For most of the modern pharmaceutical era, value creation was synonymous with internal R&D. Vertically integrated organisations invested heavily in advancing assets through clinical stages and then relying on commercial scale to drive returns.
Corporate development was a supporting function executing transactions, facilitating licensing deals, and occasionally filling portfolio gaps. That model has since evolved beyond recognition, with corporate development now sitting at the centre of how companies compete and innovate.
Internal R&D Is No Longer Enough
A core driver of this shift is the observed decline in R&D productivity described as Eroom's Law by Scannell et al. (2012) whereby the cost of developing new medicines has risen exponentially even as underlying technologies have improved. Deloitte analyses have consistently shown returns on R&D investment trending downward over the past decade.
The nature of innovation has changed too. Breakthrough science has migrated toward venture-backed biotech not because large organisations have retreated from discovery, but because the economic and organisational structures best suited to early-stage research now sit outside them. Dedicated venture funds, crossover investors, and public market access have enabled biotechs to raise substantial capital, pursue approaches that would be difficult to justify within a large corporate budget, and mature assets further before seeking partners, shifting negotiating leverage and intensifying competition for the best opportunities.
The industry has evolved toward a more specialised division of labour. Venture-backed biotech assumes early scientific risk; large pharmaceutical companies focus on late-stage development, regulatory execution, and commercialisation, where scale is a clear advantage. For many organisations, this is a deliberate strategic choice. Whilst internal R&D alone can no longer sustain competitive pipelines, it must be complemented by systematic engagement with the external ecosystem.
The Innovation is Out There, now the Job is Finding it
Corporate development now acts as the primary interface between pharmaceutical companies and that broader innovation landscape. The most underappreciated aspect of this is speed; accessing science through partnership or acquisition is simply faster than building it, often by years. That matters enormously in competitive areas. The common thread is time-to-conviction: getting a view on external science before competitors do, and securing access before a competitive process drives up the price.
Some of the most consequential transactions of recent years illustrate how much is at stake. Roche's acquisition of Genentech, from a majority stake in 1990 to full ownership in 2009, demonstrated that integration could be asymmetric, preserving entrepreneurial autonomy while embedding capital discipline. Gilead's acquisition of Kite Pharma replicated that playbook in cell therapy. Bristol Myers Squibb's purchase of Celgene and Sanofi's acquisition of Genzyme show how external innovation can be transformational and redefine therapeutic focus and reshape corporate identity. Few examples capture how quickly a well-structured partnership can generate global impact better than Pfizer and BioNTech. None of these were opportunistic; each reflected years of relationship-building and scientific conviction, with views on assets formed long before competitive processes began.
What has changed more recently is the geography of that landscape. As Bruce Booth, partner at Atlas Venture, and others have observed, Chinese biotech has undergone a remarkable maturation moving from fast following toward genuinely novel science. The wave of ADC and bispecific licensing deals flowing into Western pharma pipelines is not an anomaly; it signals that the innovation ecosystem is now global in a way it simply was not a decade ago. For corporate development teams, this demands a broader sourcing aperture and the cross-cultural relationship capital to compete in markets where they were not previously active.
The Function has Outgrown its Job Description
As the function's importance has grown, so has its mandate. Corporate development teams are now embedded in decisions about strategy, portfolio construction, competitive intelligence, and capital allocation; balancing risk across modalities and developmental maturity and managing assets approaching the end of their commercial life.
Decisions about which assets to partner around are ultimately decisions about what a company will become. Corporate development, therefore, works closely with executive leadership and interdisciplinary heads, shaping long-term strategic direction rather than simply executing on it. What makes this genuinely hard (and what the industry has been slow to acknowledge) is that the people capable of doing it well are extraordinarily rare.
The industry chronically underinvests in building this talent pipeline, defaulting to poaching from peers, which inflates compensation without solving the scarcity. The constraint on growth is no longer science or capital, but the availability of individuals trusted to deploy both under uncertainty. In a function where personal credibility opens doors that formal processes cannot, losing one or two of those people can set a programme back considerably.
