Global Drug Discovery Market Outlook, 2031

The global drug discovery industry covers the research activities, technologies and services used to identify new therapeutic targets and find molecules that can become medicines, from basic biology through target validation, hit discovery, lead optimisation and preclinical candidate selection. It includes discovery of small molecules, antibodies and other biologics, peptides, antibody-drug conjugates, nucleic acid therapies, cell and gene therapies and vaccines. Pharmaceutical companies spend more than USD 250 billion a year on research and development, and a significant share goes to discovery. The industry includes large pharmaceutical companies such as Roche, Merck, Johnson & Johnson, Pfizer, AstraZeneca, Novartis, Eli Lilly, Bristol Myers Squibb, AbbVie, Sanofi, GSK and Novo Nordisk; thousands of biotechnology companies; contract research organisations providing discovery services, including WuXi AppTec, WuXi Biologics, Charles River Laboratories, Evotec, Pharmaron, Syngene, Eurofins, Aragen and Jubilant; AI and computational companies such as Isomorphic Labs, Recursion, Insilico Medicine, Schrödinger, Xaira, Generate Biomedicines, Absci and XtalPi; academic institutions and government research agencies; and technology and tools providers including Thermo Fisher, Danaher, Illumina, Revvity, Agilent, Bruker and Nvidia. Discovery activity is concentrated in oncology, immunology, neurology, metabolic diseases and rare diseases.

Drug discovery has changed rapidly since 2020, driven by new modalities, data and artificial intelligence, and by shifting geography. The success of mRNA vaccines, antibody-drug conjugates, bispecific antibodies, GLP-1 obesity drugs and gene editing has broadened the range of discovery approaches, and large human genetic and proteomic datasets from biobanks have improved target selection. AI has become central: the 2024 Nobel Prize in Chemistry recognised AI-based protein structure prediction and computational protein design, Isomorphic Labs raised USD 600 million in 2025, Recursion merged with Exscientia in 2024, and Lilly announced an AI supercomputer built with Nvidia in October 2025, while AI-discovered drugs have reached phase 2 trials. China has become a major source of innovation, with Chinese biotechnology companies supplying a growing share of licensed drug candidates to global pharmaceutical companies in 2024 and 2025, often in bispecific antibodies, antibody-drug conjugates and obesity drugs, such as Pfizer's licensing of a PD-1 and VEGF bispecific from 3SBio in 2025. At the same time, US policy has sought to limit dependence on Chinese discovery providers: the BIOSECURE Act was enacted in December 2025, and WuXi AppTec was added to the US Department of Defense's 1260H list in June 2026. The FDA's April 2025 plan to reduce animal testing has encouraged organoids, organ-on-chip and computational models, while US research funding cuts and biotechnology funding cycles have affected discovery budgets.

Market Dynamics Market Drivers • Pipeline Replenishment Ahead of Patent ExpiriesLarge pharmaceutical companies face the loss of exclusivity for major products between 2026 and 2030 and must replenish pipelines through internal discovery, partnerships and acquisitions. This drives investment in discovery platforms, external collaborations with biotechnology and AI companies, and outsourcing to contract research organisations. Competition for promising targets and modalities in obesity, immunology, neuroscience and oncology supports high discovery spending.
• Advances in Biology, Data and ComputationGenomic sequencing, single-cell analysis, proteomics, spatial biology, CRISPR screening and large biobanks have improved understanding of disease biology and target selection. AI models predict protein structures, design molecules and antibodies, and analyse complex data, while cloud computing and GPUs enable large-scale simulation. New modalities, including protein degraders, RNA medicines and gene editing, expand the range of druggable targets.

Market Challenges • High Failure Rates and Long TimelinesMost discovery programmes fail to produce a clinical candidate, and about 90% of drugs entering clinical trials fail to reach approval, often because of lack of efficacy that could not be predicted by preclinical models. Discovery and development take more than a decade, and costs continue to rise. Although AI promises to improve success rates, it has yet to demonstrate large-scale improvements in clinical outcomes.
• Funding Volatility and Geopolitical RiskBiotechnology discovery depends on venture capital and public markets, which fell sharply after 2021 before recovering from 2024. Government research budgets, such as US NIH funding, face pressure. US restrictions on Chinese biotechnology providers under the BIOSECURE Act and trade tensions complicate outsourcing strategies for companies that relied on Chinese contract research organisations, requiring costly diversification.

