US Life Science Tools & Diagnostics: Small biotech are spending more on R&D, but what about large pharma (where the REAL spend is)?

The life science tools sector has rallied sharply over the past three months, but our recent work assessing the potential impact of increased biotech spend and pressure-testing whether the academic & government end market is really improving does not uncover enough improvement in sector fundamentals to explain that move. We therefore turned to large pharma, which accounts for ~60% of public R&D spend, to see whether this important customer group provides more support for the sector's improving sentiment. Large pharma R&D spending is growing, but we do not yet see evidence that it is meaningfully accelerating: quarterly R&D spending increased 9% YoY in 2Q26, following 7% growth in 1Q26, yet recent spending still sits around the post-COVID trendline rather than showing a meaningful step-up above it. Forward-looking indicators point to improvement rather than substantial acceleration—FY26 consensus R&D estimates rose only ~2p.p. around the start of 2Q earnings and the recent tools rally,