Discipline Over Excitement: Learnings from the last 5 years
Drug development is inherently uncertain and returns on late-stage pipeline assets, while rebounding, remain relatively modest compared to a decade ago. Deal structuring has responded accordingly. Back-ended milestone payments, earn-outs, and option agreements allow companies to stage financial commitments around key inflection points. Minority investments and incubator models provide early access while preserving flexibility for assets that are outside the core strategy.
The biotech funding cycle of the past few years has sharpened this discipline considerably. The 2021 peak; characterised by elevated valuations, compressed timelines, and fierce competition, gave way to a sharp correction through 2022 and 2023, as rising interest rates drained liquidity from early-stage markets. Many biotechs that had operated with considerable independence were suddenly forced to seek partners earlier and on less favourable terms. For corporate development teams that had held their valuation discipline through the peak, this was a genuine opportunity: strong science at more rational prices, with sellers more open to creative structures.
For clarity, rigour around valuation is not a constraint on ambition, it is a precondition for sustainable value creation. Companies that overpaid at the peak have spent subsequent years writing down assets and defending capital allocation decisions. Those who stayed disciplined found themselves better positioned when the market turned.
In a field where the science is often genuinely exciting, that restraint is harder than it sounds, but it is precisely what separates good corporate development from great corporate development.
Winning the Deal Means Nothing If You Cannot Realise the Value
Deal-making has become a core strategic capability as central to long-term growth as pipeline productivity or commercial execution. Leading organisations have responded by building sophisticated corporate development functions that combine scientific, financial, and commercial expertise to compete effectively for the best assets.
But the deal is only the beginning. Value realisation depends just as heavily on what happens after the transaction closes, and integration remains one of the most underappreciated determinants of M&A success.
Many partnered assets originate from lean organisations with distinct cultures however, often these can lack focus on ‘commercial readiness’, which can often lead to surprises during the integration process that internal R&D can protect from.
Biotech’s greatest achievement, and limitation, is an absolute focus on development and translating this into the rigid environment of a larger organisation requires careful calibration; over-integrating risks stifling the very innovation that made the asset attractive, while under-integrating creates delays, inefficiencies and misalignment.
The forward-thinking corporate development teams plan for these pitfalls and do not treat integration as a downstream operational task, often by relying on operational SMEs to prepare a launch asset for market; their role in the success of corporate M&A should not be understated.
AI will help, but it will not save you from a bad thesis
Perhaps the most significant near-term shift in how corporate development operates is the growing use of artificial intelligence in deal sourcing and scientific evaluation. Identifying promising external assets has always depended on personal networks, conference conversations, and hard-won scientific instinct. This is unlikely to change, but AI is beginning to augment it in ways that matter to efficiency.
Machine learning models can process clinical trial data, publication output, patent filings, and biomarker signals at a scale no human team could match, surfacing early patterns of scientific traction before they become visible to the wider market. The more interesting opportunity, however, is not in sourcing, where every player will soon have access to comparable subscriptions and tools, but in diligence acceleration: compressing the time between first look and conviction, which is where deals are actually won or lost. Sustainable advantage will come not from access to AI, but from the quality of data fed into it and the judgement applied to what it surfaces.
The Risks are Real and often Self-InflictedNone of this is without risk. Overpaying for assets remains a persistent concern, and the funding cycle has illustrated what happens when valuation discipline slips. An overemphasis on deal-making can also hollow out internal scientific expertise and erode the capacity for truly novel discovery and development, as well as potential future deal-making capacity; though it does drive the flywheel of innovation, with talent leaving to found smaller companies that eventually become the next generation of partners.
This is Now a Core Capability; Treat it as Such
The transformation of corporate development reflects something deeper than a shift in organisational structure; it reflects a fundamental change in how pharmaceutical innovation is produced, funded, and accessed. As discovery becomes more distributed and development costs rise, engaging with a global, fast-moving innovation ecosystem has become essential.
The function has moved from executing transactions to orchestrating growth: connecting capital with science, aligning external opportunity with internal priority, and shaping where the organisation is headed. The pharmaceutical companies that succeed in the decade ahead will be those that recognise this fully and treat corporate development not as an adjunct to R&D, but as a fundamental driver of long-term value creation.
