Pharma 2025: Industry Stress Test Offers Opportunities for Corporate Banking

Increasing margin pressure remains a key issue for pharmaceutical companies, particularly in established markets such as the US and Europe. Governments are tightening price controls, demanding greater transparency in pricing. "In the pharmaceutical sector, we are observing that careful credit assessments, combined with a deeper understanding of regulatory risks, are becoming increasingly important. The uncertainty regarding future cash flows requires more conservative valuation approaches in financing and smart acquisitions to secure revenue streams in the long term," explains Gregory Lambillon, CEO and Country Manager of ING Switzerland.

Against the backdrop of regulatory upheaval, locations with stable regulatory conditions and good international connections are gaining importance. Switzerland, traditionally a strong pharmaceutical location, could be among the beneficiaries. International uncertainty is driving capital flows toward Zurich and Basel, not only in asset management, but also in the relocation of research units and holding structures. For banks, this opens new cross-border financing opportunities and strengthens business with multinational clients.

"Despite the difficult macroeconomic environment, M&A activity in the pharmaceutical sector is expected to remain a constant driven by rising patent cliff risk – albeit more selective than in previous years. Larger pharmaceutical companies are specifically seeking biotechnology additions in the rare disease sectors to close innovation gaps and develop pipelines. China is increasingly a relevant source of innovation, with established large Pharma companies increasingly looking east for licensing deals," reports Stephen Farrelly, ING Global Lead of Pharma & Healthcare.

The financing structure of such M&A transactions is becoming increasingly hybrid: In addition to traditional credit lines, structured financing, earn-out models, and partnerships are gaining in relevance. For banks, this means they must increasingly act as strategic advisors and offer flexible, customized financing models. Especially in Switzerland, following the exit of Credit Suisse, there remains a high demand for advisory services in the market, which offers opportunities for foreign players. "Industry expertise and international networking are competitive factors that help us grow significantly in the healthcare sector. We also focus on consulting services for capital market transactions, M&A processes, and treasury services such as currency hedging, liquidity management, and payment transactions," explains Lambillon.

Geopolitical tensions—particularly between the US, China, and the EU—cast a long shadow over the industry's globalized supply chains. Pharmaceutical companies are forced to reduce their dependence on Asian suppliers and develop new "nearshoring" strategies. This requires significant investments in new production facilities and opens up significant opportunities for banks to leverage project financing, ESG-compliant loans, and hedging instruments. The trend toward strategic autonomy is increasingly driving the industry and its advisors.

Increasing pressure from investors, patients, and regulators to meet sustainability criteria is changing the industry's cost of capital structure. Companies with opaque supply chains, high emissions, or governance deficiencies are facing growing pressure of refinancing. Conversely, ESG-oriented banks are seeing opportunities to tap into new business areas through green bonds, sustainability-linked loans, or specialized advisory services. The ability to quantify sustainability in financial metrics is becoming a core competency. Gregory Lambillon: "Over the years, we at ING have acquired the necessary expertise in various industries and diverse markets and developed suitable products. This enables us to position ourselves as a leading partner in the market today."

The pharmaceutical industry will find itself in a challenging environment in 2025, presenting a dual challenge for corporate banks: On the one hand, the complexity of the industry requires in-depth analytical capabilities and strong sectoral specialization; on the other, it offers attractive opportunities in structured finance, strategic transactions, and ESG. Those who recognize trends early and respond flexibly to new conditions can operate successfully even in an environment characterized by uncertainty.