Patent Cliff Pressure to Sustain Pharma M&A Momentum in 2026

The approaching patent cliff—projected to expose as much as $300 billion in annual drug sales to loss of exclusivity by 2032—is expected to keep pharmaceutical M&A activity active in 2026, but not necessarily drive a dramatic year-over-year spike in deal volume or size. According to Dan Chancellor, Norstella’s vice president of thought leadership, the impact of deals being signed today should be viewed through a longer-term lens, as most acquisitions influence company performance three to five years out, rather than immediately.

He emphasized that the patent cliff is neither sudden nor unexpected. Large pharma companies have been aware of the risk for years and have already incorporated it into their portfolio strategies. As a result, current and near-term deal activity reflects forward-looking pipeline and revenue needs, rather than a reactive response to exclusivity losses.

While 2025 was characterized as a strong year for M&A, 2024 had been relatively quiet, despite widespread discussion about the coming patent cliff. That contrast suggests deal flow is shaped less by urgency alone and more by the availability and quality of viable assets. Pharma companies generally have ample cash and transaction capacity, but remain selective—prioritizing first-in-class or best-in-class assets that strategically fit their portfolios. If those criteria are not met, deals are unlikely to proceed.

Beyond patent expirations, companies are also confronting broader growth gaps driven by maturing portfolios and insufficient late-stage pipeline output. Analysis of the top 12 pharma companies shows that most are projected to grow below the broader market average of about 7%, with only a few exceptions. Collectively, large manufacturers face an estimated $100 billion revenue shortfall relative to desired growth targets by the end of the decade.

M&A remains one of the most direct tools to address that gap, alongside lifecycle management and internal R&D investment. As a result, 2026 is expected to bring continued, steady dealmaking—similar to 2025 levels—rather than a sharp surge, as companies keep using acquisitions to reinforce future growth.

Chancellor also comments on the specific market indicators that suggest whether 2026 is likely to exceed last year’s pharma deal value, and much more.

A transcript of his conversation with PC can be found below.

PC: Given projections that up to $300 billion in annual drug sales could be exposed to loss of exclusivity by 2032, how do you expect the upcoming looming patent cliff to quantitatively influence pharma M&A deal volume and size in 2026, compared with 2025 levels?

Chancellor: The way I see it is that the deals that are being signed today are actually the deals that aren't going to be influencing ’26, but they're actually going to be influencing 2030 or 2032, or a three-to-five-year-plus timeframe. The reality, looming was the word you used to describe the patent cliff. It has been looming for a long time. It's very well known. It's not something that, if you're a pharma company that's trying to decide your portfolio strategy, you're not sleepwalking into it. It's something that you had a long, long, long time to prepare for.

Last year was interesting, because last year was actually a really strong M&A year. The narrative also was that last year was the year in which the patent cliff arrived, and you can draw the conclusion that suddenly, pharma isn't flowing to sign deals, but actually, the deals that pharma is signing were more a reflection of what their needs are going to be in three to five years time.

The fact that 2024 was really quiet in spite of what was coming in the next few years is interesting, but I think that's more of a reflection on the opportunities that are out there. There are many people employed in pharma to come up with the search and evaluation teams and to scour and to identify what could be a strong fit for their companies. I think it's probably a reflection of the maturity or what was out there. We know pharma is sitting on a lot of cash, is sitting on a lot of ability to do these deals. But if the fit isn't right, if the assets they're bringing in aren't right, or they aren't better, they're not either first-in-class or best-in-class, those deals won't get signed.

Bringing that through to what do we expect in ‘26 versus what we saw in ’25, there is still a lot of pressure, a lot of need or demand for pharma to address not just the patent cliff, but more broadly, growth gaps they have. They're kind of the same, similar things. Patent cliff is obviously older drugs losing exclusivity, and generally sales declining. A growth gap can be caused by your portfolio being quite mature, but it can also be caused by just not having enough new drugs coming through.

We did an analysis with Evaluate, looking at the top 12 pharma companies and what the current consensus for their portfolios is, versus what the market average growth rates are. The market average growth rates are 7% according to our consensus database. The majority of large pharma aren't projected to grow at 7%; only Lily and Novo have higher than 7% CAGR.

The majority of pharma companies are facing a growth gap, if they actually are aspiring to grow at market average rates, which they should be doing. This growth gap still persists. It’s about $100 billion in revenues that are missing, (kind of put in quotes) that they'd like to bring, that they'd like to find by the end of this decade.

The simplest way, or one way to do that, is through M&A. Of course, they can also reinvest through their existing drugs and run lifecycle management. But there is still a very strong need to M&A, in spite of the large number of deals that were signed last year. So ’26, it’s kind of a cop- out prediction, but more of the same. The deals that were signed last year were very interesting, but there wasn't enough to address the core growth gap that pharma companies are facing.