INSIGHT

Life Sciences Industry Outlook 2026 

Michael VanderKlugt, Julie West • December 31, 2025

Industries: Life Science

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The Life Sciences sector continues to confront a dynamic landscape marked by technological innovation, evolving regulatory frameworks, and shifting capital dynamics. While venture funding has moderated from peak levels, strategic M&A activity and selective public market transactions signal continued confidence in high-quality assets.  

As biotech, medtech, diagnostics, and pharmaceutical companies position themselves for sustainable growth, several critical trends are reshaping how these organizations operate, compete, and create value. 

Six Areas Influencing the Industry Next Year 

1. Precision and Personalized Medicine Takes Center Stage

The expansion of precision and personalized medicine represents one of the most significant shifts in therapeutic development and patient care. Advances in genomics, companion diagnostics, and targeted therapies are enabling treatments tailored to individual patient profiles, moving away from the traditional one-size-fits-all approach. 

This trend is accelerating commercial opportunities but also raising operational complexity. Companies must invest in robust data infrastructure to capture and analyze patient-level information, while simultaneously building partnerships with diagnostic providers and genetic testing laboratories. The convergence of therapeutic development with diagnostic capabilities is no longer optional; it’s becoming a competitive necessity for organizations seeking to differentiate their pipelines and demonstrate clinical value. 

2. Digital and Decentralized Clinical Trials Alter Development Timelines 

Clinical trial design is undergoing fundamental transformation through digitalization and decentralization. Decentralized Clinical Trials (DCTs) leverage telemedicine, wearable devices, and home-based monitoring to expand patient access, improve retention, and accelerate enrollment timelines. 

The shift toward digital trials creates new operational and regulatory considerations. Organizations must: 

• Establish technology partnerships 
• Implement secure data collection systems 
• Ensure compliance with evolving guidance on remote monitoring and patient privacy 

While DCTs offer significant advantages in speed and reach, they require upfront investment in digital infrastructure and careful change management to ensure sites, investigators, and patients can effectively participate in these new models. 

3. Biomanufacturing Scaling and Supply Chain Resilience Are Priorities 

The proliferation of novel modalities (including cell and gene therapies, RNA-based treatments, and complex biologics) is placing unprecedented demands on manufacturing capabilities. These advanced therapies require specialized facilities, sophisticated quality systems, and highly trained personnel that are in limited supply. 

Companies are responding by: 

• Securing flexible manufacturing partnerships 
• Diversifying their contract manufacturing organization (CMO) relationships 
• In some cases, making strategic investments in internal capacity 

Supply chain resilience has moved from a back-office concern to a board-level priority, particularly as regulatory scrutiny and geopolitical trade dynamics introduce additional uncertainty into global manufacturing strategies. Organizations that can demonstrate agile, redundant, and compliant manufacturing capabilities will be better positioned to commercialize their pipelines successfully. 

4. Value-Based Contracting Pressure Intensifies Across Markets 

Payers worldwide are demanding greater evidence of real-world outcomes before committing to premium pricing for new therapies and devices. Value-based contracting (where reimbursement is tied to demonstrated patient outcomes rather than volume) is becoming the norm rather than the exception. 

This shift requires Life Sciences companies to rethink their commercial models, pricing strategies, and post-market evidence generation. Organizations must develop sophisticated outcomes-tracking systems, build capabilities in health economics and outcomes research (HEOR), and create flexible contracting structures that align with diverse payer requirements across geographies. The ability to demonstrate and capture value in real-world settings is increasingly determining market access and commercial success. 

5. Federal Research Funding Constraints Reshape Innovation Landscape 

Throughout 2025, the Trump administration has implemented significant changes to federal science funding that are fundamentally altering the research ecosystem for life sciences companies. The National Institutes of Health scaled back new grant awards by approximately $2.3 billion in the first nine months of the year—a roughly 28% contraction—with the biggest shortfalls hitting infectious disease research, cardiovascular and pulmonary studies, and basic biological research.  

