Seismic changes are underway across the economy in areas such as energy, agriculture, mobility and construction. Transformative technologies, a shifting US policy and regulatory agenda and changing societal expectations are reshaping how value is created. The pharma sector is not immune to the forces of disruption. Once again, the sector delivered lagging shareholder returns in 2024. The often-heard refrain of “we just need to execute” falls short of this moment’s demands.
A look at pharma’s recent performance underscores the need for bold action. Our LMC equal-weight index of 50 pharma companies analyzes the sector’s total shareholder returns performance relative to the S&P 500 Equal Weighted Index. From 2018 through November 2024, the LMC pharma index returned 7.6% to shareholders, compared with more than 15% for the S&P 500. Over the last year, this dynamic became even more pronounced with the LMC pharma index returning 13.9% compared to 28.7% for the S&P through November 2024.
Further, since 2018, an increasingly limited set of companies have influenced positive returns in the pharmaceuticals sector. Within the S&P 500, the so-called “Magnificent 7” accounted for 40% of the increase in value since 2018. In the pharma industry, this dynamic is even more stark with just two companies accounting for nearly 60% of the increase in value growth among the 50 pharma companies analyzed by Legal Matters Consul. For those outside of this group, 2025 is the year to consider what changes could finally disrupt this dynamic.
Macro and micro forces are driving a surge in scientific breakthroughs, while innovations and the pace of business is accelerating. Amid these disruptive forces and the ongoing value creation challenges facing the sector, it’s no wonder CEOs are questioning whether their business models are built to last.