Patent Cliff Looms As Pharmaceutical Sector Prepares For A New Round Of Asset Competition

The high‑profile bidding contest between Pfizer and Novo Nordisk for Metsera underscores how fiercely contested the weight‑loss drug segment has become, as major pharmaceutical firms race to plug imminent revenue shortfalls. A growing number of blockbuster medicines are approaching patent expiry in key markets, a development the industry commonly refers to as the “patent cliff.”

Estimates indicate that by 2032 the expiration of patents on leading brands could erode at least $173.9 billion in annual sales for large drugmakers. When mid‑tier and smaller brands are included, some analysts place the potential revenue impact in a range between $200 billion and $350 billion. Absent a steady stream of new, revenue‑generating innovations, these losses pose a material threat to corporate top lines.

Concurrently, after the investment surge during the COVID‑19 era and a prolonged period of depressed biotech valuations, the biotechnology sector is showing signs of recovery. This revival aligns with pharmaceutical companies’ urgent need to replenish pipelines, and merger‑and‑acquisition activity in biotech rebounded noticeably between September and October 2025 following a weak start to the year.

The biopharmaceutical sector’s structural dynamics mean that leading products typically face patent expiration roughly every decade, compelling firms either to develop replacement therapies internally or to acquire companies with promising assets. Linden Thomson, Senior Fund Manager at Candriam, observes that biotech has long served as the innovation engine that large pharmaceutical companies tap to build their pipelines.

The impending patent expirations for high‑value drugs such as Bristol Myers Squibb’s Eliquis, Merck’s Keytruda and Novo Nordisk’s Ozempic are a major catalyst for the current acquisition wave and have become central to the strategic planning of large drugmakers. Analysis by healthcare consultant Joanna Sadowska shows that roughly half of the blockbusters approved between 2014 and 2023 originated from acquisitions rather than in‑house development, with Eli Lilly and AstraZeneca among the most active acquirers during that period.

European industry leaders including GlaxoSmithKline and Novartis have publicly stated their intent to use transactions to strengthen pipelines, favoring bolt‑on deals that align with their core therapeutic areas and platform capabilities. At a November investor event in London, Novartis Chief Executive Vasant Narasimhan highlighted the company’s strong cash flow as enabling continued investment. Chris Sheldon, Head of Global Business Development at GlaxoSmithKline, described a preference for entering opportunities at optimal inflection points—projects with validated biological mechanisms in mid‑stage development and valuations typically in the $1 billion to $2 billion range.

Deal structures vary from collaborations, licensing and royalty arrangements to outright acquisitions. Sheldon noted a general preference for licensing where feasible, as it allows value to be realized progressively while sharing risk. When assets are attractive, multiple bidders frequently emerge, and late‑stage transactions often become exercises in valuation discipline as listed asset prices approach fair value.

The competitive intensity was on full display in November when Pfizer and Novo Nordisk publicly vied for Metsera, with Pfizer ultimately securing the clinical‑stage obesity company in a transaction valued at approximately $10 billion. Stefan Loren, Managing Director at Oppenheimer, remarked that open auctions are rare and carry reputational risks, but their occurrence reflects the anxiety among pharmaceutical firms as numerous products near patent expiry. Loren added that the Metsera contest highlights the escalating strategic urgency in therapeutic areas where differentiation windows are narrowing and reimbursement and regulatory environments are becoming more supportive.

Beyond obesity treatments, acquisition activity is also concentrated in neuroscience, oncology, immunology and inflammation, with companies prioritizing assets that can most rapidly address pipeline shortfalls. The sector’s cyclical nature is evident: during the pandemic, biotech attracted substantial capital, buoyed by low interest rates and strong sentiment, but the post‑pandemic shift toward risk aversion left many early‑stage firms undercapitalized.

Throughout much of 2025, policy uncertainty in the United States—centered on drug pricing, tariff threats and federal budget pressures—dampened sentiment. Over time, however, compromises on pricing and assurances regarding tariffs for firms investing in domestic manufacturing, together with encouraging clinical data, helped restore investor confidence. Loren observed that where investors once used positive data as an exit opportunity, sentiment shifted by late spring, and markets began to reward favorable clinical outcomes. He argued that depressed valuations can reduce perceived risk and that accelerating M&A activity makes the case for value recovery tangible.

Analysts expect M&A momentum to continue into 2026. PitchBook suggested that as U.S. policy uncertainty recedes and potential rate cuts revive risk appetite, 2026 could present one of the most attractive investment windows in decades. Rajesh Kumar, Head of European Life Sciences and Healthcare Research at HSBC, likewise anticipates a marked increase in deal flow next year, noting that clearer policy signals and rising investment in U.S. manufacturing create favorable conditions for biotech transactions and early‑stage financing.

Additional structural pressures may intensify the urgency for acquisitions. Provisions of the U.S. Inflation Reduction Act are likely to depress prices for certain blockbuster drugs, and proposed FDA guidance could lower barriers for biosimilar entry. Analysts caution that these developments imply post‑patent revenue declines—particularly for biologics—may be steeper than historical patterns, reinforcing the strategic imperative for companies to secure innovative assets now.