Pharma M&A Wave 2025-2027: Response to the Patent Cliff
The bill will be hefty. Between 2025 and 2028, several pharmaceutical blockbusters will lose their patent exclusivity: Cosentyx, Keytruda, Entresto… Products that collectively represent over $15 billion in annual sales. Faced with this dreaded deadline — the famous "patent cliff" — major groups are increasing acquisitions of promising biotechs. The objective is clear: diversify their pipelines, integrate disruptive technological platforms, and maintain sustained growth in a global market estimated at over $1.5 trillion.
Novartis, Merck, Sanofi: all are betting on an aggressive mergers and acquisitions strategy to compensate for imminent revenue loss and position innovation at the heart of their growth model. An analysis of a phenomenon reshaping the global pharmaceutical landscape.
The 2025-2027 Patent Cliff: A Quantified Threat
The patent cliff refers to the period during which a flagship drug loses its patent protection and becomes exposed to competition from generics or biosimilars. This loss of exclusivity leads to a sharp drop in revenue: on average, a product's sales can decrease by 80 to 90% within two years of competitors' arrival.
By 2027, several major products will cross this threshold. Keytruda (Merck), the world's leading immuno-oncology treatment, will see its patent expire in 2028. Cosentyx (Novartis), a leader in psoriasis treatment, will gradually lose its exclusivity until 2027. Entresto, another cardiovascular pillar for Novartis, faces the same deadline in 2027. These three products alone generate billions of dollars in annual revenue for their respective laboratories.
“The ten largest global pharmaceutical companies will account for over $500 billion in cumulative revenue in 2026, representing approximately 35% of the global pharmaceutical market estimated at $1.5 trillion.” — CDG Conseil
To anticipate this shock, pharmaceutical groups must both protect their margins and prepare for succession. The widely adopted solution: targeted acquisition of biotechs with differentiating technologies and advanced drug candidates.
| Product | Company | Patent Expiration Year | Estimated Annual Sales (Billion USD) |
|---|---|---|---|
| Keytruda | Merck | 2028 | > 15 (collectively with other blockbusters) |
| Cosentyx | Novartis | Gradually until 2027 | > 15 (collectively with other blockbusters) |
| Entresto | Novartis | 2027 | > 15 (collectively with other blockbusters) |
Novartis and RNA Therapeutics: The Avidity Deal
In December 2024, Novartis completed the acquisition of Avidity Biosciences for $12 billion. This operation aims to integrate a targeted messenger RNA (AOC platform) platform, specializing in rare muscle diseases, particularly Duchenne and myotonic muscular dystrophies.
The acquisition of Avidity is part of a technological transfer logic: Novartis seeks to complement its oncology and rare disease portfolio with next-generation therapies that directly target defective RNAs in diseased cells. Avidity's candidates, already in advanced clinical phases, will allow Novartis to offer innovative treatments starting in 2027-2028, just as Cosentyx and Entresto lose their protection.
This strategy illustrates a shared observation across the sector: specialized biotechs often possess an agility and specialized expertise that large groups struggle to develop internally. Acquisition then becomes an innovation accelerator.
Merck: Diversification and Subcutaneous Version of Keytruda
Merck is not idle in the face of Keytruda's expiration in 2028. In 2025, the group obtained approval for a subcutaneous version of its blockbuster, thereby extending its competitive advantage and improving patient experience. But Merck's strategy doesn't stop there.
The laboratory has multiplied acquisitions and partnerships to expand its pipeline: Winrevair (pulmonary arterial hypertension), Capvaxive (pneumococcal vaccine), and the integration of Verona Pharma strengthen a diversified portfolio. Merck aims for an ambitious goal: to reach $70 billion in annual revenue by 2030, relying on a combination of optimized established products and newly acquired therapies.
Economic literature confirms this dynamic: according to a Cornerstone Research study published in Concurrences (2024), acquisitions of small biotechs can increase incremental innovation through technology transfer and incentivize startups to invest more in research with a view to a strategic exit.
Sanofi: Precision Oncology and Neurosciences
Sanofi has adopted a different, but equally aggressive approach. The French group strengthened its precision oncology offering by acquiring Blueprint Medicines and the bispecific DR-0201 from Dren Bio, then acquiring Vigil Neuroscience to expand its footprint in neurosciences.
These operations reflect a major trend: more than 40% of global pharmaceutical R&D spending is now dedicated to precision oncology (bispecific antibodies, ADCs, radioligands) and therapies targeting metabolism (GLP-1 analogues for diabetes and obesity). Sanofi, historically positioned in vaccines and immunology, thus seeks to diversify its revenue sources and capture the rapid growth of these promising segments.
The 2025 Sanofi Universal Registration Document highlights this strategic orientation: acquisitions aim to complement the existing pipeline, reduce dependence on a few flagship products, and prepare the group for the regulatory and scientific requirements of the next decade.
The Economic Drivers of the M&A Wave
Several factors explain the intensification of mergers and acquisitions in the pharmaceutical sector between 2025 and 2027:
- Compensation for patent losses: acquiring an advanced pipeline allows for quickly filling the void left by the expiration of blockbusters.
- Access to technological platforms: messenger RNA, bispecific antibodies, cell therapies… Biotechs possess specialized know-how that large groups struggle to develop alone.
- Operational synergies: integrating a biotech allows for pooling manufacturing, distribution, and clinical trial infrastructures, thereby reducing costs and accelerating market launches.
