.5 billion) stand out as high-performing export economies, despite their smaller size, driven largely by the presence of large-scale manufacturing facilities and favorable tax and regulatory frameworks that attract global biopharma investment.

The Netherlands (€56 billion) and Italy (€48 billion) also play important roles, leveraging extensive logistics networks and advanced production capabilities, particularly in active pharmaceutical ingredients and generics. Together, the top ten exporting countries account for the overwhelming majority of Europe’s total pharmaceutical exports, underlining how trade excellence is concentrated in a handful of highly integrated innovation and manufacturing hubs. France, the United Kingdom, Denmark, and Spain complete the list, each contributing between €20 and €36 billion annually.

While export performance highlights the breadth of Europe’s industrial reach, trade balance data reveal the countries that gain the greatest net benefit from this global integration. Ireland emerges as Europe’s undisputed leader in trade surplus, with an impressive €64.8 billion in 2024 — exceeding even the combined surpluses of several mid-sized nations. This reflects Ireland’s role as a pharmaceutical manufacturing powerhouse, hosting major global producers of biologics and vaccines that serve both U.S. and EU markets. Germany (€42.4 billion) and Switzerland (€41.2 billion) follow, reaffirming their dual status as both innovation leaders and export engines.

Northern Europe also contributes significantly to this positive balance: Denmark (€16 billion), driven by its world-leading diabetes and obesity treatment segment, and the Netherlands (€11.7 billion), sustained by its logistical centrality and production efficiency. Smaller nations such as Slovenia, Belgium, and Sweden maintain robust surpluses relative to their size, reflecting how even niche economies can secure strong positions within the global value chain through specialization.

Europe’s dominance in pharmaceutical exports is not simply a matter of scale but of sophistication. The continent remains a global reference for quality assurance, safety regulation, and manufacturing excellence. Its advanced infrastructure supports the seamless cross-border flow of medicines, ensuring Europe’s role as both a supplier to global markets and a guardian of global health.

However, maintaining this trade advantage will require continued attention to competitiveness. Rising production costs, fragmented market access policies, and growing regulatory divergence threaten to erode Europe’s leadership in the coming decade. Strengthening innovation ecosystems, harmonizing approval procedures, and reinforcing investment incentives will be essential to safeguard Europe’s position as the world’s leading exporter of high-value, science-driven medicines.

European Pharmaceutical Deal Activity: Consolidation, Capital, and Strategic Realignment

The European pharmaceutical industry has entered a period of strategic recalibration, marked by a more disciplined and targeted approach to deal-making. Mergers, acquisitions, and initial public offerings (IPOs) have long served as mechanisms through which companies expand therapeutic portfolios, gain technological advantages, and optimize their positions within increasingly competitive global markets. However, in recent years, macroeconomic volatility, rising capital costs, and regulatory uncertainty have reshaped the dynamics of pharmaceutical deal activity across Europe.

Between 2016 and 2025, the industry experienced distinct cycles of consolidation and restraint. After a period of strong activity from 2016 to 2020, the total capital deployed in M&A surged dramatically in 2020, reaching over $110 billion, driven by several megadeals and an industry-wide focus on expanding capabilities in biotechnology, oncology, and digital health integration. Yet this momentum was short-lived. In the years that followed, M&A volumes declined sharply as companies adopted a more cautious investment posture, reacting to inflationary pressures, higher interest rates, and the post-pandemic normalization of valuations. By 2025, both the total capital deployed and the number of deals had contracted substantially, with deal counts dropping from nearly 250 transactions in 2020 to just around 130 in 2025 — a clear indicator of the market’s retrenchment.

Despite this reduction in activity, deal valuations have shown remarkable resilience, reflecting sustained investor confidence in the strategic importance of the sector. The median deal size and median post-transaction valuation both climbed steadily after 2022, reaching approximately $50 million and $60 million respectively by 2025 — their highest levels in nearly a decade. This divergence between declining deal volume and rising valuation underscores a shift toward fewer but higher-quality transactions. Companies are increasingly prioritizing precision over scale, targeting specialized biotech firms, advanced therapy developers, and digital innovation assets rather than pursuing broad-based acquisitions.

This evolution reflects a deeper transformation within Europe’s pharmaceutical investment landscape. Traditional large-cap consolidations have given way to an ecosystem increasingly driven by partnerships, licensing, and equity stakes in innovation-led startups. Major European pharmaceutical groups are now acting as hybrid investors, blending corporate venture strategies with classical M&A. The most sought-after targets are those developing next-generation biologics, gene and cell therapies, and AI-enabled drug discovery platforms — all viewed as crucial to restoring Europe’s long-term competitiveness in life sciences innovation.

The IPO market tells a parallel story of cyclical highs and structural adjustment. Between 2016 and 2021, the European pharmaceutical IPO environment followed a pattern of volatility, with a pronounced surge in 2021 when capital deployed exceeded $5 billion and nearly 70 companies went public. This peak coincided with the pandemic-driven acceleration of biotech investment and the unprecedented liquidity that defined global markets at that time. However, by 2022, the landscape had cooled significantly as macroeconomic tightening and investor fatigue dampened risk appetite.