Market Trends • AI and Data-Driven Discovery PlatformsPharmaceutical companies are building AI capabilities and partnering with AI-native companies to identify targets, design molecules and antibodies, predict toxicity and optimise candidates. Foundation models trained on biological and chemical data, automated laboratories and large proprietary datasets are central to these efforts. Technology companies, including Nvidia, Google, Microsoft and Amazon, provide computing platforms and models, and consortia share data to train models while protecting confidentiality.
• Global Sourcing of Innovation and Supply Chain DiversificationPharmaceutical companies increasingly source drug candidates from China, where biotechnology companies develop assets quickly and at lower cost, and licensing deals involving Chinese assets reached record levels in 2025. At the same time, US policies encourage diversification of discovery services toward the United States, Europe, India and other countries. Contract research organisations in India and Europe are expanding capacity to capture work shifting from China.



Segment Analysis Small molecules still account for the largest share of drug discovery activity, while biologics and newer modalities such as antibody-drug conjugates, nucleic acid therapies and cell and gene therapies are the fastest-growing areas. Small molecule discovery remains the largest segment by number of programmes, supported by high-throughput screening, structure-based design, DNA-encoded libraries and AI, and it continues to produce important drugs such as oral GLP-1 agonists, kinase inhibitors and pain medicines. Biologics discovery, including monoclonal antibodies, bispecific and multispecific antibodies, fusion proteins and peptides, has grown strongly and accounts for many of the best-selling medicines, using display technologies, immunised animals, single B-cell screening and AI-based antibody design. Antibody-drug conjugates, combining antibodies with potent drugs, have become one of the most active discovery areas, especially in oncology. Peptide discovery has expanded with the success of GLP-1 and related obesity drugs. Nucleic acid therapies, including antisense oligonucleotides, siRNA and mRNA, target genes and RNA directly. Cell and gene therapies, including CAR-T cells, gene replacement and gene editing, require discovery of vectors, targets and editing tools. Vaccines, including mRNA and protein-based vaccines, form another segment. Targeted protein degraders and molecular glues represent a newer small molecule modality.

Target identification and lead optimisation account for large shares of drug discovery spending, while hit identification and preclinical candidate development are essential stages increasingly supported by AI and outsourcing. Target identification and validation uses genetics, genomics, proteomics, functional screens, disease models and literature and data analysis to find biological targets linked to disease and confirm that modulating them could help patients. Human genetic evidence has been shown to increase the chance of clinical success, and large biobanks and multi-omic datasets are increasingly used. Hit identification finds initial molecules that interact with the target, through screening of compound or antibody libraries, virtual screening and AI-based generation. Hit-to-lead and lead optimisation improve potency, selectivity, pharmacokinetics and safety through iterative design, synthesis and testing, and they are among the most resource-intensive stages. Preclinical development, including in vitro and in vivo pharmacology, safety and toxicology studies, formulation and manufacturing development, prepares candidates for clinical trials and regulatory submission. Biomarker discovery identifies measures for patient selection and monitoring response in trials. Translational research connects discovery with clinical development, using human tissue and data to predict efficacy. New approach methodologies, such as organoids and organ-on-chip systems, are increasingly used alongside or instead of animal studies.

Oncology is the largest therapeutic area for drug discovery, while immunology, neurology, metabolic diseases and rare diseases are major and growing areas. Oncology accounts for the largest share of discovery programmes and spending, covering targeted therapies, immunotherapies, antibody-drug conjugates, bispecific antibodies, cell therapies, radiopharmaceuticals and cancer vaccines. Immunology and inflammation, including autoimmune diseases, allergic conditions and inflammatory disorders, is a major area with strong commercial potential, including oral alternatives to biologics and cell therapies for autoimmune disease. Neurology and psychiatry, including Alzheimer's disease, Parkinson's disease, ALS, pain, depression and schizophrenia, have seen renewed investment following recent approvals. Metabolic and cardiovascular diseases, particularly obesity, diabetes, MASH and lipid disorders, have become one of the most active areas after the success of GLP-1 drugs. Rare diseases attract discovery investment because of regulatory incentives and genetic understanding. Infectious diseases, including antibiotics, antivirals and vaccines, receive public and philanthropic support because of weak commercial incentives for some areas. Respiratory, ophthalmology, dermatology, kidney disease and women's health are further areas.

