Justin Wilson, partner and life sciences sector specialist at Withers & Rogers, highlights the importance of ensuring IP readiness ahead of an expected surge in M&A activity as the industry approaches the patent cliff.
Withers & Rogers
Some of the world’s best-selling drugs are due to go off patent between now and the end of 2028, and the pharmaceutical companies affected are exploring opportunities to restock their pipelines, potentially by filling the gap with more biotech-focused M&A.
The world’s largest selling drug, Keytruda (pembrolizumab), is due to come off patent in 2028. Keytruda is a PD-1 inhibitor used in cancer immunotherapy and has an annual revenue for its manufacturer Merck of around $30bn. This dwarfs the sales of other drugs and represents the biggest patent cliff event in pharmaceutical history. Another of Merck’s drugs, Gardasil 9, an HPV vaccine with annual revenue of ~$9bn, is also coming off patent in 2028. Therefore, it is likely that Merck will have to bring through a number of new drugs to fill the gap left as these two patents expire.
Prior to that, a blockbuster drug developed by Pfizer, Eliquis (apixaban) - an anticoagulant widely used as a therapy for stroke prevention and the treatment of blood clots, with an annual revenue of ~$12bn, is due to fall off patent in European markets this year, and in the US in 2028. As a small molecule drug that is proven to be safe and effective, Eliquis is currently widely prescribed around the world, which means the market opportunity for generics producers is considerable.
For some pharmaceutical companies, the patent cliff has already arrived. In 2025, another anticoagulant, Xarelto (rivaroxaban), with revenue of ~$7bn for Johnson & Johnson, and a leading heart failure drug, Entresto (sacubitril/valsartan), developed by Novartis with sales of ~$6bn, came off patent.
In addition, the molecule behind Novo Nordisk’s blockbuster diabetes and weight-loss drugs, Ozempic and Wegovy, lost its exclusivity rights in India in March 2026, opening the door to generic competition. The company’s exclusivity rights will soon be expiring in China, Canada, Brazil, Turkey and South Africa too, which means the market for generic versions of semaglutide is about to expand significantly. However, secondary patents covering these drugs in major markets such as Europe and the US extend through to the early or mid-2030s, so the drop off in revenue is unlikely to be as pronounced.
The M&A activity of big pharmaceutical companies facing patent cliffs could be even more evident this time around, due to the increased prevalence of AI-based drug discovery companies. Trained on large quantities of chemical, biological and clinical data, the AI models enable biotech companies to identify new drug candidates targeting specific conditions more quickly and easily. As such, biotech-focused M&A and joint ventures could once again be high on the corporate agenda for big pharma in 2026.
For biotech companies that demonstrate their ability to act quickly, producing multiple interesting candidates for specific health conditions, there could be some excellent deal-making opportunities. For example, they might consider entering into a joint venture or working with a corporate investor, to support them in the costly process of developing their proposition, conducting clinical trials, securing regulatory approvals and manufacturing at scale.
From an intellectual property (IP) perspective, it’s never too early for biotech companies to prepare for any interest they might receive from a potential partner or corporate investor. Patents are intangible assets, which can be difficult to value accurately, so it is important that portfolios are well-organised and up to date. It is always advisable to seek patent protection for innovations at an early stage to mitigate the risk that a competitor might get there first, effectively blocking their route to market. They should also adopt a lifecycle management approach, which involves layering patents to protect each stage of the drug development process. For example, patents might be obtained for any new molecules created, and for a new drug’s formulation, method of manufacture, administration routes, delivery devices, dosage regimens, secondary indications etc.
Organisations keen to attract investor interest should have a clear IP strategy in place and a good story to share with potential buyers. They should be able to demonstrate that they have structured their IP portfolio with longevity in mind, for example, by seeking patent protection in the broadest terms possible to stay flexible to changes that might arise during the drug development process. They should also ensure that their ‘data room’ is comprehensive and up to date with details of patent filings and how they protect the commercial assets, assignments, licences, freedom to operate assessments etc, so it is ready for due diligence and negotiations to get underway quickly. Not only is this best practice, it also sends the right signals to a potential investor/buyer, giving them some extra assurance that IP assets are well managed and strategic consideration has been given to them.
The role of AI in drug discovery is reshaping the pharmaceutical industry and some analysts believe this could be one of the last periods of significant patent cliffs. Advanced AI capabilities have made it possible for smaller companies to produce more candidates, targeting more conditions, much more quickly than would have been possible just 10 years ago. There is also perhaps less scope for the discovery of new blockbuster drugs, as proven treatments already exist for many of the world’s most prevalent diseases. Instead, as AI-based drug discovery capabilities grow further, we are likely to see more treatments for specific conditions or conditions affecting smaller groups of patients. For the pharmaceutical and biotech industry, this means revenues could be spread across a wider portfolio of drugs, so when patents expire, the dip in revenues is less marked.
With more M&A activity expected in 2026, biotech companies must ensure they are ready to take advantage of any deal-making or partnering opportunities that come their way, and a well-managed IP portfolio is a must.