In the years following, while the volume of IPOs declined sharply, the median IPO valuations rose to record highs — with 2024 and 2025 marking exceptional years in terms of deal quality. In 2024 alone, median post-IPO valuations soared close to $1 billion, while median deal sizes also climbed above $800 million, demonstrating that public listings, though fewer, were concentrated among late-stage, high-value biopharma and specialty medicine firms.

This reflects a structural maturing of the European biotech ecosystem: smaller and early-stage firms now tend to secure later-stage private financing or strategic partnerships rather than pursuing early IPOs, while those reaching the public market tend to be more advanced and globally competitive.

Taken together, these trends reveal an industry transitioning from volume-driven expansion to value-driven consolidation. Europe’s pharmaceutical sector remains an active participant in global dealmaking, but its focus has clearly shifted toward strategic selectivity and sustainable capital deployment. The slowdown in M&A deal count does not signal weakness — rather, it highlights a recalibration toward quality, with larger firms leveraging their balance sheets to secure assets that strengthen therapeutic depth, digital infrastructure, and data analytics capacity.

Moreover, the rising valuations across both M&A and IPO markets reflect the enduring premium placed on innovation. In an environment of tightening financial conditions, investors are rewarding scientific differentiation and regulatory clarity. European dealmakers have increasingly concentrated on assets with strong clinical pipelines and demonstrable potential for commercialization, especially in oncology, rare diseases, and advanced biologics.

As the continent looks ahead, the next wave of deal activity will likely emerge from a convergence of biopharma, medtech, and digital health — creating hybrid value chains that bridge therapeutic development with real-world data and personalized medicine. Europe’s pharmaceutical investment cycle is thus entering a new phase: leaner, smarter, and more strategically aligned. The sector’s ability to maintain global relevance will depend not on the number of deals executed, but on the vision, scientific credibility, and strategic coherence behind each one.

Conclusion: Strategic Imperatives for Healthcare Investors and Industry Dealmakers

The European pharmaceutical landscape of 2025 presents a paradox — a mature, high-value industry at the height of its scientific sophistication, yet navigating structural pressures that demand sharper strategy and selectivity. For investors, private equity firms, and corporate M&A developers, the message is clear: value creation in European life sciences will increasingly hinge on precision, timing, and strategic alignment rather than scale alone.

The fundamentals remain compelling. Europe’s pharmaceutical sector continues to deliver strong trade performance, a robust innovation pipeline, and enduring global influence. Yet, the competitive balance has shifted. With North America and Asia accelerating their innovation cycles and attracting higher research investment, European players must extract superior returns through smarter capital deployment. For private equity, this means pivoting toward specialized assets — companies developing advanced therapies, AI-enabled discovery tools, and precision manufacturing platforms. Traditional buy-and-build models are giving way to deeper partnerships, minority stakes, and co-development structures that balance financial returns with long-term technological relevance.

For healthcare and pharma corporates, M&A strategy should now emphasize complementarity over consolidation. The next generation of deals will not be about sheer market share, but about integrating differentiated capabilities — from genomic data to digital therapeutics — that strengthen competitive positioning in an increasingly personalized and value-based healthcare system. Europe’s regulatory environment, though complex, offers a unique opportunity: firms that can navigate its diversity will gain a durable advantage in quality, compliance, and patient access.

Private capital will play a decisive role in bridging the funding gap between discovery and commercialization. With public market volatility reshaping IPO pathways, private equity and venture investors have become the new custodians of Europe’s biomedical innovation. Those who can identify scalable science, support management teams through clinical and regulatory milestones, and prepare portfolio companies for strategic exits will find exceptional upside potential.

For corporate development teams, agility and collaboration will define success. The most competitive organizations will be those that blend disciplined financial stewardship with an innovation mindset — building ecosystems of scientific partnerships, digital alliances, and cross-border R&D platforms. Europe’s pharmaceutical industry remains a cornerstone of global healthcare, but its future will belong to those who invest intelligently, act decisively, and shape deals that advance both profitability and progress in human health.

Sources & References

EFPIA. (2025). The Pharmaceutical Industry in Figures. https://www.efpia.eu/media/uj0popel/the-pharmaceutical-industry-in-figures-2025.pdf 

EFPIA. (2025). 2024 Pipeline Review – Innovation for Unmet Need. https://www.efpia.eu/media/hibdosn5/2024-pipeline-review.pdf 

IQVIA. (2025). The case for investment and change in European life sciences. https://www.iqvia.com/locations/emea/blogs/2025/10/the-case-for-investment-and-change-in-european-life-sciences 

IQVIA. (2025). The Global Use of Medicines 2025: Outlook to 2029. https://www.iqvia.com/-/media/iqvia/pdfs/events/presentation_global-meds-webinar_public.pdf 

OECD. (2025). OECD Health Statistics. https://www.oecd.org/en/data/datasets/oecd-health-statistics.html