Pharmaceutical and biotechnology companies are the main performers and funders of drug discovery, while contract research organisations, AI companies and academic institutions play increasingly important roles. Pharmaceutical companies conduct extensive internal discovery research and are the largest funders of discovery, while also acquiring and licensing assets from external sources, which now account for a large share of their pipelines. Biotechnology companies, from start-ups to established firms, are a major source of innovation, often built around specific platforms or targets and funded by venture capital. Contract research organisations provide discovery services, including chemistry, biology, pharmacology, DMPK, toxicology and antibody discovery, with WuXi AppTec, Charles River, Evotec, Pharmaron and Syngene among the largest, and outsourcing of discovery work continues to grow, although US restrictions are affecting the choice of providers. AI-native discovery companies, including Isomorphic Labs, Recursion, Insilico, Xaira and Generate Biomedicines, develop their own pipelines and partner with pharmaceutical companies. Academic institutions and government research agencies, including the NIH, UK Research and Innovation, the Wellcome Trust and national research institutes, conduct basic research that generates new targets and spinouts. Non-profit organisations and product development partnerships support discovery for neglected diseases. Technology companies provide computing and AI tools.

Regional Analysis North America leads the drug discovery market because of the scale of US pharmaceutical and biotechnology R&D, venture funding and academic research, while Asia-Pacific, led by China, is the fastest-growing region and a major source of both outsourced services and innovative assets. North America, led by the United States, accounts for the largest share of drug discovery spending. The United States has the largest concentration of pharmaceutical R&D centres, biotechnology companies, venture capital, AI discovery companies and research universities, and the NIH is the world's largest public funder of biomedical research, although its funding faced cuts in 2025. US policy developments, including the BIOSECURE Act enacted in December 2025, the FDA's plan to reduce animal testing and drug pricing policies, are influencing discovery strategies. Canada has growing discovery and AI clusters. Europe is the second largest region, with major pharmaceutical R&D in Switzerland, the UK, Germany, France, Denmark and Belgium, contract research organisations such as Evotec, and AI companies such as Isomorphic Labs, as well as strong academic research funded by the EU, national governments and charities such as the Wellcome Trust. Asia-Pacific is the fastest-growing region. China has become a major discovery centre, with large contract research organisations such as WuXi AppTec and Pharmaron and innovative biotechnology companies that supplied a growing share of global licensing deals in 2025, although US restrictions, including WuXi AppTec's addition to the 1260H list in June 2026, create uncertainty. India's contract research sector, led by Syngene, Aragen and Jubilant, is growing as companies diversify. Japan and South Korea have strong pharmaceutical research, and Singapore and Australia have growing ecosystems. Latin America, the Middle East and Africa have smaller discovery sectors, with growing capabilities in Israel, the Gulf states and Brazil.

Key Developments June 2026: The US Department of Defense added WuXi AppTec to its list of Chinese military companies, bringing the contract research organisation within the scope of BIOSECURE Act restrictions.
December 2025: The Fiscal Year 2026 National Defense Authorization Act included the BIOSECURE Act, restricting US federal agencies and contractors from using biotechnology services from designated companies of concern.
October 2025: Eli Lilly announced plans for an AI supercomputer built with Nvidia systems to accelerate drug discovery, including training models on its research data.
May 2025: Pfizer agreed to pay USD 1.25 billion upfront for rights to a PD-1 and VEGF bispecific antibody from China's 3SBio, one of the largest licensing deals for a Chinese asset.
April 2025: The FDA outlined a roadmap to phase out animal testing requirements for some drugs in favour of organoids, organ-on-chip systems and computational models.
October 2024: The Nobel Prize in Chemistry was awarded for computational protein design and AI-based protein structure prediction, recognising tools that have transformed drug discovery.

Considered in this report
• Historic Year: 2020
• Base Year: 2025
• Estimated Year: 2026
• Forecast Year: 2031

Aspects covered in this report
• Global Drug Discovery Market with its value and forecast along with its segments
• Various drivers and challenges
• Ongoing trends and developments
• Top profiled companies
• Strategic recommendation

By Molecule Type
• Small Molecules
• Biologics
• Antibody-Drug Conjugates
• Nucleic Acid Therapies
• Cell and Gene Therapies
• Vaccines

By Discovery Stage
• Target Identification and Validation
• Hit Identification
• Lead Optimisation
• Preclinical Development

By Therapeutic Area
• Oncology
• Immunology and Inflammation
• Neurology and Psychiatry
• Metabolic and Cardiovascular Diseases
• Rare Diseases
• Infectious Diseases

By End User
• Pharmaceutical Companies
• Biotechnology Companies
• Contract Research Organisations
• AI Drug Discovery Companies
• Academic and Government Institutions