Big Pharma race to snap up biotech assets as $170 billion patent cliff looms

A multitude of factors are coming unneurotic to bring a large burst successful biotech M&A.

The high-profile bidding war betwixt Pfizer and Novo Nordisk implicit Metsera and its starring value nonaccomplishment cause campaigner shows conscionable however competitory immoderate pockets of the assemblage person become, arsenic Big Pharma frantically works to capable the looming gross hole.

Some of the best-selling drugs successful the satellite are facing a nonaccomplishment of exclusivity successful cardinal jurisdictions successful what the assemblage calls "the patent cliff." By 2032, losses of exclusivity for best-selling brands are worthy astatine slightest $173.9 cardinal successful yearly sales, according to CNBC calculations. Estimates alteration connected the full magnitude of gross astatine hazard erstwhile factoring successful smaller brands, with immoderate analysts putting the fig betwixt $200 cardinal and $350 billion.

That poses a existent menace to their makers' apical lines — unless they negociate to replenish their pipelines with new, revenue-bearing innovations.

The request for pharma to apical up their pipelines coincides with the broader biotech assemblage coming backmost to beingness aft years of depressed valuations pursuing a boom successful healthcare investing during the Covid-19 pandemic.

M&A successful the assemblage picked up dramatically successful September and October 2025, pursuing a unspeakable commencement to the year. The lifting of overhangs from Trump's warfare connected precocious cause prices for Americans and threats of triple-digit pharma assemblage tariffs, arsenic good arsenic the opening of an interest-rate cutting cycle, has further encouraged dealmaking.

Now, companies are facing a concern wherever they request to capable their pipelines, portion besides navigating a competitory situation for the champion assets.

Filling the gross hole

The biopharma assemblage is unsocial successful that companies look a nonaccomplishment of patent for pb assets each decennary oregon so. That lifecycle of assets requires companies to perpetually travel up with caller innovations – oregon bargain those who do.

"Biotech, being the innovation benignant of motor of healthcare, is wherever pharmaceutical companies person travel historically to physique their biopharma businesses," Linden Thomson, elder portfolio manager astatine Candriam, told CNBC.

Pharmaceutical firms, galore of which started arsenic chemic companies, typically built their businesses connected simpler, tiny molecule drugs, portion biotechs usage surviving organisms to marque medicines similar antibodies and mRNA. Over time, the favoritism betwixt the 2 has blurred arsenic pharma invested heavy successful biotech and galore of the drugs connected the marketplace contiguous were alternatively discovered by biotech companies oregon progressive with biotech manufacturing, Thomson said.

The looming patent cliff, which includes the nonaccomplishment of exclusivity connected Bristol Myers Squibb's Eliquis, Merck's Keytruda, and Novo Nordisk's Ozempic, is simply a driving unit down M&A and a cardinal portion of galore large-cap pharma companies' concern strategy.

According to investigation by healthcare marketplace researcher and advisor Joanna Sadowska, astir fractional of the blockbuster drugs approved betwixt 2014 and 2023 were bought, arsenic opposed to being developed internally. The 2 astir palmy drugmakers successful presumption of the fig of blockbusters approved implicit those years were Eli Lilly and AstraZeneca, which acquired 8 and 5 medicines retired of a full of 13, respectively.

European heavyweights GSK and Novartis are among those wide astir the request to adhd to their pipelines done deals. Both are looking for what they telephone "bolt-on deals" that acceptable successful with their cardinal therapeutic and exertion areas.

During an capitalist lawsuit successful London successful November, Novartis CEO Vasant Narasimhan emphasized the company's beardown currency procreation "that truly allows america to put successful the business."

While Novartis doesn't enactment a size connected these bolt-on deals, having done deals of up to $12 billion, GSK is much specific.

Chris Sheldon, planetary caput of concern improvement astatine GSK, calls it the "sweet spot": going aft validated biology, often successful mid-stage improvement successful the $1 cardinal to $2 cardinal range, wherever the result of a cause campaigner isn't yet obvious. Many acquisitions of late-stage assets extremity up becoming a maths problem, Sheldon told CNBC, peculiarly if it's a listed institution that has reached just value.

"BD [Business development] I ever picture arsenic a interaction sport. If an plus is bully enough, there's aggregate suitors," helium added.

Deals tin scope from partnerships and licensing and royalties agreements to clear-cut buyouts.

"We would bash licensing each time of the week versus M&A if we could, due to the fact that you tin negociate hazard and reward the spouse arsenic worth is unlocked and hazard is discharged," Sheldon said.

However, an acquisition with a large terms tag paid up beforehand whitethorn astatine times beryllium the lone option, and it tin person immoderate charismatic benefits, specified arsenic taking full power of the improvement plans and acquiring endowment arsenic good arsenic the molecules. "The world is really the seller often dictates that, a batch of radical don't recognize that," Sheldon said.

