Patent Expirations Accelerate

The global pharmaceutical sector faces its most significant challenge in over a decade: the looming “patent cliff.” A wave of blockbuster drugs is losing exclusivity between 2025 and 2030, exposing firms to generic competition that could strip over $200 billion in sales from the industry.

For example, Merck’s cancer therapy Keytruda, with $25 billion in 2023 revenue, faces patent expiry by 2028. Pfizer and Bristol Myers Squibb face similar risks with leading oncology and cardiovascular drugs.

Market Response and Strategy

The threat has already altered capital markets. The MSCI World Pharma Index has lagged broader benchmarks, as investors anticipate revenue declines. At the same time, biotech stocks with promising late-stage pipelines are outperforming, buoyed by expectations of acquisition bids.

Big Pharma is already preparing for the cliff. In 2023, sector-wide M&A topped $140 billion, with Pfizer’s acquisition of Seagen being a standout. Analysts expect deal activity to remain robust as firms chase therapies in oncology, rare diseases, and gene editing.

Investor Behavior

Investor sentiment remains cautious but opportunistic. While long-term revenue risks weigh on valuations, the M&A trend offers trading opportunities in smaller biotech firms. According to EY’s annual outlook, more than 60% of pharma executives rank dealmaking as their top priority in navigating the patent cliff.

Looking Ahead

The industry’s ability to adapt will depend on balancing in-house R&D with external acquisitions. For investors, the key lies in identifying which companies can offset the revenue erosion most effectively while leveraging innovation in precision medicine and next-generation therapies.