According to CDG Conseil's 2026 HR outlook for the pharmaceutical sector, Johnson & Johnson aims for $100 billion in sales in 2026, driven by Darzalex, Rybrevant, Tremfya, and its MedTech segment. Eli Lilly, boosted by Mounjaro and Zepbound, is closing the gap at an unprecedented speed, illustrating the need for all players to maintain a sustained pace of innovation.
Academic literature confirms this logic. A Cornerstone Research study (2024) shows that acquisitions can stimulate incremental innovation but also carry a risk of cannibalization of existing products if pipelines are not sufficiently differentiated. American and European regulators are increasingly scrutinizing the potential impacts of these operations on R&D competition and final prices for patients.
Regulatory and Financing Challenges
Regulatory authorities, particularly the FTC in the United States and the European Commission, have intensified their vigilance over pharmaceutical mergers. New guidelines published in 2023 by the DOJ and FTC broaden the scope of review to actual and perceived potential entrants, i.e., biotechs that could become competitors if they were not acquired.
This approach aims to prevent large groups from stifling innovation by acquiring and then abandoning competing programs. Several transactions have thus been blocked or heavily conditioned in recent years, forcing acquirers to demonstrate that the operation will ultimately benefit patients through accelerated access to new treatments.
On the financing side, biotech acquisitions often occur at high multiples of their initial capitalization: the Avidity operation at $12 billion is a striking example. However, laboratories have significant cash reserves, accumulated during years of strong blockbuster growth, and benefit from still favorable credit conditions despite the rise in interest rates observed since 2022. To learn more about market and rate dynamics, consult our analysis on stock markets 2024 facing inflation and rates.
2025-2027 Outlook: Growth and Transformation
The global pharmaceutical market is expected to continue growing at a rate of 7 to 9% per year between 2025 and 2027, supported by demographic aging, the rise of chronic diseases, and the arrival of disruptive therapies. GLP-1 analogues (Mounjaro, Ozempic, Zepbound) will continue to drive growth in diabetes and obesity, while precision oncology, driven by bispecific antibodies and radioligands, will capture a growing share of R&D budgets.
The M&A wave observed today is not an isolated phenomenon: it is part of a structural logic of permanent renewal of the pharmaceutical pipeline. Each patent cliff cycle leads to a phase of intense acquisitions, followed by a period of consolidation and maturation of new products.
For investors, this dynamic offers opportunities at several levels: direct equity participation in promising biotechs upstream of acquisitions, investment in large groups capable of effectively managing their pipeline, or exposure via specialized sectoral funds. Geopolitical tensions and regulatory developments nevertheless remain risk factors to monitor closely, as highlighted in our report on the ECB and the impact of geopolitical tensions on rates.
A Profound Transformation of the Pharmaceutical Model
The mergers and acquisitions wave in pharmaceuticals from 2025-2027 reveals a profound transformation of the sector. Faced with the imminent expiration of major patents, large laboratories are no longer content with optimizing their existing products: they are massively acquiring innovative biotechs to integrate disruptive technological platforms — messenger RNA, bispecific antibodies, cell therapies — and diversify their revenue sources.
This aggressive strategy carries risks: high acquisition costs, integration challenges, increased regulatory scrutiny. But it responds to an imperative strategic necessity: maintaining sustainable growth in an environment where innovation is the only bulwark against generic and biosimilar competition.
For industry players — laboratories, investors, regulators — the years 2025-2027 mark a decisive turning point. The ability to detect, acquire, and integrate the right targets will determine tomorrow's leaders in a pharmaceutical market undergoing major restructuring. In this regard, dynamics observed in other high-tech sectors can offer interesting parallels, as shown in our analysis of the great return of tech IPOs in 2026-2027.
Frequently Asked Questions
Q: What is the "patent cliff" in the pharmaceutical industry? A: The patent cliff refers to the period during which several major drugs simultaneously lose their patent protection, leading to a sharp drop in revenue due to the arrival of generics or biosimilars. This loss of exclusivity can reduce a product's sales by 80 to 90% in two years, forcing laboratories to quickly renew their innovation pipeline.
Q: Why do large pharmaceutical groups acquire biotechs instead of developing internally? A: Specialized biotechs often possess specialized expertise and agility that large organizations struggle to replicate. Acquiring a biotech allows for quickly acquiring disruptive technologies (RNA, bispecifics, cell therapies), advanced clinical-stage drug candidates, and reducing time to market, while benefiting from operational synergies.
Q: Which major blockbusters are threatened between 2025 and 2028? A: Among the major products whose patents are expiring are Keytruda (Merck, 2028), Cosentyx (Novartis, gradually until 2027), and Entresto (Novartis, 2027). These drugs collectively represent over $15 billion in annual sales, justifying massive acquisition efforts to offset these losses.
Q: Are regulators scrutinizing these pharmaceutical M&A operations more closely? A: Yes. The FTC and the European Commission have strengthened their review of pharmaceutical mergers, particularly to prevent large groups from acquiring promising biotechs to neutralize potential competitors. New guidelines from 2023 broaden the scope of analysis to include impacts on innovation and R&D competition, sometimes leading to blockages or strict conditions.
Q: Which technologies are most attractive to acquirers in 2025-2027? A: Targeted messenger RNA platforms, bispecific antibodies, radioligands, ADCs (antibody-drug conjugates), and cell therapies account for the majority of investments. More than 40% of global pharmaceutical R&D spending is now directed towards precision oncology and metabolic diseases (diabetes, obesity), high-growth and high-value-added segments.