A competitory environment

As biotech M&A became blistery again, November saw arguably the sector's astir melodramatic lawsuit of the twelvemonth instrumentality place: the public bidding war betwixt Pfizer and Novo Nordisk implicit clinical-stage value nonaccomplishment cause shaper Metsera, yet won by Pfizer successful a woody worth up to $10 billion.

It's uncommon for bidding to instrumentality spot successful the nationalist eye, said Stefan Loren, managing manager astatine Oppenheimer. "It's a precise nationalist happening to pursuit a company, and truthful you person to interest astir the reputational damage: A, if you lose; B: if you get excessively exuberant and spell to buy," helium told CNBC.

"That decidedly says thing astir the biotech marketplace and companies wanting to play catch-up," Loren added. "They are responding to what their concern is, their concern is that they're astir to person a batch of things travel disconnected patent."

Typically, pharma buying sprees thin to past up to a twelvemonth and a fractional earlier pulling back, Loren added.

The GLP-1 marketplace for value nonaccomplishment drugs has go 1 of the astir competitory segments successful planetary pharma arsenic large players contention to unafraid next-generation assets done some interior improvement and acquisitions, noted PitchBook researchers successful their 2026 Healthcare outlook published aboriginal December. More than 120 metabolic assets are presently successful improvement crossed 60 companies, creating a heavy excavation of imaginable M&A targets, they added.

"The high-profile conflict betwixt Pfizer and Novo Nordisk for Metsera underscores the escalating strategical urgency successful this space," they said. "We expect contention to intensify arsenic differentiation windows constrictive and argumentation tailwinds grow reimbursement and regulatory support."

While the obesity abstraction lends itself good to exemplify existent competitory dynamics, the biotech roar isn't confined to 1 azygous therapeutic area. Neurology, oncology, immunology, and inflammation are different cardinal areas of activity.

"It's idiosyncratic what's fashionable astatine immoderate fixed point," said Loren. "They [companies] are going for what tin capable the pipelines arsenic rapidly arsenic possible."

A boom, dip and different boom

During the Covid-19 pandemic, biotech sailed to the apical of investors' wishlists. Amid accrued attention, investors' optimism, and debased involvement rates, the assemblage flourished, valuations skyrocketed, and galore biotech companies went nationalist oregon were bought by larger peers.

As the biopharma manufacture is simply a cost-intensive probe business, raising wealth is captious for cause discovery. Early-stage biotechs run with precocious stakes, often making them aboriginal casualties of a risk-off marketplace similar the 1 pursuing the pandemic boom.

Throughout overmuch of 2025, the Trump medication besides clouded the outlook for biopharma with threats of precocious assemblage tariffs, cuts to national wellness agencies, and little cause prices. But arsenic companies person made deals with Trump connected pricing and the president has made wide that if they put successful U.S. manufacturing, they would beryllium exempt from further tariffs — 2 large overhangs for the assemblage person cleared.

A flurry of bully information readouts has besides boosted biotech valuations, said Loren. Only a twelvemonth ago, adjacent bully information sent stocks down, helium said. "People were utilizing everything arsenic an lawsuit conscionable to get out."

By precocious spring, the marketplace started to displacement and now, investors instrumentality bully information and tally with it. "There's a constituent astatine which these things get truthful debased that astatine the extremity of the day, what's the risk?" Loren said. "And now, erstwhile we saw the acceleration of M&A, the bully quality is that that play became precise real."

More deals successful 2026

In 2026, deals could prime up adjacent further, analysts say.

"We spot 2026 arsenic providing 1 of the champion investing opportunities we person seen successful decades," the PitchBook analysts said, driven by the clearing of U.S. healthcare argumentation overhangs and further complaint cuts spurring much speculative investing postures.

Rajesh Kumar, caput of European beingness sciences and healthcare equity probe astatine HSBC, likewise expects a "big ramp up of woody flows" successful the twelvemonth up present that the sound astir cause pricing has settled.

"The market's borderline expectations beyond [2026] mightiness beryllium a spot much optimistic than it should be, but nonetheless, the companies are deploying superior successful the U.S., manufacturing is happening, clarity is there, and that is simply a large situation for really doing biotech deals and aboriginal signifier biotech funding," helium told CNBC's "Squawk Box Europe."

Other developments successful the pharma assemblage could marque for different twelvemonth of important headwinds – perchance adding to the urgency for drugmakers to marque deals.

Prices for definite bestselling drugs volition commencement to travel down under the U.S. Inflation Reduction Act successful 2026, which appears to dainty the progressive constituent of drugs by the aforesaid shaper arsenic the same, limiting beingness rhythm absorption options successful immoderate cases, HSBC analysts said. Biosimilars successful the U.S. mightiness besides go easier to motorboat if a caller Food and Drug Administration draft guidance is implemented.

"All these factors mightiness mean that the slice beyond the patent cliffs, particularly for biologics, mightiness beryllium much assertive than successful the past," the analysts said.