The biotech and therapeutic sector is entering 2026 with a ticking clock on revenue replacement and growing urgency around patent cliffs. Loss of exclusivity and IP across large-cap pharmaceutical products is pressuring a significant portion of industry sales and is forcing a shift in portfolio strategy of strategics and pharma companies, away from optimization and focused towards replacement of the pipeline. Evaluate estimates that more than $300 billion in prescription drug revenues are expected to lose exclusivity between 2025 and 2030. And the Financial Times has highlighted the timing pressure more sharply, noting that drugs representing roughly $180 billion of revenue per year are expected to go off patent in 2027–2028, which is around 12% of global pharma revenue.

For many large pharmaceutical companies, the next wave of losses now sits within the planning horizon of current management teams and boards, while internal pipelines are unlikely to deliver sufficient replacement revenue over the same period. As a result, external assets are no longer optional portfolio enhancements but are increasingly necessary to close near-term revenue gaps, which is bringing M&A and late-stage assets back into focus.

In a normal cycle, large pharma can afford to be opportunistic, and interesting science can earn attention even when timelines are long. In a patent cliff cycle, timelines matter more than anything else. Boards and management teams need assets that can deliver cash flows within two to three years, and that pushes demand toward late-stage programs, catalysts that can move stock prices quickly, and platforms that can produce multiple shots on goal. This has made later-stage clinical assets more appealing to major strategic investors and public guidance is already starting to reflect this dynamic. Reuters reported that Novartis expects a low single-digit decline in 2026 adjusted operating profit as key patents expire. When companies of that scale put patent expiry effects into their forward numbers, it signals where internal capital will be allocated and why external buying becomes rational, even at higher prices.

This reflects what we’ve been seeing across our life sciences client base, as well as through our close relationships and direct conversations with major venture capital and strategic investors in Europe and the US. Many investors are sitting on historically high levels of dry powder but are increasingly focused on securing future revenue streams, driving strong interest in high-quality pipeline assets to support their next phase of growth. That said, this does not signal a broad return to risk-on behavior among strategic buyers and institutional investors. Investors remain highly selective and markets are pricing uncertainty more explicitly. Buyers are not acquiring innovation in the abstract but they are instead underwriting probability, timing, and strategic fit. Assets that can be diligenced efficiently and are supported by clean endpoints, well-defined regulatory pathways, and commercially credible positioning continue to attract strong interest.

A question we are frequently asked is whether the recent wave of large public-market biotech transactions is translating into renewed activity in the private markets. Our answer is generally yes across the sector, but selective at the company level. While public-market mega-deals tend to capture headlines, the same strategic drivers (patent cliffs, revenue visibility, compressed timelines) are increasingly shaping private market behavior as well. This effect, however, is uneven. We are seeing strong inbound interest in private companies with late-stage or near-commercial assets, particularly where clinical risk has been substantially reduced and regulatory pathways are well understood. On the other side, early-stage programs continue to face longer fundraising timelines and more structured capital, especially where development paths remain long or outcomes are binary. In many cases, private financings are being designed with strategic optionality in mind. So in other words, public-market deal activity is not lifting all boats, but it is creating a strong tailwind for the right private assets at the right stage.

PitchBook’s 2026 healthcare outlook noted that biotech M&A picked up in the second half of 2025, with competitive tension re-emerging in select categories. Strategic demand from large pharmaceutical companies is accelerating as patent expiries approach, while the supply of differentiated and financeable assets remains limited. In that environment, capital does not disperse broadly across the sector. Instead, the patent cliff concentrates capital into a limited number of underwriteable assets and raises the cost of misallocation, as capital tied up in non-core or slow-moving programs reduces flexibility at precisely the moment replacement capacity is needed.

The obesity category shows most clearly how capital concentration is shaping strategic behavior. While the market is large and fast-moving, the more relevant dynamic is that leadership positions are being established early and only a limited number of programs offer sufficient differentiation to compete meaningfully. Competition has therefore centered on assets that can either rival or extend beyond the profiles already set by Novo Nordisk and Eli Lilly, whose approved products now define efficacy, safety, manufacturing scale, and commercial execution benchmarks for the category. The Financial Times has reported on major strategic moves to strengthen weight-loss pipelines, reflecting how aggressively large pharmaceutical companies are competing to secure credible positions. Reuters has similarly noted that expectations around the obesity market are tightening as the competitive gap between market leaders and the rest of the field becomes clearer. In that context, buyers are less willing to wait for uncertainty to resolve and are instead moving earlier, accepting higher entry prices, and pushing residual risk into deal structure.

Biotech management teams should expect more M&A activity, but should also expect that only a narrow set of assets will command premium terms. More processes will be run and more inbound conversations will happen, but fewer assets will ultimately clear at premium valuations. In a patent-cliff environment, strategic buyers are buying a timeline as much as they are buying a molecule. They will press on the next inflection point, the probability of success, the regulatory path, the payer story, and how the asset integrates into an existing commercial and medical affairs infrastructure.

We also believe this year that deal structures are changing too. Where strategic interest is strong but technical risk has not been fully resolved, we expect that investors will continue to increasingly rely on staged approaches that allow access to assets while deferring full commitment, whether through options / licensing arrangements / or milestone-weighted economics. By contrast, when assets are de-risked and sit squarely within a buyer’s portfolio priorities for near-term revenue replacement, competitive pressure tends to simplify structure and shift value into price. That is where bidding dynamics begin to re-emerge, and why PitchBook’s observation around returning competitive tension is a meaningful signal for 2026.

The patent cliff is creating sustained demand for de-risked innovation, with more aggressive allocations and stronger M&A activity as the logical response. The scale of upcoming exclusivity losses and the concentration of expiries over the next several years are now being reflected in capital allocation decisions and competitive behavior in priority categories. As long as these exclusivity losses remain unresolved, strategic activity is likely to remain elevated through 2026 rather than taper after a small number of headline transactions.