2026 outlook for biopharma outsourcing is ray of light as JPM26 kicks off

As contract development and manufacturing organizations (CDMOs) attend this week’s annual J.P. Morgan Healthcare Conference in San Francisco, there are indications that 2026 could be a good year for the biopharmaceutical outsourcing and services sector. William Blair analysts in a report point to leading indicator data they say will drive demand.

While CDMOs faced macroeconomic and industry-specific headwinds in 2025, the outlook this year for the outsourcing and services space is optimistic based on the biopharma industry’s funding levels, product pipeline, and research and development (R&D) spending, according to William Blair analysts.

“The strong funding momentum observed toward the end of the third quarter continued through the end of the year, with the $26.8 billion raised in the fourth quarter representing the highest amount raised in any period since fourth quarter 2021 (up 88% year-over-year and 55% sequentially),” states the report.

The analysts pointed out that, on an annual basis, capital raised by the biopharma industry in 2025 was $70.7 billion — approximately 6% below the $75 billion raised in 2024 “but comfortably above” the $57.7 billion and $66.1 billion raised in 2023 and 2022, respectively.

“Capital raised by the biotech industry in the fourth quarter of 2025 was $26.8 billion, compared to $17.3 billion in the third quarter, $12.6 billion in the second quarter, $13.9 billion in the first quarter, and $14.2 billion a year ago,” the analysts wrote. “After five straight quarters of sequential declines in funding, this is now the second consecutive period in which funding has improved sequentially, with the amount raised in the fourth quarter the highest we have observed since the fourth quarter of 2021.”

At the same time, the analysts called out the fact that product pipeline growth remained well below pre-pandemic levels. However, the data improved in the fourth quarter of 2025 compared to the end of the third quarter of last year.

“Through the end of December, the number of preclinical programs in development was up 3% year-over-year, meaningfully below its pre-pandemic norm of mid- to high-single-digit growth but in line with the 3% year-over-year growth in preclinical programs observed both last quarter and in 2024,” the analysts wrote. 

The good news is that the number of preclinical programs in development increased sequentially in October, November, and December of 2025, resulting in a “nice step-up” in the total number of preclinical programs in development since the end of September, according to the analysts.

“Clinical programs also showed positive momentum, with the number of ongoing trials up a modest 1% year-over-year (compared to down 1% year-over-year at the end of September) and showing slight improvement since the end of September (versus a slight decrease sequentially from June through September),” states the report.

Growth continued to come mostly from Phase I programs, which were up 2% year-over-year and nearly 1% sequentially, found the analysts. Although the number of late-stage programs was roughly flat year-over-year, they said it “represents an improvement from the 3% year-over-year decrease in Phase II trials observed through the end of September and the 2% year over-year decrease in Phase III trials observed over the same period.”

R&D, M&A, and policy

Biopharma R&D spending as of the third quarter of 2025 — the latest data available, according to William Blair analysts — was up 9% year-over-year, significantly above the 5% growth in second quarter of last year and the mid- to high-single-digit average growth observed over the last decade.

R&D spending by large biopharma companies grew 9% year-over-year in the third quarter of 2025, well above the 5% growth rate in the previous quarter and mid-single-digit growth during the last decade, the analysts said.

While small and midsize biopharma total spend was up 7% year-over-year in the third quarter of 2025, which the analysts pointed out is consistent with the growth observed last quarter, it was “well below its low to midteens historical growth average.”

Still, the report cited data from Evaluate Pharma forecasting that total biopharma R&D spending will “be up 4% in both 2026 (down slightly from 5% from our last key metrics update) and 2027 (consistent with our last key metrics update).”

As in previous years, biopharma dealmaking at this week’s J.P. Morgan Healthcare Conference will be closely watched, as major drugmakers face a daunting patent cliff and M&A announcements typically make big news at the industry’s annual investment event.

“We expect the recent uptick in pharma M&A, positive updates on tariffs and drug pricing, and another year of strong drug approvals to result in continued funding strength in 2026, ultimately leading to a rebound in demand from smaller innovators,” according to the William Blair analysts.

In addition to driving a rebound in biotech funding, they predict that the increase in M&A “should help large pharma deal with the significant loss of exclusivity headwinds that many of them are facing in 2027 and 2028.”

On the policy front, the analysts concluded that the “recent clarity and positive updates that these drug developers have received over the last couple months around tariffs and drug pricing should free these companies up to start spending more aggressively to rebuild their pipelines after a couple years of culling or sitting on programs.”

GlobalData’s latest report, The State of the Biopharmaceutical Industry 2026, has similarly found that “optimism and investment sentiment have strengthened, although cautiously.”

The J.P. Morgan Healthcare Conference “will be a pivotal indicator on the direction for the biopharma sector for 2026,” argues GlobalData, setting the “tone for dealmaking, capital flow and R&D priorities in the year ahead” as companies look to strengthen their pipelines.

Pharma Manufacturing has identified four CDMOs to watch in 2026 — Fujifilm Biotechnologies, Lonza, Samsung Biologics, and WuXi Biologics — who are poised to have the biggest impact this year on biopharma.