Patent cliffhanger: will China biotech throw Big Pharma a lifeline?

Core Insights - The biopharma industry is facing a significant "loss of exclusivity" wave, with estimates indicating a potential revenue loss of between US$17 billion and US$18 billion for Pfizer alone, starting gradually in 2026 and peaking in 2028 [2][12][28] - Morgan Stanley projects that US$171 billion of revenue from large-cap biopharma companies will go off-patent by the end of 2030, prompting a race to replace aging blockbusters [3][28] - The patent cliff is expected to be one of the largest since 2010, with a substantial impact on pricing power as generics and biosimilars enter the market [6][11] Industry Dynamics - The Biosecure Act is adding uncertainty to the industry, as US drug makers navigate a tougher political environment and seek to refill their pipelines [4][21] - The impending patent expirations are creating a competitive landscape where generics and biosimilars can enter at significant discounts, leading to rapid price erosion [7][12] - Drug prices have historically decreased by 30% to 82% over eight years following patent expiration, with the US experiencing the steepest declines [12][17] Chinese Biotech Opportunities - Chinese biotech firms are positioned to capitalize on the patent expirations, offering lower costs and faster clinical execution, making them attractive partners for global pharmaceutical companies [9][28] - The trend of in-licensing assets from Chinese companies is growing, with Chinese firms accounting for 32% of out-licensing deals to multinationals by value in the first half of 2025, up from 21% in previous years [15][27] - Upfront payments to Chinese biotech companies are estimated to be 60% to 70% lower, with timelines for development being accelerated by 30% to 50% [16][28] Strategic Shifts in Big Pharma - As timelines tighten, pharmaceutical companies are increasingly willing to license earlier-stage candidates rather than only late-stage assets, reflecting a shift in strategy to mitigate the impact of patent expirations [10][11] - Major companies like Merck have invested US$40 billion over the past five years in acquisitions and collaborations, particularly with Chinese biotech firms specializing in cancer therapies [14][28] - The urgency to rebuild pipelines before pricing power diminishes is driving Big Pharma to seek innovative solutions, including partnerships with Chinese biotech [28][29]