The next big wave of patent cliffs is ahead; expect biopharma M&A to rise – report

With a significant number of blockbuster drugs at risk of losing market exclusivities in the next five years, big pharma is expected to ramp up deal-making and market consolidation in the short-to-medium-term, the credit rating and research house, Fitch Solutions projects.

The report comes as drugmakers are bracing for a major wave of loss of patent exclusivities (LOE) in 2025 – 2030, which could open up floodgates of low-cost biosimilars and generics for the first time against some of the leading pharma brands in the U.S. and EU.

“We expect that generic companies will waste no time bringing competitor generic and biosimilar drugs to market,” the authors wrote.

Fitch projects an unprecedented biosimilar wave in the U.S. and EU amid rising demand for cheaper pharmaceuticals and against a supportive regulatory backdrop.

This past week, the U.S. Health Secretary gave the go-ahead to test a payment model designed to limit out-of-pocket costs for certain generics at a maximum of $2 per month per drug for Medicare recipients.

According to industry observers, even leading drugmakers have not yet positioned their pipelines to offset an estimated >$200B loss during 2022 – 2030, when some of the best-selling medications are expected to go off-patent.

Steep patent cliffs are ahead for pharma majors such as AbbVie (NYSE:ABBV), Johnson & Johnson (NYSE:JNJ), Pfizer (NYSE:PFE), Novartis (NVS) (OTCPK:NVSEF), Merck (NYSE:MRK), Eli Lilly (NYSE:LLY) and Bristol Myers Squibb (BMY) from 2023 to 2028.

Late January, AbbVie (ABBV) faced the first of as many as ten knockoffs set for market entry this year against its blockbuster rheumatoid arthritis therapy Humira in the U.S. as Amgen (AMGN) launched its biosimilar Amjevita.

However, after navigating significant LOEs in 2020, Roche (OTCQX:RHHBF) (OTCQX:RHHBF) is largely immune from biosimilar threat, as is Sanofi (SNY), whose asthma therapy Dupixent, marketed with Regeneron (REGN) is patent protected in the U.S. until 2031.

“Pharmaceutical companies often turn to M&As when they are faced with patent cliffs, and this is something we have seen previously in earlier patent cliffs, such as the one from 2011 to 2015,” Fitch wrote.

That LOE wave saw biopharma resorting to M&A to offset revenue impact from generic competition against blockbuster small molecule brands such as Plavix from Bristol Myers Squibb (BMY) and Lipitor from Pfizer (PFE), currently marketed by its spinoff Viatris (VTRS).

Fitch points to Pfizer’s (PFE) deal-making focus in 2022 ahead of LOEs for its key revenue generators, such as oral JAK inhibitor Xeljanz and breast cancer medication Ibrance expected in 2025 and 2027, respectively.

Last year, the New York-based pharma giant spent ~$12B to acquire the migraine drug maker Biohaven Pharmaceuticals and closed a ~$5B deal to scoop up the sickle cell disease drug developer Global Blood Therapeutics.

Meanwhile, AbbVie (ABBV) is lifting a self-imposed $2B cap on deals and readying newer medications to offset the impact of its Humira LOE.

Pfizer (PFE) could afford deals of this magnitude thanks to firepower generated from its COVID franchise, but “other companies with less cash holdings may struggle to employ M&A as a protective technique over the coming years,” Fitch argues.

However, patent holders are expected to deploy several other tactics to defend the territory, including settlements to delay the copycat launch and clinical studies to introduce evergreening techniques, such as new dosage forms.

Seeing the 2028 LOE for its blockbuster cancer therapy Keytruda in the U.S., Merck (MRK) is reportedly developing easier-to-use formulations to replace the intravenous version.

Seeking Alpha contributors have different views on how well big pharma can cycle through the upcoming big LOEs. SA Author Vera Glebova picks AbbVie (ABBV) ahead of Merck (MRK) even as both are set to face significant patent cliffs in the years ahead.