Innovative pharmaceuticals is inherently a high-risk, high-reward industry, with high attrition rates across development stages. So why has GSK just made a USD 10.6bn bet on a particularly challenging segment – oncology – in buying Nuvalent?
By Sabrine Boudella, Director, Corporate Ratings:
After all, around an estimated 80% of molecules fail between phase I trial and commercialisation, reflecting the scientific complexity and regulatory hurdles involved in drug development. Within this risky universe, oncology stands out as an even more challenging segment, typically associated with longer development timelines, higher clinical trial costs, and elevated failure rates.
Credit: GSK
Against this backdrop, some large pharmaceutical companies have, at times, reduced or rebalanced their exposure to oncology as part of broader efforts to optimise their drug portfolios (Figure 1). GSK itself divested its oncology portfolio to Novartis in 2014 for around USD 16bn.
GSK’s agreed deal for Nuvalent, the UK-based firm’s most significant addition to a rebuilt cancer-treatment franchise, could signal a broader shift for the industry, indicating that the risk-reward calculus for oncology is changing.
Underlying advantages of the cancer-treatment segment appear in a new light
Oncology offers distinct advantages in terms of scalability and innovation. Successful oncology assets can expand across multiple tumour types and lines of therapy, while combination approaches and platform technologies create additional avenues for growth and lifecycle extension.
Good examples are mega blockbusters such as Merck’s Keytruda, which generated around USD 31.7bn in 2025, and Johnson & Johnson’s Darzalex, with sales exceeding USD 10bn. Both treatments have evolved from single indications into broad, multi-line treatment platforms. Their success across different types of tumour, earlier lines of therapy and combination regimens shows how oncology drugs can achieve exceptional commercial breadth and longevity, reinforcing the sector’s attractive risk-reward dynamics despite inherently high development risk.
So, what has changed? The answer is less a reduction in risk, but more an increase in the potential reward. In the past, reducing exposure to oncology let pharmaceutical companies reduce execution risk by limiting high-risk R&D and avoiding expensive, value-destructive deals in a highly competitive segment. It also supported a shift toward therapeutic areas with more predictable returns and shorter development timelines. However, as the upside from successful oncology innovation has increased, this trade-off has become less favourable.
Evolving AI-fed R&D techniques likely contribute to a fresh take on the investment appeal of oncology
Today’s re-assessment likely reflects evolving R&D models, with a gradual shift away from largely empirical “trial and error” approaches toward more targeted strategies such as biomarker-driven development and precision medicine. Improved selection of eligible patients and better-designed trials, particularly in oncology, are improving success rates even if they remain structurally low, with much uncertainty across development stages.
In parallel, many in the industry expect advances in data analytics and artificial intelligence to support drug discovery and development, even if convincing evidence of their impact on productivity and success rates is yet to emerge.
Oncology is the industry’s largest therapeutic category by revenue
It is worth remembering that oncology has become increasingly strategic, accounting for around USD 215–250 bn in annual sales and approximately 18%–20% of total global pharmaceutical revenues, making it the largest therapeutic category.
By comparison, other major therapeutic areas such as immunology, diabetes, CNS and cardiovascular diseases are smaller, often more fragmented or subject to greater pricing and competitive pressures.
In this context, the trade-off between reducing risk and capturing growth has become less straightforward for large pharmaceutical companies. Limiting exposure to oncology may still support near-term visibility and discipline, but it can also constrain access to one of the industry’s main sources of innovation and long-term expansion. Increasing exposure may help fill up R&D pipelines and improve growth prospects, albeit with higher R&D execution risk, both internal and external.
The oncology market is highly consolidated, and meaningful participation remains difficult to achieve. In our view, the strategic challenge does not necessarily require absolute scale or presence across all tumour types. Instead, it relies on a clear understanding of where a company can create differentiated value, together with the discipline to capture opportunities selectively across long-term innovation cycles.
As the risk-reward balance across therapeutic areas shifts, strategic positioning in oncology is increasingly a matter of calibration rather than a binary choice.