Beyond direct funding cuts, the administration introduced a 15% cap on indirect costs for NIH grants, a dramatic reduction from the negotiated rates of 30-45% that research institutions typically receive to cover facilities, administration, and infrastructure expenses. While federal courts have temporarily blocked some aspects of these policies, the volatile funding climate has created widespread uncertainty across academic institutions and their commercial partners. 

The ripple effects extend directly into the biotech sector’s innovation pipeline. Venture investors warn that cutting federal support for basic science threatens the foundation of drug development, as early academic discoveries typically provide the basis for startup formation. Enrollments in PhD programs for life and biomedical sciences have flatlined, and early-career grant awards fell to their lowest levels since 2016—a trend that will constrain the scientific workforce for years to come.  

Biotech companies are responding to investor skittishness by reducing development programs and staff, with some industry leaders warning that these cuts could hand global biotech leadership to China. The administration’s stated goal of achieving better “geographic balance” in research funding adds another layer of uncertainty for established life sciences hubs. 

Life sciences companies should reassess their R&D strategies to account for diminished federal research partnerships. Organizations historically reliant on academic collaborations and NIH-funded talent pipelines may need to diversify their discovery engines through expanded industry partnerships, international research alliances, or increased internal basic research capabilities.  

Companies with strong cash positions should evaluate opportunities to acquire promising technologies from academic institutions facing funding pressure. Additionally, businesses should monitor how funding redistribution affects regional talent availability and consider how shifts in the academic research landscape might create new competitive advantages—or vulnerabilities—in specific therapeutic areas or technology platforms. 

6. Regulatory Focus on AI and Algorithms in Medical Devices Sharpens 

As artificial intelligence and machine learning become embedded in medical devices and diagnostic tools, regulatory agencies are developing more sophisticated frameworks to evaluate these technologies. The FDA and international counterparts are issuing guidance on algorithm validation, post-market surveillance of AI systems, and transparency requirements for machine learning models. 

Device manufacturers must prepare for heightened regulatory expectations around algorithm performance, bias testing, and ongoing monitoring of AI-enabled products. This includes investing in regulatory affairs talent with digital health fluency, establishing robust quality management systems for software-as-a-medical-device (SaMD), and building relationships with regulatory bodies early in the development process. Companies that proactively address these regulatory requirements will avoid costly delays and demonstrate commitment to patient safety. 

Learn more about our Life Science Industry

Strategic Imperatives for Life Sciences Leaders 

To capitalize on these trends and navigate industry headwinds, Life Sciences executives should consider the following actions: 

• Invest in Digital Therapeutics and Data Platforms – Build or acquire capabilities that enable patient-level data capture, analysis, and therapeutic personalization 
• Secure Flexible Manufacturing Partnerships – Diversify CMO relationships and ensure supply chain resilience for novel modalities with specialized production requirements 
• Adapt Pricing Models to Outcomes – Develop contracting frameworks that tie reimbursement to real-world performance and build HEOR capabilities to support value demonstrations 
• Prioritize Regulatory and Quality Talent – Hire professionals with digital health, AI/ML, and advanced therapy regulatory experience to navigate evolving compliance landscapes 
• Accelerate Genomics and Companion Diagnostics Programs – Integrate diagnostic capabilities into therapeutic development strategies to enable precision medicine approaches

How BPM Can Support Your Strategic Objectives 

BPM works alongside Life Sciences organizations to address the financial, operational, and strategic challenges created by these industry trends. Our integrated teams provide accounting, tax planning, audit assurance, and advisory services tailored to the unique needs of biotech, medtech, diagnostics, and pharmaceutical companies at every stage of growth.  

Whether you’re navigating complex M&A transactions, implementing value-based contracting models, scaling manufacturing operations, or preparing for regulatory milestones, BPM delivers practical guidance to help you achieve your objectives. Contact us to learn how we can support your organization’s success in this dynamic environment.